ETF Allure: Investors Have Nearly Doubled Allocations in Five Years

60% of Millennials Expect to Increase ETF Investments in Next Year

September 11, 2017 — SAN FRANCISCO–(BUSINESS WIRE)–Individual investors continue to demonstrate their affinity for exchange traded funds (ETFs), and ETF adoption appears to be headed for exponential growth in the years to come, according to the ETF Investor Study by Charles Schwab & Co., Inc.

On average, ETF investors say more than a quarter of their portfolios (27%) are currently in ETFs, up from just 16% in 2012. Looking ahead, more than four in 10 ETF investors (42%) say ETFs will be the primary investment vehicle in their portfolios in the future – a sharp increase from 2016 (28%) – and investors expect to have one-third (33%) of their portfolios in ETFs in five years.

This seventh annual survey explores the attitudes and behaviors of more than 1,200 ETF investors, more than one-third of whom said they would put more than $50k into ETFs if given an extra $100K to invest today, up from 28% who said the same thing last year.

Confidence in the versatile ETF

“It has been fascinating to watch attitudes toward ETFs evolve over the seven years we’ve done this survey,” said Heather Fischer, Vice President, ETF & Mutual Fund Platforms at Charles Schwab. “Each year, investors tell us that ETFs play an even greater role in their portfolios, and all signs point to that growth continuing,” she observed. “As investors have become more familiar with the versatility of ETFs, their confidence levels have grown. Half of ETF investors consider their understanding of ETFs at an intermediate level, and almost all (93%) are now fully confident in their ability to choose an ETF that is right for their investment objective,” she noted.

Millennials are ETF obsessed

A generational breakdown of the survey data shows that more than half of Millennials (56%) say ETFs are their investment vehicle of choice, more than any other generation. Sixty percent of Millennials surveyed expect to increase investments in ETFs in the next year, and most (63%) expect ETFs to be the primary investment vehicle in their portfolio in the future.

Nearly 60% of Millennials say they use ETFs to reach long-term goals such as building wealth and saving for retirement, which is consistent with older generations. However, Millennials are much more likely to consider holding only ETFs rather than solely investing in individual securities.


MillennialsGen XBoomersMatures
ETFs are investment vehicle of choice42%56%44%30%23%
Expect to increase investments in ETFs in next year45%60%48%29%25%
Expect ETFs to be primary investment vehicle in the future42%63%45%23%17%
Use ETFs to reach long-term goals59%59%58%59%57%
Would consider holding only ETFs instead of individual securities43%62%47%24%23%


“Millennials continue to lead the charge when it comes to ETF adoption,” said Fischer. “Millennials have grown up with ETFs, and because of this familiarity they seem to be more comfortable than other generations in embracing them as their investment vehicle of choice – and enjoying the benefits of low costs, tax efficiency and transparency.”

ETF investors test the waters with socially responsible investing (SRI)

While only one in 10 ETF investors is currently invested in socially responsible investments, there appears to be growing interest in these strategies. Almost half of ETF investors (46%) believe it is important to invest in socially responsible funds because they want their investments to align with their beliefs, and half (51%) would invest more in these strategies if more SRI product education was offered.

Socially responsible investing has already gained traction among Millennial ETF investors, with almost half (48%) actively seeking out funds that use SRI strategies, and 63% saying they believe SRI strategies can help them reach their investing goals.


MillennialsGen XBoomersMatures
Actively seeks out funds that use SRI strategies30%48%32%14%9%
It’s important to invest in socially responsible funds because I want my investments to align with my beliefs/interests46%60%50%36%27%
I think SRI strategies can help me reach my investing goals47%63%50%36%23%

Cost is king

When choosing an ETF, investors prioritize a low expense ratio (62%) and total cost (60%) above all else. When evaluating brokerages, the importance ETF investors place on the ability to trade ETFs commission-free has risen significantly over the last five years. Fifty-five percent said the ability to trade ETFs without commissions or other brokerage fees is the most important or a very important consideration, compared to 38% in 2012.

“ETF investors continue to demonstrate a strong desire for cost-effective ways to meet their investing goals,” Fischer said. “While costs have been trending downward across the industry, it’s clear that ETF investors still keep an eye on what they’re paying.”






About the Study
The 2017 ETF Investor Study by Schwab is the seventh installment of an annual online survey of more than 1,200 individual investors between the ages of 25-75 with at least $25,000 in investable assets who have purchased ETFs in the past two years. Conducted by Koski Research from June 6 – July 15, 2017, the study has approximately a three percent margin of error. Survey respondents were not asked to indicate whether they had accounts with Schwab. All data is self-reported by study participants and is not verified or validated.
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