Investments in exchange-traded funds set a record last year, and 52% of U.S. investors plan to buy an ETF this year, BlackRock reported Wednesday.
BlackRock’s inaugural ETF Pulse Survey showed that 94% of U.S. financial advisors polled expect to invest in ETFs in client portfolios over the coming year. Eighty-two percent currently use the vehicles in the portfolios they manage.
A quarter of mainly younger investors already use ETFs, the survey found. These tend to be more engaged in managing their finances than the overall investment population, and more optimistic about their financial future.
“What’s encouraging is that people who like ETFs really like them,” Martin Small, head of U.S. iShares at BlackRock, said in a statement. “These are confident investors who plan to continue to put their cash to work in the markets with ETFs, and expect to keep it there for the long term.”
Kantar TNS, a research agency, conducted an online poll for BlackRock in September of 1,001 U.S. investors and 409 financial advisors.
ETF Benefits and Uses
The survey found that ETF investors are generally more active in the markets and hold 17% cash in their investment portfolios, compared with 29% cash held by non-ETF investors.
Of respondents currently invested in ETFs, 90% said they intended to allocate new investments to ETFs in 2017, and 79% said they felt positive about their financial future for 2017.
At present, 33% of millennials are invested in ETFs, compared with 25% of other investors on average, according to the survey results. Seventy percent of millennials said they planned to invest in ETFs in the next 12 months, versus 52% of other investors.
About half of investors said they did not have a particular bias toward active or passive investing. Among those who own ETFs, the vast majority said owning ETFs and mutual funds together in a portfolio could be beneficial.
Sixty-four percent of investors and 81% of advisors said they viewed ETFs as long-term or both short- and long-term investments. Both groups hold the funds for an average of five years, BlackRock said.
Some of the ways advisors and investors use ETFs: increasing diversification, core exposure to large market indexes and access to specific sectors. They use them to replace individual stocks and to replace mutual funds.
The survey found that both groups have high regard for ETFs’ cost benefits but have different views on other attractive features of these vehicles:
- Low management fees: 30% investors, 58% financial advisors
- ETFs’ ability to give specific investments: 29% investors, 41% advisors
- Tax advantages relative to mutual funds: 23% investors, 36% advisors
Curiosity About ETFs
A quarter of investors educated themselves about ETFs in 2016, as did more than three-quarters of financial advisors. This year, 49% of investors said they planned to learn more about ETFs.
Younger investors tend to be more proactive in informing themselves. Last year, 45% of millennial and 38% of Gen X investors took steps to learn about ETFs, compared with 24% of boomers and 16% of older investors. Fifty-eight percent of the younger cohort planned to continue doing so in 2017.
Financial advisors were older investors’ top source of ETF information, according to the poll, while younger ones relied more heavily on financial media sources.
These are ETF topics that interest surveyed investors in 2017:
- ETF risks (43%) and benefits (40%)
- How to evaluate (38%) and select (32%) ETFs that work for their goals
- Tax advantages (37%)
- ETF management fees (28%) and performance (28%)
— Check out 5 Trends in How Advisors Construct Portfolios on ThinkAdvisor.