Furthermore, a number of mutual funds will require a minimum investment that can range from anywhere between $500 to $3,000 for the individual investor. An ETF investor doesn’t need access to war chests of capital in order to begin investing in ETFs–it will be largely dependent on the share price and how many shares of the ETF the investor wishes to own.
Low Cost
Add in the low price of entry with an average expense ratio of 0.44% for an ETF as opposed to mutual funds, which can range from 0.5 percent to 1 percent, and it makes for an ideal investment vehicle for millennials.
“Millennials are part of the Napster generation where things are generally free or very low cost,” said Ryan Marshall, certified financial planner at ELA Financial in Wykoff, N.J. “The conversations I have with my millennial clients generally all start with fees as their topic. Not how much money they should put away, not how their investments works, but what the cost is.”
Built-In Diversification
Not all investors have the time to perform copious amounts of research in order to build the ideal portfolio that can generate positive returns and at the same time, be bulletproof during a sharp market downturn. As such, the ability of an ETF to hold various stocks as opposed to being exposed to the risk associated with concentrating investment capital into one stock saves millennials time while reducing risk simultaneously.
“The bottom line is that this age group absolutely needs exposure to stocks in their investment portfolio, however it is important to manage both risk and costs which can take away from returns,” said Halpern Financial certified financial planner Melissa Sotudeh of Rockville, Maryland. “There is simply no reason to do it the hard way, since there are so many diversified ETFs available at low cost. Why not take advantage of them?”
For more information on ETFs, visit ETF Trends.