The ETF market in the first half of 2026 is experiencing a profound shift, marked by both record product launches and a contraction in total assets under management compared to the start of the year. Retail participation has surged, but this influx raises a critical question: are these new investors actually making money?

A newly released joint report, combining trading and holdings data from end-2025 with mid-2026 figures, along with anonymized retail transaction records and survey responses, offers some revealing insights into current investor behavior and outcomes.

Investor profitability: a gap between expectations and reality

When asked about annual return targets, 31.24% of respondents selected the 10%-20% range. Reality, however, paints a far more sobering picture. Over the past year, a combined 45.05% of respondents reported losses of varying degrees, 24.61% said their returns were essentially flat, and only 30.34% of investors managed to turn a profit.

Investment styles are also sharply divided. Long-term allocation investors represent the largest group at 30.76%, but short-term traders follow closely behind at 25.75%. Investors are polarizing into two camps: those who hold for the long haul and those who thrive on short-term trading, with far fewer occupying the middle ground.

Rational responses to gains and losses

When ETF holdings show a floating profit of 10%-20%, 42.16% of investors prefer to trim positions in batches to lock in partial gains, while 18.03% choose to take full profits and exit entirely. Only 3.62% opt to add to their positions and chase momentum. This suggests investors are increasingly focused on securing returns and adopting a cautious, disciplined approach rather than blindly following market trends.

Conversely, when holdings show a floating loss of 10%-20%, 22.38% of investors choose to hold and wait for a rebound, and 19.3% opt to average down by buying at lower prices. Combined, 35.16% of investors immediately stop losses or reduce positions. In the face of modest losses, most investors prefer to hold their ground or even add to positions, betting on a market recovery.

Younger investors are flooding in

One of the most striking findings is the rapid rejuvenation of the ETF investor base. Comparing data from end-2025 to June 2026, the 30-40 age group remains the core trading demographic, but the proportion of traders aged 18-35 has risen significantly across all sub-age brackets.

The share of ETF traders under 35 climbed from 35.6% at the end of 2025 to 39.5% by June 2026—a nearly 4 percentage point jump in just six months. Even more notable is the 18-25 age group, which shows a "disconnect-level" preference for ETFs, with an ETF-to-stock trading ratio of 173%. Unlike older investors who typically transition from individual stocks to funds, the younger generation is entering the market directly with index-based tools.

Education levels follow a similar pattern. Investors with a master's degree or higher have an ETF-to-stock trading ratio of 136%, compared to 100% for bachelor's degree holders and just 81% for those with junior high school education or below. The higher the education level, the greater the inclination toward index investing.

The proportion of female investors is also steadily increasing, accounting for 15.7% of ETF traders—significantly higher than the 11.8% in the stock market. However, conversion of first-time female buyers into long-term traders remains a weakness, with strong front-end acquisition but insufficient back-end retention.

The simultaneous rise of young, highly educated, and female investors is shaping the next generation of core ETF users. Once established, this behavioral paradigm shift is largely irreversible—just as investors moved from over-the-counter trading to mobile platforms, today's young investors are entering with ETFs, and this habit is likely to accompany them throughout their entire investment careers.

Portfolio construction awareness is rising

Data on ETF holdings reveals that the average number of ETFs traded per client has grown from 3.2 to 4.2 over the past year. The proportion of users trading three or more ETFs has risen from 42% to 50%, while "heavy users" trading more than ten ETFs have grown from 9.0% to 14.9%.

Investors are no longer making single-product bets; they are building diversified portfolios with multiple ETFs. The shift from buying one product to speculate on direction to constructing a balanced allocation represents a qualitative leap forward.

In terms of hot sectors, semiconductor (materials & equipment) leads with 5.34% of new trading accounts, followed by robotics, communications, defense, AI, and batteries—all hard-tech sectors contributing strongly to new account growth. Among cross-border ETFs, Hong Kong tech, Hong Kong innovative pharmaceuticals, and US Nasdaq indices continue to attract significant capital, while gold commodity ETFs maintain steady client acquisition as allocation vehicles.

A notable contrast: trading sector ETFs but watching broad-based indices

Interestingly, while investors trade sector ETFs, they are keeping a close eye on broad-based indices. The ratio of watchlist additions to total trading accounts for the CSI A500 and STAR 50 indices stands at 416% and 254% respectively, with gold ETFs at 207% and Hong Kong tech cross-border ETFs at 144%. This suggests users' intent to follow broad-based indices far exceeds their actual trading activity.

In contrast, most industry-themed ETFs have watchlist-to-trading ratios below 100%. Industry-themed ETFs are primarily used as short-term trading tools, while broad-based indices, Hong Kong tech, and gold products are placed in long-term observation pools as actively tracked allocation targets.

Product selection: liquidity first, sector second

With nearly 1,600 ETFs to choose from, how do investors make their selections? The report offers a relatively rational answer. Liquidity (active trading) ranks first among core selection criteria at 17.54%, followed by promising underlying index outlook at 16.48%. Investors first assess a sector's growth potential, then ensure they can buy in and sell out efficiently.

Fees, product scale, volatility, institutional holdings, and tracking error form the second tier of considerations—important but secondary to sector outlook and liquidity. Dividend yield ranks lowest at just 9.04%, indicating that for most investors, ETFs serve as trading tools and sector vehicles rather than income-generating assets.

When faced with multiple ETFs in the same sector, investors consistently gravitate toward the largest and most liquid products. Overall, investors are no longer chasing short-term hotspots at the expense of fundamental trading conditions; liquidity and growth prospects remain the primary decision factors.

Five principles and four red lines for ETF investing

While market fluctuations are beyond individual control, investment behavior can be optimized. The report outlines several practical recommendations to help investors avoid common pitfalls.

The five principles for ETF investing are: first, prioritize sector outlook with liquidity as a safety net—evaluate long-term sector prospects, then select ETFs with large scale and active trading, avoiding the premium/discount and liquidation risks of small, illiquid products. Second, maintain balanced diversification—combine multiple sectors and asset classes, allocating across broad-based, fixed income, and cross-border ETFs rather than concentrating all capital in one basket. Third, establish position discipline—set position limits, profit-taking ranges, and stop-loss thresholds in advance to reduce emotional decision-making. Fourth, conduct independent research—rely on quantitative indicators such as capital flows, valuations, and tracking error, along with official materials and brokerage reports, rather than being swayed by fragmented information. Fifth, combine short and long-term approaches—consider using broad-based, dividend, and gold ETFs as core holdings, with smaller allocations to industry-themed ETFs for tactical trading, balancing long-term appreciation with short-term opportunities.

The four irrational traps to avoid include: the disposition effect—taking small profits while holding deep losses; try implementing batch profit-taking and layered position building instead. Impulsive trading—rather than acting on impulse, consider a 1-3 day observation period before entering positions. Blind trend-chasing—avoid following popularity rankings without doing homework; compare fees, tracking error, and scale before buying. Excessive short-term trading—frequent turnover raises costs and amplifies risk, and avoid relying solely on any single tool or information source.

As the report emphasizes, the value of ETF allocation lies not in the short-term elasticity of any single product, but in building a robust portfolio around investors' risk-return objectives using strategies with different risk-return characteristics. As industry rules continue to improve and product systems expand, combined with investors gradually establishing scientific allocation thinking, risk control frameworks, and trading systems, the ETF market will continue to deliver inclusive financial value. The above views are based on current market conditions, are time-sensitive, and are for reference only. They do not constitute specific investment advice.

Investment involves risk. Investors should carefully read fund contracts, prospectuses, and product summaries before making investment decisions, fully understand the risk-return characteristics of funds, and make rational judgments based on their own investment objectives, time horizons, experience, and risk tolerance. Past performance does not guarantee future results.