E*TRADE Study Reveals What Investors Worry About Most When Investing in ETFs
The biggest challenge among ETF investors is likely also the most fundamental: choosing which to purchase
1. Choosing the right ETF. With roughly 2,0001 ETFs to choose from, and more coming to market at a rapid pace, investors may be beginning to feel overwhelmed.
2. The complexity of ETFs. Investors can be challenged with understanding the increasingly complex strategies providers are bringing to the market as they seek to deliver on both wide and narrow objectives alike. Given this complexity, investors are concerned that the fund's actual performance may not align with expectations.
3. The tracking difference between the ETF and its underlying assets. Many ETFs aim to mirror the returns of a specific index. Yet in some cases ETF returns can lag the index's, which can come as an unwanted surprise.
"ETFs have experienced extraordinary growth in recent years, allowing investors easy access to virtually any asset class and investing strategy," said
- Millennials are more concerned than other age groups about delisting. This group is significantly more concerned about their ETFs getting delisted; however, it hasn't dissuaded Millennials from gravitating toward less traditional ETFs like commodity, style, foreign currency, derivative, or inverse funds.
- Boomers appear to be more concerned about choice. Boomers are most likely to gravitate to the types of ETFs that can serve as the bedrock of a retirement portfolio, such as U.S. market index and dividend funds. Given the critical role these funds can play in a retiree's investment mix, it is understandable that this age group tends to be more sensitive about picking the right ones.
- Gen Xers are more likely to look overseas and to smart beta for their fund selection. While Gen Xers show similar interest in mainstream ETFs like U.S. market index and dividend ETFs as other age groups, they show greater interest in foreign market index ETFs and smart beta ETFs than Boomers and Millennials.
1. Source: E*TRADE's ETF Screener, which allows customers to evaluate and compare virtually every ETF on the market
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About the Survey
This wave of the survey was conducted from
|Which of the following concerns you the most about investing in ETFs?|
|Choosing the right one||53%||43%||52%||64%|
|Will not perform as expected because the strategy is more complex than it appears||41%||38%||41%||42%|
|A tracking difference between the ETF and the index it means to follow||35%||37%||32%||33%|
|Large 'bid-ask spread' when buying and selling||28%||31%||30%||21%|
|The ETF getting delisted or liquidated||22%||36%||21%||10%|
|In what types of ETFs are you most interested?|
|U.S. market index||48%||41%||49%||54%|
|Sector- and industry-specific ETFs||28%||22%||28%||36%|
|Foreign market index||19%||17%||24%||15%|
|Style or market cap ETFs||17%||23%||13%||12%|
|Actively managed or smart beta ETFs||13%||13%||15%||11%|
|ETNs (exchange-traded notes)||7%||10%||5%||5%|
|Other (i.e. Vol ETFs, ETFs of ETFs, equal weight ETFs)||3%||2%||5%||1%|
"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.
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