E*TRADE Study of Experienced Investors Bucks the Traditional Understanding of ETF Use
Traditionally thought of as buy-and-hold investing products, in reality, many ETFs are created to be—and exclusively used as—vehicles for active traders
- Two out of five investors believe ETFs are better suited for short-term trading than long-term investing.
- Only about one in four investors believe ETFs are entirely or mostly better suited for long-term investing over short-term trading.
- Millennials are more likely than Boomers to gravitate towards the less popular, yet more opportunistic ETFs like foreign currency, derivative, and inverse ETFs.
- The top three types of ETFs selected by the total surveyed population remained consistent q/q with U.S. market index ETFs, dividend ETFs, and sector- and industry-specific ETFs.
"While ETFs are traditionally associated with long-term investing solutions that mirror indexes, the data suggests a far more nuanced picture," said
- U.S. market index ETFs remain popular for investors and traders alike. U.S. market index ETFs remain the most popular ETF sector for the second straight quarter, according to the survey. These ETFs often serve as the core foundation of a balanced portfolio, offering investors broad access to the U.S. market, and often come with relatively low expense ratios. However, while U.S. market index ETFs are often used as passive vehicles, they are also among the most frequently traded,1 favored by active investors for their liquidity and efficiency.
- ETF usage is not either/or. Three out of five investors feel ETFs are either somewhat long-term or somewhat short-term vehicles, which suggest many may be employing a hybrid strategy, in which they utilize passive ETFs to capture general market returns, as well as vehicles like sector, volatility, and style ETFs to capitalize on short-term themes.
- For younger investors, time is on their side to seize opportunity. Foreign market index, foreign currency, derivative, and inverse ETFs are more popular among younger investors than older investors. This could be attributable in part to the higher risk tolerances developed by some younger investors as a result of their longer time horizons.
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About the Survey
This wave of the survey was conducted from
|If you had to choose, do you believe that ETFs are more for short-term trading or long-term investing strategies?|
|TOTAL Q4'16||AGE: 25-34||AGE: 35-54||AGE: 55+|
|In what types of ETFs of are you most interested?|
|TOTAL Q4'16||TOTAL Q3'16||AGE: 25-34||AGE: 35-54||AGE: 55+|
|U.S. market index ETFs||48%||48%||40%||50%||54%|
|Sector- and industry-specific ETFs||30%||31%||27%||30%||39%|
|Foreign market index ETFs||19%||15%||24%||19%||14%|
|Style or market cap ETFs||13%||13%||15%||12%||13%|
|Actively managed or smart beta ETFs||13%||12%||14%||13%||13%|
|Foreign currency ETFs||12%||10%||15%||12%||4%|
|ETNs (exchange-traded notes)||7%||6%||8%||6%||3%|
|Other (i.e., vol. ETFs, ETFs of ETFs, equal weight ETFs)||2%||3%||3%||1%||3%|
"Millennials" defined as age 25-34 // "Gen X" defined as age 35-54 // "Baby Boomers" defined as age 55+
The information provided herein is for general informational purposes only and should not be considered investment advice. Past performance does not guarantee future results. ETFC-G
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