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September 30, 2015 at 09:28 AM
A generation gap has emerged in the usage of exchanged-traded funds. According to Schwab’s 2015 ETF Investor Study released today at Morningstar’s ETF conference being held in Chicago. ETFs account for 41% of the portfolios of millennials compared with just 17% for boomers.
Moreover, 61% of millennials surveyed expect to increase their ETFs holdings next year compared with just 25% of boomers. The gap is even greater when looking at the role that ETFs play in their respective portfolios. Seventy percent of millennials view ETFs are a core investment vehicle in their future portfolios, while only 17% of boomers do.
“Millennials are doubling down on ETFs,” says Heather Fischer, vice president of Schwab’s ETF Platform, who spoke with ThinkAdvisor at the Morningstar ETF conference. Since millennials tend to be new to investing with a clean slate, they’re open to the latest new types of investment products, Fischer explained.
The Schwab study found that ETFs are becoming more popular among investors overall, comprising 21% of portfolios currently, up from 10% in 2012, and usage is expected to grow. Investors surveyed anticipate that ETFs will account for 25% of their portfolios in the next five years, and 34% expect ETFs will become a core part of their future portfolios.
“In the five years we’ve conducted this survey, we’ve witnessed an evolution in how investors think about the role that ETFs play in their portfolios,” said Fischer in a statement.“More investors are viewing ETFs as the foundational component of a well-diversified investment portfolio, and we think that sentiment will continue to grow.”
In addition, more investors are expected to use ETFs in ways that differ from their conventional use as an index substitute. which predominates today. Sixty-one percent of investors surveyed, for example, said they would consider using stock-based ETFs instead of individual stocks in the future, and 55% said they would consider substituting fixed income ETFs for individual bonds. The numbers for millennial were even higher: 77% and 69%, respectively.
