The exchange traded fund vehicle is quickly becoming a mainstay in the investment community, gaining popularity as a core component in many diversified portfolios.
Investors show a 22% increase in demand for ETFs, with almost one in ten now holding at least 50% of their portfolios in ETFs, double what it was last year, according to Charles Schwab’s 2013 ETF Investor Study.
“Demand is up across the board, and investors who own ETFs appear to be more interested in the product than ever,” Beth Flynn, vice president of ETF platform management at Charles Schwab, said in a note. “We’re seeing less discussion of ‘if’ and more about ‘how’ investors will buy and use ETFs. We’re seeing an upward shift in sophistication among ETF investors, and a hunger to learn more.”
ETFs continue to attract investment interest as investors point to commission costs and expense ratio fees as critical factors.
About 94% of investors now know that an ETF’s total cost is important. Investors are beginning to show concerns about redemption fees and other hidden fees, with 71% saying it is extremely important, followed by 61% pointing to low expense ratios and 54% indicating trade commissions. [Low Fees Help ETFs Attract Affluent Investors]
Three in ten investors are beginning to show greater interest in learning about ETFs in order to invest in the vehicle, especially for tax purposes.
“Investors are ready to move beyond a rudimentary understanding of ETFs and get into the nitty gritty details on things like costs and taxes,” Flynn added. “We’re turning a corner on ETF education which is very good news.”
Looking at the investor base, 53% say ETFs are suited for long-term positions, whereas 40% believe ETFs are better used for active traders.
The 2013 ETF Investor Study is a survey of more than 1,000 investors between the ages of 25 to 75 with at least $25,000 in investible assets and who have invested in ETFs over the past two years or are considering ETFs in the next two years.
For more information on ETF asset flows, visit our ETF performance reports category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.