BlackRock survey shows it’s not an 'age thing'
They’re in their peak investing years but one group of investors appear to be missing out on the growth of ETFs according to a survey by BlackRock.
Just 27% of Boomers (52-70 years old) are investing in ETFs compared to 42% of Millennials (21-35). But this is not purely an ‘age thing’ because ETFs are being used by 37% of ‘silvers’ (over 71).
“Boomers, who came of age during one of the most extended bull markets in memory, may still be holding onto a stock-picking mentality,” says Martin Small, head of U.S. iShares at BlackRock. “They may not realize that ETFs are as easy to trade as stocks and available in virtually every market segment imaginable. As a result, many pre-retirees and investors in their early years of retirement may be overlooking the ETF revolution.”
Overall adoption reaches record high
The adoption of ETFs has reached record levels with 1 in 3 investors using them; and those set to buy ETFs in the next year is 62% (up from 52% last year) including 85% of millennials and 64% of Gen-Xers.
Among those who already hold ETFs, 88% say they plan to continue.
“People have evolved from ‘what are ETFs?’ to ‘how do I use them to meet my investment goals?’ That’s a tremendous shift from a few years ago and a reflection of greater awareness, and the innovative ETFs coming to market,” says Small. “Today, iShares is able to index exposures with greater quality and precision that we could only dream of just a decade ago.”
Most investors value EFT, mutuals mix
Among respondents to BlackRock’s survey, most investors see holding a mix of exchange-traded and mutual funds as the best strategy.
Only 1 in 10 thought there’s no need for mutual funds if they hold ETFs and a quarter are happy with just mutuals.
However, only 1 in 4 respondents believe they can pick active managers who can outperform the market.
“The whole active-passive argument is outmoded,” says Small. “Today, investors have ETFs and mutual funds, and they can both be used together. There are many ETFs that replicate strategies used by active managers, and many active managers that hug the index. More to the point, every decision is active, whether it’s where and when to invest, which vehicle to use or how much you’re willing to pay for the goal you’re seeking. There is no such thing as a passive portfolio.”
Knowledge gap
The survey reveals some key areas of knowledge lacking among investors and explaining reluctance on ETFs.
Many are not aware of how ETFs can generate income with around half using individual stocks for this purpose; the exception is the older cohort with two thirds of over 71s using ETFs for income generation.
There is also a lack of understanding of the tax efficiency of the funds and that they can be used to buy bonds.
“Even with the explosive growth of ETFs in the U.S. and around the world, they are still a relatively small part of the investable universe,” says Small. “We believe this is just the beginning, as more people seek efficient, low-cost ways to build out their core portfolios, diversify internationally, target niche markets and put their hard-earned cash to work.”
Just 27% of Boomers (52-70 years old) are investing in ETFs compared to 42% of Millennials (21-35). But this is not purely an ‘age thing’ because ETFs are being used by 37% of ‘silvers’ (over 71).
“Boomers, who came of age during one of the most extended bull markets in memory, may still be holding onto a stock-picking mentality,” says Martin Small, head of U.S. iShares at BlackRock. “They may not realize that ETFs are as easy to trade as stocks and available in virtually every market segment imaginable. As a result, many pre-retirees and investors in their early years of retirement may be overlooking the ETF revolution.”
Overall adoption reaches record high
The adoption of ETFs has reached record levels with 1 in 3 investors using them; and those set to buy ETFs in the next year is 62% (up from 52% last year) including 85% of millennials and 64% of Gen-Xers.
Among those who already hold ETFs, 88% say they plan to continue.
“People have evolved from ‘what are ETFs?’ to ‘how do I use them to meet my investment goals?’ That’s a tremendous shift from a few years ago and a reflection of greater awareness, and the innovative ETFs coming to market,” says Small. “Today, iShares is able to index exposures with greater quality and precision that we could only dream of just a decade ago.”
Most investors value EFT, mutuals mix
Among respondents to BlackRock’s survey, most investors see holding a mix of exchange-traded and mutual funds as the best strategy.
Only 1 in 10 thought there’s no need for mutual funds if they hold ETFs and a quarter are happy with just mutuals.
However, only 1 in 4 respondents believe they can pick active managers who can outperform the market.
“The whole active-passive argument is outmoded,” says Small. “Today, investors have ETFs and mutual funds, and they can both be used together. There are many ETFs that replicate strategies used by active managers, and many active managers that hug the index. More to the point, every decision is active, whether it’s where and when to invest, which vehicle to use or how much you’re willing to pay for the goal you’re seeking. There is no such thing as a passive portfolio.”
Knowledge gap
The survey reveals some key areas of knowledge lacking among investors and explaining reluctance on ETFs.
Many are not aware of how ETFs can generate income with around half using individual stocks for this purpose; the exception is the older cohort with two thirds of over 71s using ETFs for income generation.
There is also a lack of understanding of the tax efficiency of the funds and that they can be used to buy bonds.
“Even with the explosive growth of ETFs in the U.S. and around the world, they are still a relatively small part of the investable universe,” says Small. “We believe this is just the beginning, as more people seek efficient, low-cost ways to build out their core portfolios, diversify internationally, target niche markets and put their hard-earned cash to work.”
