Like cassette tapes or electric typewriters, mutual funds feel increasingly old-fashioned and suboptimal to younger investors. That’s the conclusion of the 10th edition of Charles Schwab & Co.’s ETF Investor Study.
That’s not to say that mutual funds are extinct. Exchange-traded funds have their own challenges with today’s consumers, according to the survey. Most notably some 46 percent of respondents say they don’t understand ETFs, while 10 percent say they find them risky and complicated.
Still, the momentum is with ETFs, the survey said.
-- respondents said they expect the share of ETFs in their portfolios to grow from an average of 29 percent today to 38% during the next five years
-- and even the 45% of non-ETF investors in the survey said they are likely to buy ETFs sometime in the next two years.
Younger investors are driving the push toward ETFs. During the next year, 29% of Millennial ETF investors said they expect to increase their investments in ETFs significantly in the next year. By comparison, 23% of Gen X investors expect a similar increase while only 9% of Boomer investors plan a significant shift toward ETFs.
Schwab hired Logica Research, based in San Francisco, to conduct an online survey of 2,000 individual investors between the ages of 25 and 75 with at least $25,000 in investable assets who are aware of ETFs. The study has a 3% margin of error at the 95% confidence level, according to a news release.
