The future looks bright for the ETF industry, with ‘Millennials’ embracing ETFs more than their older counterparts, according to a survey of self-directed retail investors by BlackRock, the parent of iShares.
Martin Small, head of US iShares at BlackRock.
The survey found that 42% of Millennials (those aged 21 – 35) and 37% of ‘Silvers’ (aged 71+) use ETFs as investment vehicles, up from 33% and 22% respectively last year. ‘Baby Boomers’ (aged 50 – 70), however, lag behind at 27%.
Martin Small, head of iShares US at BlackRock, commented, “People have evolved from ‘what are ETFs?’ to ‘how do I use them to meet my investment goals?’ That’s a tremendous shift from a few years ago and a reflection of greater awareness, and the innovative ETFs coming to market.”
In reference to the lagging Baby Boomer ETF usage, Small stated that “they [Baby Boomers] may not realize that ETFs are as easy to trade as stocks and available in virtually every market segment imaginable. As a result, many pre-retirees and investors in their early years of retirement may be overlooking the ETF revolution.“
Women investors also showed a significant increase in ETF adoption from last year, rising from 23% to 30%.
A third of investors hold ETFs, up from a quarter last year, the survey showed. And, for those who already own ETFs, 88% plan to continue or increase their holdings.
BlackRock highlights that the demand for lower costs, diversification and international sector exposures have all driven the increased use of ETFs as long-term investment vehicles. Only one in four investors believe they can choose active fund managers who can outperform the market, which bodes well for passive ETF adoption rates. However, Small suggests that “there are many ETFs that replicate strategies used by active managers”.
The research showed that perhaps unsurprisingly, nearly two-thirds of Silvers who use ETFs do so for income generation.
Other findings reveal that 65% of all ETF users see a mixture of ETFs and mutual funds as the best approach to building a portfolio, while only 23% of investors recognize ETFs as being more tax efficient than mutual funds. Only 32% know ETFs can be used for bond investing, showing that while ETF adoption is growing, greater education is still needed.