Two out of three say they have little or no knowledge of exchange-traded funds; 'too complicated' for 15%
Investors who don't have exchange-traded funds in their portfolios usually have not purchased ETF shares because they “don't know what they are.”
According to new research from Mintel Comperemedia, about 64% of investors claimed ignorance about ETFs — that is, they either lack any knowlege of the investments or they don't understand how ETFs work.
Another 15% of investors said they don't own ETFs because they are “too complicated,” the online survey of 2,000 adult investors found.
Of people who do invest in ETFs, half said they do so for the diversification that the investments offer.
About 63% of ETF investors said they own more now than they did three years ago and 59% said they plan to increase their ETF investments over the next year.
Nearly half of the investors, who completed the surveys in September, said they learned about ETFs from an adviser. About 63% said they received their knowledge of ETFs from the Internet.
“Investors are still quite unfamiliar with ETFs,” said Susan Menke, a vice president and behavioral economist at Mintel Comperemedia.
One reason is that ETFs are not commonly offered within retirement plans, such as 401(k)s or individual retirement accounts, which is where many people make their investment choices, she said.
But advisers may also need more education on ETFs, Ms. Menke said.
“With all the new products coming out, advisers feel a little nervous about some of the more exotic ones out there,” she said, such as new ETFs that are actively managed.
Adviser interest in ETFs is increasing and many said they plan to start recommending that clients use them, according to Ms. Menke, who cited adviser surveys completed in the last few months.
In addition to more adviser education, ETF companies should consider more general knowlege advertising and continue pushing to have the funds included as options in retirement plans, she said.
The Mintel research shows that investors who own ETFs look to their advisers for ideas on ETFs more than they do for other types of investment ideas.
Younger people and those with higher incomes are more likely to include ETFs in their portfolios, the research shows. More older respondents said they don't own ETFs because their advisers didn't recommend them.
Assets in U.S. ETFs stood at about $923.5 billion as of Oct. 31, according to the Investment Company Institute.
Mintel expects the ETF market to exerience double-digit asset growth every year for the next five years, at the expense of other products, especially mutual funds.
