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Investors Don't Understand ETFs, TD Ameritrade Survey Finds

By Danielle Andrus

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A survey released Monday by TD Ameritrade found 34% of investors have never heard of exchange-traded funds. Of those who have, 25% have a "basic understanding" of the products, and 15% own ETFs in their portfolios.

Nearly 40% of investors said their most important requirement when choosing an investment product, though, was to reduce risk through diversification. Also in the top five most important requirements were lower expenses and the ability to trade without commissions.

“ETFs may fulfill many of the stated needs that investors have told us are important to them,” Mike McGrath, director of ETFs for TD Ameritrade, said in a press release. “It’s a matter of awareness, education and simplifying the selection process."

"ETFs are still a relatively new asset class, and as awareness continues to increase, we believe the popularity of ETFs will increase as well,” he added.

TD Ameritrade announced earlier this month that it had launched an ETF Market Center designed for long-term investors and its affiliated RIAs that included 101 commission-free ETFs picked by Morningstar.