Investors hungry for more ETFs

Majority of investors are confident about picking products, others want help.
JUL 22, 2014
By Minda Smiley Despite the abundance of exchange-traded funds on the market, two-thirds of investors say there's room for more, according to a study released Thursday. The study, released by Charles Schwab & Co. Inc., which sells ETFs on its platform, also found that seven in 10 investors are confident in their ability to choose ETFs that fit their investment objectives. Despite that confidence, 38% want to better understand how to choose ETFs and 39% could use guidance on how to use them in portfolios. “It's clear that investors expect innovation and choice when it comes to ETFs, but that enthusiasm is coupled with a desire for a deeper understanding of how to choose and use the products,” Heather Fischer, vice president of ETF platform management at Charles Schwab, said in a statement. At the end of 2013, there were 1,294 ETFs in the U.S., with nearly $1.7 trillion in assets, according to the Investment Company Institute. Today, 20% of ETF investors say the products make up at least a quarter of their total investments, up from 16% in 2011. Half of all investors expect their portfolio will have a higher proportion of ETFs in the next five years, according to the survey. When asked to imagine their investment portfolio as a dinner menu, 57% of investors compared ETFs to a side dish while 13% viewed them as a main entrée. But among the most confident investors, described as those who say they are extremely confident in their ability to choose an ETF, 38% view ETFs as the main entrée in their investment portfolios. “The future of ETFs certainly appears bright, but as an industry, it is our responsibility to keep the flame alive with the right education and resources so investors can keep pace,” Ms. Fischer said. The study surveyed more than 1,000 individual investors with at least $25,000 in investible assets who have purchased ETFs in the past two years or are considering doing so in the near future.

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