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Millennials are ‘mad’ for ETFs, says new Schwab study


Exchange Traded Funds (ETFs) are the investment vehicle of choice for 91 per cent of Millennial investors, according to the ETF Investor Study by Charles Schwab & Co.

Millennials say 42 per cent of their portfolios are currently in ETFs, and more than half (56 per cent) of investors in that generation say they have already replaced all individual securities in their portfolios with ETFs. Nearly 80 per cent of Millennials see ETFs as their primary investment vehicle in the future. Looking ahead, nearly three quarters (74 per cent) of Millennials surveyed expect to increase their ETF investments in the next year and 54 per cent say they would consider placing their entire portfolio in ETFs in the same time frame.
 
“It is striking after eight years of conducting this study to see investor appetite for ETFs still going strong,” says Heather Fischer, Vice President, ETF & Mutual Fund Platforms at Schwab. “Within a decade, we’ve seen ETFs grow to the point where investors now see them as a foundational investment vehicle. While this sentiment is particularly pronounced among Millennial investors, it is reflected strongly across generations and genders.”
 
According to the survey, the return of volatility to financial markets in 2018 has so far not dampened investor interest in ETFs – just the opposite. More than 80 per cent of all investors surveyed say they believe ETFs provide the flexibility they need to react to short-term market swings, and more than two-thirds (67 per cent) say they expect to allocate more to ETFs during periods of market volatility. Taking a generational view, Millennials report significantly higher levels of activity and interest in ETFs during periods of market volatility. Additionally, investors overall are more interested in exploring smart beta ETFs during periods of market volatility (73 per cent).
 
Examining the survey results by gender reveals that more often than not, men and women are closely aligned in their views about and adoption of ETFs. Male and female investors report that about a third of their portfolios are currently invested in ETFs and they plan to increase ETF investments in the next year at about the same rate. Slightly more men (32 per cent) than women (29 per cent) say they would consider placing their entire investment portfolio (excluding cash holdings) in ETFs within the next year. But over the next 10 years, women (56 per cent) are somewhat more likely than men (52 per cent) to consider such a move.
 
Generational gender differences do exist, however. While 44 per cent of Millennial men describe themselves as experienced compared to 40 per cent of Millennial women, just 26 per cent of all female investors consider themselves experienced compared to 36 per cent of male investors.
 
A quarter of investors are turning to automated investing platforms or portfolio-building tools designed for self-directed investors to select ETFs, with Millennials and women indicating they are early adopters of these platforms compared to other groups. Just over a quarter of investors rely on their advisors to select ETFs. Baby Boomers and mature investors are much more likely to use an advisor than younger generations, while women are somewhat more likely to work with an advisor than men.

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