Investors looking at ETFs as long-term holdings deals a blow to one of the primary arguments used by mutual fund companies for keeping ETFs out of employer-sponsored 401(k) plans. With little empirical data to suggest as much, some fund companies have argued that by including ETFs in 401(k) plans, employees will be tempted to actively trade or even day trade their retirement accounts.
Remember that 25 years ago (ETFs did not exist in the U.S. then) critics also asserted updating 401(k) balances daily rather than quarterly would lead to increased trading. That never materialized and there is no empirical evidence to suggest that simply because a worker has the ability to trade his or her retirement account more frequently means they will exploit the opportunity. After all, those workers do have jobs to tend to. [Low Fees Suport ETF 401(k) Push]
Forty-eight percent of respondents to the BlackRock/Fidelity survey said their current ETF holdings are comprised of equity index funds with another 38% saying they own sector funds. Ownership rates for commodity and fixed income ETFs among those surveyed were 24% and 21%, respectively.
Adoption of ETFs as Long-Term Holdings
Chart Courtesy: BlackRock, Fidelity