Three in five ETF investors expect market volatility to increase in the next six months, and more than two in five say they will put more money into ETFs as a result, according to a study released Friday by Charles Schwab & Co.
“After a decade of market gains, ETF investors now see clouds on the horizon and are planning to use ETFs to help them weather the storm,” Kari Droller, vice president of third-party mutual fund and ETF platforms at Schwab, said in a statement.
“It’s clear that ETFs serve a unique role for investors, as the foundation of a portfolio and also as a vehicle that enables them to be nimble.”
Logica Research conducted the ninth installment of Schwab’s annual ETF investor study from Feb. 20 to March 4 among 1,500 individual investors 25 to 75 with at least $25,000 in investable assets who had bought or sold ETFs in the past two years.
Sixty-three percent of study participants said they planned to invest in domestic equity ETFs over the next year. For sector ETFs, technology was the top choice for 69% of all respondents and 74% of millennials. Half of respondents chose financial services, and 45% real estate.
Some three-quarters of those surveyed said now was a good time to invest in fixed income ETFs.
Because of increased market volatility, 51% of respondents said they had increased their allocations to ETFs in the past six months. Seventy-three percent of these said they expected to increase their ETF investments over the next year, and 37% said they would consider placing their entire investment portfolio, excluding cash, into ETFs in the next year.
The survey found that ETF investors continued to use ETFs to meet their investing goals, with 68% planning to increase investments in the next year, up from 54% in 2018.
Sixty-three percent said they expected ETFs to be the primary investment type in their portfolios in the future, up from 55% last year.
Millennials in the survey were the most enthusiastic ETF investors by generation, with 42% on average saying their portfolios were currently in ETFs. Gen Xers followed at 34%.
Four in five millennials and three in five Gen Xers said they expected ETFs to be the primary investment in their portfolios. In addition, 44% of millennials said they would consider placing their entire portfolio in ETFs in the next year, compared with 26% of Gen Xers and only 9% of baby boomers.
ETF investors in the study said total cost, the ETF provider’s reputation and how well an ETF tracks its index were the most important considerations when choosing an ETF.
When evaluating brokerages that offer commission-free ETFs, investors said that before anything else, they looked for a broad selection of ETF categories and no additional fees.