Why Investor Lack of Knowledge About ETFs Is a Good Thing

According to a new report, most retail investors don’t know what ETFs are. Therein lies a major opportunity for ETF providers to nab even more market share beyond the $1 trillion they’re currently enjoying.

The report by Mintel Comperemedia also showed a few other things about investors these days:

• Mintel says its research shows that more than six in 10 investors don’t invest in ETFs because they “don’t know what they are.” That percentage remained the same for households with higher incomes, which are more likely to be investors.

• Investors in the products are not comfortable with their knowledge level of ETFs. Only 54% of people who own ETFs feel they are “very knowledgeable” about ETF investing.

• Owners of both mutual funds and individual stocks say they are even less comfortable with the products. A mere 17% of these investors say they are comfortable investing in ETFs.

• A major reason ETFs are still unfamiliar for investors is because they have not been offered in 401(k) retirement plans. However, the majority of investors are still unfamiliar with these tools. 

A lot of what the report points out seems to be reflective of the current environment. ETF providers continue to note the need for even more ETF education and have ramped up their own efforts to help investors make decisions.

But most interestingly, this report shows that the ETF industry is only in the earliest stages of growth. That it has reached the $1 trillion mark while the majority of investors remain unaware shows that that $1 trillion is just a drop in the bucket from what it really could be. This is especially true as many of the sidelined investors wade back into the markets, because ETFs will get more than their fair share.

Once the majority of investors understand ETFs…look out!