What You Need to Know
- Fixed income comprises 45% of younger investors' portfolios, according to a Schwab survey.
- Nine in 10 millennials reported that ETFs were their vehicle of choice.
- A significant driver of growth for ETFs may come from investors who have yet to buy their first one.
Millennial investors in exchange-traded funds are gravitating toward fixed income at a more rapid rate than older peers, according to a study released Thursday by Schwab Asset Management.
Not only are millennials more interested in learning about fixed income, but also more of them plan to invest in fixed income ETFs in the next year. The asset class comprises 45% of their portfolios, compared with 37% of Gen Xers’ and 31% of baby boomers’ portfolios.
Millennials’ love of ETFs continues to outpace that of other generations across several measures. Nine in 10 millennials reported that ETFs were their investment vehicle of choice, and 22% plan to increase their investments in ETFs in the next year. This compares with 78% of Gen Xers whose top choice is ETFs and 10% who will increase their investments, and 67% and 3% of baby boomers.
Millennials said ETFs made up 37% of their investment portfolios, well above the 25% of Gen X portfolios and 21% of boomers’.
Moreover, 99% of millennials in the study said they are extremely confident they can choose an ETF that will help achieve their investment goals.
Logica Research conducted an online survey in June among 2,200 individual investors between the ages of 25 and 75 with at least $25,000 in investable assets, 1,000 of whom have bought or sold ETFs in the past two years and 1,000 of whom have not done so within the past two years.
ETF Investors Stay the Course
According to the study, ETF investors this year are staying the course or finding opportunities to increase investments in ETFs.
“ETF investors have navigated two dramatically different market environments over the last two years, yet their approach to investing and affinity for ETFs has remained extremely consistent,” David Botset, head of equity product management and innovation at Schwab Asset Management, said in a statement. “As we’ve seen historically, millennials take a unique approach to how they invest, and that holds true for their approach to fixed income.”
Schwab Asset Management’s long-running study of ETF investors found that cost remains the top factor when choosing an ETF, and overall affinity for ETFs remains high.
Eighty percent of ETF investors overall agreed that ETFs are their investment of choice. The overwhelming majority said they are likely to consider buying an ETF in the next two years, and about half have increased their allocations to ETFs in 2023. Still, ETFs as a share of portfolios has come down from 33% last year to 29%.
Fifty-five percent of ETF investors said they would invest in equities over the next year, 47% will invest in bonds/fixed income and 43% will invest in real assets.