From their proclivity toward social media presence to their spending habits, Millennials have received a lot of publicity as a generation, both positive and negative. Data suggest that those same individuals in the 18 to 34 age bracket also like exchange-traded funds.
Charles Schwab Corp SCHW's 2015 ETF Investor Study, the company's fifth iteration of the study, shows that Millennials are embracing ETFs more widely than other generations.
“The prominence of ETFs within an overall investment strategy is particularly pronounced among younger ETF investors. Millennials (aged 25-35) say that ETFs currently make up an average of 41 percent of their portfolios, compared to a 21 percent share among all investors. Sixty-one percent of Millennials plan to increase their investments in ETFs in the next year,” according to the Schwab study.
Study Results
The 2015 ETF Investor Study by Schwab surveyed over 1,000 investors ages 25 to 75 between late July and early August. To be eligible for the study, participants had to have at least $25,000 in investable assets and had purchased an ETF in the past two years.
While financial services companies are smitten by Millennials and the potential flood of new assets the demographic could bring to ETFs, data from the Schwab study suggest ETFs are being more widely embraced across a broad swath of age groups.
For example, in 2012, among investors that owned ETFs, just 5 percent allocated 50 percent or more of their portfolios to ETFs, while just 11 percent devoted 25 percent to 49 percent of their portfolios to ETFs, according to Schwab data. Those numbers have surged to 10 percent and 15 percent.
Sentiment In Action
Millennials think the future of ETFs is bright. Seventy percent of Millennials see ETFs as the core investment type in their portfolio in the future. Significantly, 77 percent say they would consider using stock-based ETFs instead of individual stocks in their portfolios and 69 percent “would consider using fixed income ETFs instead of individual bonds,” said Schwab.
Millennials' views on ETFs, assuming they are able to acquire the capital to put these views into action, bode well for the already booming ETF industry.
Sixty-one percent of Millennials expect to increase their ETF allocations over the next year, while 70 percent see ETFs as a core portfolio building blocks, according to Schwab.
A staggering 77 percent of Millennials would consider equity ETFs over single stocks, while 69 percent would mull owning fixed income ETFs over individual bonds.
California-based Schwab, the seventh-largest U.S. ETF issuer with $34.3 billion in ETF assets under management as of September 25, also highlighted investors' views on commission-free ETF trading. Schwab's ETF OneSource is the largest commission-free ETF platform.
“A resounding 41 percent of ETF investors believe that commission-free ETF offerings are game-changing for investors. And, when evaluating the overall cost of an ETF, 87 percent believe that trade commissions are important. In fact, 28 percent only invest in commission-free ETFs at their brokerage firm and 17 percent say they would move their account to a different brokerage firm to gain access to commission-free ETFs,” said Schwab.
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