ETF Allure: Investors Have Nearly Doubled Allocations to ETFs in Five Years

60% of Millennials Expect to Increase ETF Investments in Next Year

Thursday, September 7, 2017 5:00 am PDT

Dateline:

SAN FRANCISCO

Public Company Information:

NYSE:
SCHW
"It has been fascinating to watch attitudes toward ETFs evolve over the seven years we’ve done this survey"

SAN FRANCISCO--(BUSINESS WIRE)--Individual investors continue to demonstrate their affinity for exchange traded funds (ETFs), and ETF adoption appears to be headed for exponential growth in the years to come, according to the ETF Investor Study by Charles Schwab & Co., Inc. On average, ETF investors say more than a quarter of their portfolios (27%) are currently in ETFs, up from just 16% in 2012. Looking ahead, more than four in 10 ETF investors (42%) say ETFs will be the primary investment vehicle in their portfolios in the future – a sharp increase from 2016 (28%) – and investors expect to have one-third (33%) of their portfolios in ETFs in five years.

This seventh annual survey explores the attitudes and behaviors of more than 1,200 ETF investors, more than one-third of whom said they would put more than $50k into ETFs if given an extra $100K to invest today, up from 28% who said the same thing last year.

“It has been fascinating to watch attitudes toward ETFs evolve over the seven years we’ve done this survey,” said Heather Fischer, Vice President, ETF & Mutual Fund Platforms at Charles Schwab. “Each year, investors tell us that ETFs play an even greater role in their portfolios, and all signs point to that growth continuing,” she observed. “As investors have become more familiar with the versatility of ETFs, their confidence levels have grown. Half of ETF investors consider their understanding of ETFs at an intermediate level, and almost all (93%) are now fully confident in their ability to choose an ETF that is right for their investment objective,” she noted.

Millennials are ETF obsessed

A generational breakdown of the survey data shows that more than half of Millennials (56%) say ETFs are their investment vehicle of choice, more than any other generation. Sixty percent of Millennials surveyed expect to increase investments in ETFs in the next year, and most (63%) expect ETFs to be the primary investment vehicle in their portfolio in the future.

Nearly 60% of Millennials say they use ETFs to reach long-term goals such as building wealth and saving for retirement, which is consistent with older generations. However, Millennials are much more likely to consider holding only ETFs rather than solely investing in individual securities.

                     
   

All ETF
Investors

  Millennials   Gen X   Boomers   Matures
ETFs are investment vehicle of choice   42%   56%   44%   30%   23%
Expect to increase investments in ETFs in next year   45%   60%   48%   29%   25%
Expect ETFs to be primary investment vehicle in the future   42%   63%   45%   23%   17%
Use ETFs to reach long-term goals   59%   59%   58%   59%   57%
Would consider holding only ETFs instead of individual securities   43%   62%   47%   24%   23%
         

“Millennials continue to lead the charge when it comes to ETF adoption,” said Fischer. “Millennials have grown up with ETFs, and because of this familiarity they seem to be more comfortable than other generations in embracing them as their investment vehicle of choice – and enjoying the benefits of low costs, tax efficiency and transparency.”

ETF investors test the waters with socially responsible investing (SRI)

While only one in 10 ETF investors is currently invested in socially responsible investments, there appears to be growing interest in these strategies. Almost half of ETF investors (46%) believe it is important to invest in socially responsible funds because they want their investments to align with their beliefs, and half (51%) would invest more in these strategies if more SRI product education was offered.

Socially responsible investing has already gained traction among Millennial ETF investors, with almost half (48%) actively seeking out funds that use SRI strategies, and 63% saying they believe SRI strategies can help them reach their investing goals.

                     
   

All ETF
Investors

  Millennials   Gen X   Boomers   Matures
Actively seeks out funds that use SRI strategies   30%   48%   32%   14%   9%
It’s important to invest in socially responsible funds because I want my investments to align with my beliefs/interests   46%   60%   50%   36%   27%
I think SRI strategies can help me reach my investing goals   47%   63%   50%   36%   23%
         

Cost is king

When choosing an ETF, investors prioritize a low expense ratio (62%) and total cost (60%) above all else. When evaluating brokerages, the importance ETF investors place on the ability to trade ETFs commission-free has risen significantly over the last five years. Fifty-five percent said the ability to trade ETFs without commissions or other brokerage fees is the most important or a very important consideration, compared to 38% in 2012.

“ETF investors continue to demonstrate a strong desire for cost-effective ways to meet their investing goals,” Fischer said. “While costs have been trending downward across the industry, it’s clear that ETF investors still keep an eye on what they’re paying.”

About the Study

The 2017 ETF Investor Study by Schwab is the seventh installment of an annual online survey of more than 1,200 individual investors between the ages of 25-75 with at least $25,000 in investable assets who have purchased ETFs in the past two years. Conducted by Koski Research from June 6 – July 15, 2017, the study has approximately a three percent margin of error. Survey respondents were not asked to indicate whether they had accounts with Schwab. All data is self-reported by study participants and is not verified or validated.

About Schwab

At Schwab, we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity.

A leader in the retail ETF market, as of June 30, 2017, Schwab had $355 billion in ETF assets custodied on its platform. More information is available at www.aboutschwab.com. Follow us on Twitter, Facebook, YouTube and LinkedIn .

Disclosures

Through its operating subsidiaries, The Charles Schwab Corporation (NYSE:SCHW) provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; compliance and trade monitoring solutions; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com.

Brokerage Products: Not FDIC Insured • No Bank Guarantee • May Lose Value

Investment returns will fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost. Unlike mutual funds, shares of ETFs are not individually redeemable directly with the ETF. Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV).

© 2017 Charles Schwab & Co., Inc., All rights reserved. Member SIPC

(0917-7FUR)

Contact:

Charles Schwab
Kaitlyn Downing, 212-403-9240
kaitlyn.downing@schwab.com

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