ETF investors are not shying away from expected market volatility in the months to come. Instead, they intend to invest more money and ride out the storm, according to a new study by Charles Schwab.
The ninth annual 2019 ETF Investor Study by Schwab found that 61 percent of investors expect a turbulent market in the next six months, and 44 percent say they will put more money into ETFs as a result.
The study noted that 51 percent of respondents already have increased their allocations to ETFs in the past six months after increased market volatility, and expectations for volatility are also likely impacting their plans for the coming year.
Among the subset of investors who anticipate increased volatility, 73 percent expect to increase their ETF investments in the next year and 37 percent would consider placing their entire investment portfolio, excluding cash, into ETFs in the next year, the report said.
Domestic equity ETFs top the list (63 percent) of the ETF asset classes in which respondents said they plan to invest over the next year. Bonds and fixed income was second with 61 percent, followed by real assets at 58 percent and international equity at 41 percent.
Sixty-nine percent of investors chose technology as the top sector for ETFs, a particularly popular choice for millennials (74 percent) and Gen Xers (71 percent). Financial services were ranked second at 50 percent, followed by real estate at 45 percent and healthcare at 43 percent.
The report found that nearly three-quarters of those surveyed say now is a good time to invest in fixed-income ETFs. Millennials especially were bullish here, with 86 percent feeling good about fixed income.
Aside from the expected market volatility, ETF investors are optimistic that their investing goals will be met with ETFs. About two-thirds (68 percent) of all ETF investors surveyed plan to increase ETF investments in the next year, up from 54 percent in 2018. Sixty-three percent expect ETFs to be the primary investment type in their portfolios in the future, up from 55 percent in 2018.
As far as generations go, the report found that millennials are the most enthusiastic ETF investors, but Gen Xers are not far behind. Forty-two percent of millennial portfolios are currently in ETFs, on average, with Gen X portfolios at 34 percent.
Four in five millennials expect ETFs to be the primary investment in their portfolio in the future. Three in five Gen Xers expect the same. Millennials also are the most likely to consider placing their entire portfolio in ETFs in the next year (44 percent), compared to 26 percent of Gen Xers and only 9 percent of baby boomers, the study found.