surprise that ETFs are the product of choice for millennials, at least not to
Charles Schwab, whose 2018 ETF Investor study released this week shows 96% of
millennials see ETFs as a necessary part of their portfolio.
“It’s a trend
we’ve seen with millennials, but the surprise is how the numbers continue to
trend upward to the point that when millennials think investing, they think
ETFs, which are becoming synonymous for that generation,” said Kari Droller,
Schwab vice president of third-party platforms for mutual funds and ETFs.
study, which Schwab has done for eight years, is to get a sense of how
customers are engaging with and sentiments around ETFs, she said. As a
comparison, while 91% of millennials strongly or somewhat agreed that ETFs were
their investment vehicle of choice, that number dropped to 80% of Gen Xers and
54% of baby boomers surveyed.
study of 1,500 ETF investors found 55% of all participants expected ETFs to be
a primary investment in their portfolios in the future. Millennials stated that
at least 40% of their current portfolios were made up of ETFs — more than any
other generation — with almost 80% stating they expected to grow that in the
future. Further, millennials were the largest segment to replace individual
securities with ETFs in their portfolios.
The study also
found that overall, investors remain positive on ETFs in periods of market
volatility, with 83% of respondents stating that ETFs provide them with
flexibility to react to short-term market swings and 73% stating they were more
interested in exploring smart beta ETFs during market volatility. Sixty-seven
percent allocated more to ETFs and 60% buy and sell ETFs more frequently during
periods of market volatility. These numbers are higher for millennials.
fueling growth in ETFs, Droller told ThinkAdvisor, and is why millennials are
more apt to use ETFs. In fact, 25% of all investors use either robo-advisors or
surprising finding in the study, Droller said, was gender differences. Men and
women were “pretty closely” aligned in the amount of ETFs used in the portfolio
(about a third overall), the difference, she said, was in experience, where 46%
of millennial male respondents were more apt to select ETFs for their portfolio
themselves, verses 33% of women. A similar differential was across all
generations, although boomers and matures were more likely to do their own
selection or use an advisor than to use technology.
The study also
found that low expense ratio still was the key factor in selecting ETFs, with
95% of respondents saying it was extremely or somewhat important. Total cost,
including commissions, expense ratio and bid/ask spread, was just as important.
Also in the 90%-and-up zone in importance was how well an ETF tracked to its
index, reputation of the ETF provider, and historical returns of the ETF.
the importance of commission-free ETF trading has grown over time. In 2015,
only 18% of participants said commission-free ETFs were “most important” to
them and they would move to a brokerage firm that offered them. Today that
number has grown to 31%. Again, millennials were most adamant about
commission-free ETFs, with 79% stating it was a most or very important factor.
were firm about not wanting additional fees, such as short-term redemption fees
for selling an ETF within 30 days of purchase; 91% said this was extremely or
somewhat important. Brokerages also needed to have a broad selection of ETF
categories and providers.
here for the original article from Think Advisor.