Millennials are Mad for ETFs, Says New Schwab Study

Exchange Traded Funds (ETFs) are the investment vehicle of choice for 91% of Millennial investors according to the ETF Investor Study by Charles Schwab & Co., Inc. Millennials say 42% of their portfolios are currently in ETFs, and more than half (56%) of investors in that generation say they have already replaced all individual securities in their portfolios with ETFs. Nearly 80% of Millennials see ETFs as their primary investment vehicle in the future. Looking ahead, nearly three quarters (74%) of Millennials surveyed expect to increase their ETF investments in the next year and 54% say they would consider placing their entire portfolio in ETFs in the same time frame.

ETF Sentiment   2017 2018
Say ETFs are investment vehicle of choice All ETF Investors 
Millennials
N/A
N/A
72%
91%
See ETFs as primary investment type in future All ETF Investors
Millennials 
42%
63%
55%
79%
ETF Holdings   2017 2018
% of portfolio already in ETFs All ETF Investors 
Millennials
28%
36%
34% 
42%
Have replaced all individual securities in portfolio with ETFs All ETF Investors 
Millennials
N/A
N/A
32%
56%
ETF Behavior   2017 2018
Expect to increase ETF investments in next year All ETF Investors 
Millennials
45%
60%
54%
74%
Would consider placing their entire invesment portfolio in ETFs in next year (excluding cash holdings) All ETF Investors 
Millennials
N/A
N/A
31%
54%

“It is striking after eight years of conducting this study to see investor appetite for ETFs still going strong,” said 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.”

A deeper look: ETFs and the current market environment

The return of volatility to financial markets in 2018 has thus far not dampened investor interest in ETFs – just the opposite. More than 80% 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%) 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%).

  All ETF Investors Millennials
(age 25-37)
Gen X
(age 38-53)
Boomers
(age 54-72)
Matures
(age 73+)
Say that ETFs provide the flexibility needed to react to short-term market swings 83% 95% 87% 73% 59%
Expect to allocate more to ETFs during periods of market volatility 67% 89% 79% 41% 28%
More interested in exploring smart beta ETFs during periods of market volatility 73% 92% 81% 53% 33%

A deeper look: views by gender

Examining the results by gender revealed 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%) than women (29%) 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%) are somewhat more likely than men (52%) to consider such a move.

Generational gender differences do exist, however. While 44% of Millennial men describe themselves as experienced compared to 40% of Millennial women, just 26% of all female investors consider themselves experienced compared to 36% of male investors. 

  All ETF
Investors

Women

Men
Percent of portfolio currently invested in ETFs (on average) 34% 33% 34%
Expect to increase investments in ETFs in next year 54% 57% 54%

A deeper look: Technology fuels ETF growth

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.

Most of my ETFs are selected... All ETF
Investors

Millennials

Gen X

Boomers

Matures
...by an automated investing platform (e.g., robo-advisor) 8% 12% 11% 3% 3%
...using a portfolio-building tool designed for self-directed investors 17% 26% 20% 7% 2%
...by an advisor 29% 22% 22% 36% 48%
...by myself 46% 40% 46% 52% 47%
Most of my ETFs are selected... Men Women
...by an automated investing platform (e.g., robo-advisor) 6% 11%
...using a portfolio-building tool designed for self-directed investors 17% 19%
...by an advisor 26% 33%
...by myself 51% 37%


To review the full study, click here.


About the Study

The 2018 ETF Investor Study by Schwab is the eighth installment of an annual online survey of 1,500 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 April 28 – May 15, 2018, 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.

About Schwab

At Schwab, we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity.

Disclosures

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