The structure of exchange traded funds (ETFs) gives investors of all types more power to manage their portfolios than ever before. Do-it-yourself investors striking out on their own are using them in larger numbers.
The latest data from Schwab included in a report that shows that retail investors (that is, not professional ones) owned 37% of the ETF assets traveling through the discount broker. Murray Coleman for Barron’s reports that retail traders make up about 51% of the Schwab clientele.
That’s a trend that has appeared to be in the making for some time, and by all appearances, it could continue. Investors will increasingly turn to ETFs and leave the individual stock picking to professional money managers, says Matt Hougan of Index Universe. [Online ETF Brokers Lure Investors.]
Schwab says its clients hold about $100 billion in ETF assets, representing more than 10 % of all ETF assets outstanding. However, despite the growth, only 15 % of retail investors own ETFs at all. That compares with about 90% of Schwab customers who own individual stocks.
More individual investors will switch to ETFs after they realize that single shares are not a core portfolio investment. They are diversifiers and building blocks, however, they cannot give the diversification that an ETF can. [ETFs: A Portfolio Diversifier.]
If you want to get started trading ETFs, check out some of our educational articles that cover strategies, ETF types and how to choose among the industry’s hundreds of ETFs.
Tisha Guerrero 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.