The latest research from Cerulli Associates and the Investment Company Institute suggests that investors who use exchange traded funds are more savvy. In fact, the study indicates that investors who use ETFs are wealthier, younger and better-educated.
Unlike traditional mutual funds, ETFs can be bought and sold during the day. According to the report, advisors aren’t using a lot of ETFs, but those who do are ahead of the curve.
“ETFs are attracting a crowd that understands the benefits of indexing,” said Christian Magoon, chief executive of Magoon Capital Management, on Investment News.
“Because people have to make more of an effort to seek out ETFs, the ETF investors tend to be more engaged,” Magoon adds. “And they are finding ETFs to be a better option.”
Overall, ICI research found that the typical mutual fund investing household made an average income of $80,000, compared with $130,00o for ETF users. [ETFs Seen Hitting $2 Trillion by 2015: Research]
“In some respects, you could think of ETFs as digital music, in terms of the way they represent the emerging and disruptive technology,” Mr.Magoon said.
ETFs only represent about 7% of assets under advisement across all distribution channels, and account for 16% among independent advisors. Mutual funds still represent 41% of all assets under advisement management, and about 53.5% are accounting for independent broker-dealer-rep assets .[Have an ETF Investing Plan to Avoid Trading on Emotions]
ETFs are able to give investors full portfolio transparency, a better tax rate, and the ability to trade throughout the day as one would a single stock. These features are attractive in this market climate, as tactical strategies become necessary and volatility is an issue. [Leadership Shift in Sector 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.