ETF Trends
ETF Trends

With the advent of exchange traded funds (ETFs), there’s another trend emerging when it comes to investing: more and more self-directed investors, tired of relying on mutual fund managers to pick what they own, are taking charge themselves.

In a recent Investment Trends study, 48% of participants who invest in actively managed mutual funds agreed that faith in fund managers is waning and investing directly is the way to go, according to The Australian. The new investor trend indicates that growth for online brokerages is on the rise.

ETFs are becoming a popular asset-class and self-directed investors are utilizing online brokerages to invest in ETFs with relative ease. People are realizing that they are able to buy ETFs to get index exposure, or supplement ETFs with individual companies for greater exposure to a sector.

ETFs provide single-stock exposure to the beta, or market performance, of the stock index or portfolio. The investment tool also allows a trader to buy and sell the stock with a normal brokerage at a low annual management fee. ETFs have no commission, upfront or trailing, paid to an adviser.

Another study performed by Cogent Research earlier this year supports these findings. In a study of 4,000 affluent Americans, the usage of ETFs is much higher among self-directed investors, Reuters reports. Among the other findings include:

  • While equal proportions of advised investors and self-directed investors use ETFs, the self-directed ones allocate 20% more of their portfolios to ETFs
  • Self-directed investors are more loyal to providers
  • Usage of ETFs should continue to grow throughout this year

Advances in technology could further increase the use of online brokering as more people use portable devices to check daily market activities.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.