Study finds younger, confident investors attracted to ETFs
Exchange traded funds have been gaining popularity over many years and a new study delves into who’s buying them.
It reveals that ETF investors tend to be younger households than those who hold mutual funds outside of retirement accounts. They also tend to be confident, and self-reliant.
The joint study from the Investment Company Institute and Strategic Business Insights discovered that 21% of ETF households were headed by someone under 40 compared with 15% of retail mutual fund households.
Conversely, while 52% of retail mutual households were headed by someone aged 60 or older, just 36% of ETF households were.
“The use of ETFs has grown significantly in the 25 years since they were introduced, and they continue to be a popular way to access stock investing,” said Sarah Holden, ICI senior director of retirement and investor research. “This growth reflects ETF households’ willingness to take financial risks, and 30% of ETF households indicate they enjoy learning about different investment opportunities.”
More than a third of ETF households had children living at home compared to 26% of retail mutual fund households. While 38% of mutual fund households were retired, this fell to 24% for ETFs.
Nine percent of ETF households were younger, single with no children, and not retired, compared with only 4% of retail mutual fund households.
Willing to take risks, better educated
ETF households were also found to take at least moderate financial risks – 83% compared to 78% of mutual fund households and 58% of all US households.
Those holding ETS also tend be more highly educated (66% college degree vs. 56% of mutual fund holders) and more aware of Robo-advisors (19% vs. 7%) although only 11% of ETF households use them and just 6% said they would in the future.
“ETF households are self-assured and self-reliant when making their financial decisions,” said Larry Cohen, director of SBI’s consumer financial decisions group. “Thirty-two percent of ETF households used the internet to research their own financial decisions and 23% indicated they have become more knowledgeable about savings and investments over the past several years. Combined, this helps them feel more qualified and secure when making their investment choices, often investing in stocks.”
Note:
The report defines ETF households as those currently owning ETFs outside of retirement accounts or those that had purchased an ETF in the past two years. Retail mutual fund households are defined as households that do not own ETFs, but own stock or bond mutual funds outside of retirement plans at work or individual retirement accounts (IRAs).
