Studies: Individual Investors Rule ETFs

For the last two years, a series of studies has revealed that individual investors are leading the charge when it comes to ETFs. According to Cogent Research, U.S. households with investable assets of at least $100,000 are putting more money into ETFs and almost two-thirds of U.S. investors bought ETFs without the aid of an advisor. Christy White, Cogent Research co-founder, stated that 40% of current self-directed ETF owners plan to increase their use of ETF products, compared to only 26% of advised ETF owners.

Cogent Research also found that The Vanguard Group is “best positioned” to capitalize on self-directed investors because the fund provider brings in a more loyal ETF consumer base. Still, other big names – like Charles Schwab entering the space and iShares partnering up with Fidelity – want a piece of this market, says John Meunier, Cogent research co-founder. Other ETF providers viewed favorably among ETF investors include Claymore, Pacific Investment Management Co. (PIMCO), and PowerShares.

 The results of their study are an improvement over last year's results, which also found that ETF usage is greater among more affluent investors. Last year's study also revealed:

• While equal proportions of advised investors and self-directed investors use ETFs, the self-directed ones allocate 20% more of their portfolios to ETFs
• Self-directed investors are more loyal to providers
• Usage of ETFs should continue to grow throughout this year

Providers have done a great job of educating investors and working with advisors who use ETFs in their practices. What we’ve found, though, is that there is a huge amount of self-directed investors who make their own decisions and have made a major shift into ETFs. Most of our readers here on ETF Trends are self-directed investors who are highly educated (nearly 45% have an advanced degree) and most of them use the internet for all of their investing research. 

No matter who you are or what your goals happen to be, ETFs are versatile and efficient ways to track the markets.  They way they've caught on with everyone from large institutions to retail investors is a thrilling trend to watch, and we may just be at the beginning of a new movement.