The younger generation of investors are beginning to fill out their investment portfolio, and the up-and-coming group of millennials have increasingly turned to exchange traded funds as their go-to tool of choice.
According to a Charles Schwab Corp. survey of ETF investors, 66% of Generation Y, or so-called millennials, revealed that they expect to raise their holdings of ETFs over the next year, compared to 61% of millennials surveyed last year and well above the 43% of investors in general who say they plan to buy more ETFs this year, reports Gerrard Cowan for the Wall Street Journal.
SEE MORE: Millennials Are More Likely to Own ETFs
Millennials have already indicated that they are putting 36% of their investment portfolio into ETFs on average, or well above the average 23% allocation reported by all investors surveyed.
As millennials grow their wealth, the younger generations’ preference for ETFs could help bridge the market share between traditional mutual funds and the smaller market for ETFs.
Millennials are considered those ages between 18 to 34 in 2015, or those born from the early 1980s until at least the mid-1990s, making them the country’s largest generation.
The younger generation is also more apt to focus on different investment themes with ETFs. Dave Gedeon, head of research and development at Nasdaq Global Indexes, said investors are now capable of targeting niche market segments with ETFs while also diminish risk because of the innate diversification that index investments provide.
[related_stories]Generation Y investors are also more likely to use technology to invest and find it easier to trade ETFs. Ben Johnson, director of global ETF research at Morningstar, argued that ETFs are often marketed in a “generationally friendly setting,” such as a robo-advice app on a smartphone. “It’s not something that’s being sold to them across an old oak desk by one of their dad’s friends.”
Money managers are also seeing the potential of this new group of investors and have launched a number of millennial-themed investment strategies.
SEE MORE: Why Millennials May Be Looking to Change Advisors
For instance, the Principal Millennials Index ETF (Nasdaq: GENY) is an example of thematic investing. GENY tracks the Nasdaq Global Millennial Opportunity Index. This index seeks to capture the global spending and lifestyle activities of the largest generation ever, offering exposure to brand name companies specializing in social media, digital media, technology, healthy lifestyles, travel and leisure. The companies will evolve over time as the spending patterns of millennials change as they age.
Global X also came out with the Global X Millennials Thematic ETF (NasdaqGM: MILN), which focuses on investing in companies poised to benefit from the growing spending power of the US millennial generation.
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