It’s no surprise that ETFs are the product of choice for millennials, at least not to Charles Schwab, whose 2018 ETF Investor study released in mid-June showed 96% of millennials surveyed see ETFs as a necessary part of their portfolio.
“It’s a trend we’ve seen with millennials, but the surprise is how the numbers continue to trend upward to the point that when millennials think investing, they think ETFs, which are becoming synonymous for that generation,” said Kari Droller, Schwab vice president of third-party platforms for mutual funds and ETFs.
The annual study, which Schwab has done for eight years, is to get a sense of how customers are engaging with and sentiments around ETFs, she said. As a comparison, while 91% of millennials strongly or somewhat agreed that ETFs were their investment vehicle of choice, that number dropped to 80% of Gen Xers and 54% of baby boomers surveyed.
The online study of 1,500 ETF investors found 55% of all participants expected ETFs to be a primary investment in their portfolios in the future. Millennials stated that at least 40% of their current portfolios were made up of ETFs — more than any other generation — with almost 80% stating they expected to grow that in the future. Further, millennials were the largest segment to replace individual securities with ETFs in their portfolios.
The study also found that overall, investors remain positive on ETFs in periods of market volatility, with 83% of respondents stating that ETFs provide them with flexibility to react to short-term market swings and 73% stating they were more interested in exploring smart beta ETFs during market volatility. Sixty-seven percent allocated more to ETFs and 60% buy and sell ETFs more frequently during periods of market volatility. These numbers are higher for millennials.
Technology is fueling growth in ETFs, Droller told Investment Advisor, and is why millennials are more apt to use ETFs. In fact, 25% of all investors use either robo-advisors or portfolio-building tools in self-directed accounts.