A new survey by Schwab Asset Management indicates market volatility hasn't quelled investor interest in exchange-traded funds.
For two weeks in June, Schwab Asset Management surveyed 2,000 investors between the ages of 25 and 75 who had at least $25,000 in investable assets. Half of those surveyed had bought or sold ETFs over the past two years.
Of those who had already traded ETFs, nearly one-third said they had invested more money into ETFs in the first half of this year, while only a fifth took money out. About half said that market disruptions—including equity volatility, rising interest rates, and high inflation—did not impact how they invested in ETFs.
What’s more, 93% expect to purchase additional ETFs in the next few years, 80% said ETFs remain their vehicle of choice (up from 71% just two years ago), and 71% said the top reason for buying ETFs was that they are “easy to buy and sell.” In fact, ETF investors expect that 40% of their portfolios will be allocated to ETFs in the next five years.
Even among non-ETFs investors, 72% said they are interested in learning more about ETFs, and 41% are “somewhat or very likely” to invest in ETFs in the next two years.
“Sustained interest among current ETF investors combined with interest from those who have never invested in ETFs is a very promising sign for more growth ahead,” David Botset, managing director and head of equity product management and innovation at Schwab Asset Management, said in a prepared statement.
“ETF investors have continued adding ETFs to their portfolios at a strong clip over the last 10-plus years,” said Botset.
When it comes to specific types of ETFs, 56% of ETF investors said they are looking to invest more in equities, 47% emphasized fixed-income securities, another 47% cited “real assets,” and 46% said cryptocurrencies—all via ETFs.
Sixty-seven percent feel it’s “extremely important” to have more control over their investments, and half want their investments aligned with their personal beliefs and/or values. To underscore the point, 29% said they would divest from companies that don’t align with their values.
Overall, ETF investors are “interested in exploring ways to tailor their investments to their personal situations, goals, and preferences,” said Botset. “For some, personalization goals can be met by investing in ETFs that align with their preferences, but for others, new solutions such as direct indexing may offer a more refined approach to meeting their investment and personalization objectives.”
Direct indexing refers to holding the individual securities that make up an ETF, to take advantage of greater personalization and potential tax benefits. For instance, investors could consider selling individual securities at a loss to offset capital gains.
The study also suggested a relationship between age and ETF interest. Millennials reported having 41% of their portfolios in ETFs, Gen Xers (those born between 1965 and 1985) have 33% and baby boomers (born between 1946 and 1964) have just 19%.
“The millennial generation’s confidence in selecting and [using] ETFs is high,” said Botset.
The study was conducted by Logica Research.