This year's volatile, trade war-obsessed market didn't shake American investors' fondness for exchange-traded funds. In fact, it only made them love them more.

Investors have plowed a record $437 billion into U.S. ETFs so far this year, unfazed by the wildest markets since Covid. And if inflows maintain the current pace -- historically, they accelerate in the summer and fall months -- it will mark the second straight record year for U.S. ETF flows.

That is happening in part because of the relentless flow of money out of mutual funds and into ETFs, which tend to offer lower fees and certain tax advantages that their older cousins can't match. But the decadelong trend doesn't fully explain this year's surge; indeed, when U.S. markets turned choppy, many began to double down on their bets on U.S. assets. And, now more than ever, they placed those wagers by buying ETFs.

"Investors are seeing selloffs as buying opportunities," said Todd Rosenbluth, head of research at data provider VettaFi.

The hundreds of billions of dollars that investors poured into ETFs found their way into every major fund category: Stock funds and bond funds. Funds that track popular indexes continue to sell well, but so have those managed by professional stock and bond pickers, a relatively new corner of the ETF market that has gained momentum.

No one fund benefited more from the surge than the ETF industry's new champ: Vanguard Group's S&P 500 ETF. The ultracheap index fund has soaked up a stunning $65 billion in net inflows this year, along the way becoming the world's biggest ETF by assets.

Known by ticker symbol Vanguard S&P 500 ETF, the fund more than doubled the previous annual ETF inflow record when it took in $116 billion last year. Now it is on pace to reset that mark again by October.

VOO's rise illustrates how investors more broadly turned to ETFs this year. When stock-market volatility soared to a five-year high in April, Vanguard's S&P 500 fund reported its highest monthly inflows ever. Many investors had built up large cash holdings by then, and had been waiting for the right moment to shift money back into stocks, according to Greg Davis, president and chief investment officer at Vanguard.

"During that period of tumult in early April, we saw a 5-to-1 buy-to-sell ratio," Davis said. "Investors have a tremendous amount of cash sitting on the sidelines and they know that if things are on sale, it is time to put money to work."

Swelling ETF assets have been a windfall for Vanguard and BlackRock, the two largest U.S. fund managers. BlackRock Chief Executive Larry Fink has talked repeatedly about the opportunity for his firm to capitalize on a reallocation from cash to stock and bond funds.

"In the United States, there's $11 trillion sitting in money-market funds," Fink said at the Saudi-U. S. investment forum in Riyadh earlier this month. "When there is uncertainty, you're going to keep more money in cash and that is what we witnessed."

Several years after the Federal Reserve began lifting interest rates to combat inflation, the allure of cash is still strong for many investors. The second-most popular ETF this year has been a BlackRock 0-3 month Treasury bond fund, which has almost $17 billion in inflows. The cashlike fund has a 12-month trailing yield of 4.7%. A similar offering from State Street is also in the top 10 of the flows leaderboard.

"We are seeing some defensiveness on the fixed-income side," said VettaFi's Rosenbluth. "With several short-term Treasury products in the top 10, that's a sign investors are happy being paid to wait."

Still, equity funds have taken in a majority of this year's flows. Joining VOO in the top 10 are State Street's S&P 500 fund, Vanguard's total stock-market and equity growth funds, and two Nasdaq-100 funds from Invesco.

An actively managed equity fund from JPMorgan that aims to reduce volatility and produce above-average dividend income through an options strategy also cracked the top 10. Part of a broader class of active funds that some analysts have dubbed "boomer candy" thanks to their popularity with retirees, the JPMorgan fund is building on a breakout 2024.

Actively managed funds continue to capture an outsize share of new assets. According to Trackinsight, 30% of this year's ETF flows have gone to active funds even though they make up less than 10% of the industry's total assets.

Longtime mutual-fund giant Fidelity has been focusing on active ETF launches in recent years, and interest continues to grow, said Greg Friedman, Fidelity's head of ETF management and strategy.

"For the last 12 to 24 months, we've been seeing a very nice level of inflows with most of it on the active side," Friedman said. "That has held up even during extreme volatility."

For years, investors have been swapping their mutual funds for the tax benefits and liquidity offered by ETFs, boosting inflows.

That trend could soon accelerate even further. Dozens of fund managers have filed applications with the Securities and Exchange Commission to offer new ETF share classes of existing mutual funds, which would allow them to offer popular strategies in the ETF wrapper without starting from scratch.

SEC Commissioner Mark Uyeda said earlier this year he has told the agency's staff to give priority to the issue, and many in the industry are expecting approval as soon as this year.