Young people are driving demand for ETFs and ETPs, survey finds

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The young are driving demand for exchange-traded funds as those over 55 stick with mutual funds and investment trusts

  • Only 22% of UK-based retail investors have invested their money into ETPs 
  • Exchange-traded funds are valued for their diversification and transparency
  • Over a third of 18 to 34-year olds have put their money into ETFs or other ETPs 

Young adults are driving the growth in popularity of exchange-traded funds and products, new data suggests. 

A WisdomTree Investments survey found that more than one-third of 18- to 34-year-olds have put money into ETFs or other exchange-traded products, compared to just 5 per cent among those aged 55 and older.

Just over half of those in their twenties and early thirties also told Opinium, the organisation which conducted the poll, that they plan to increase the number of ETFs in their investment portfolio in 2022.

Young demand: WisdomTree Investments has found that more than one-third of 18 to 34-year olds have put money into ETFs or other exchange-traded products

Young demand: WisdomTree Investments has found that more than one-third of 18 to 34-year olds have put money into ETFs or other exchange-traded products

The age group are choosing ETFs because they desire access to a more diverse offering from investment platforms, according to the research. 

Much like a mutual fund, ETFs are a collection of individual stocks or bonds often tracking an index or commodity, and are overseen by professional fund managers.

Yet they can be bought and sold on a stock exchange just like the stock of any other publicly-listed company and do not usually require a minimum level of investment for a person to imbue them with financing.

According to independent consultancy firm ETFGI, the total amount of European ETP assets under management had climbed to $1.6trillion at the end of last year as demand for them has grown.

WisdomTree Physical Gold is one of the most popular ETFs traded on the London financial markets, but most of the top funds are either managed by the Vanguard Group or iShares.

Yet the proportion of UK-based retail investors who have invested money into ETPs is just 22 per cent, compared to nearly half who invest in single shares and stocks.

Definition: Like a mutual fund, exchange-traded funds are a collection of individual stocks or bonds, but they can be bought and sold on a stock exchange like any other listed firm

Definition: Like a mutual fund, exchange-traded funds are a collection of individual stocks or bonds, but they can be bought and sold on a stock exchange like any other listed firm

Adria Beso, the head of platforms distribution for WisdomTree in Europe, noted that this proportion is lower than in other European countries such as Germany.

He blames much of the weak uptake on a lack of education, which he said is ‘crucial to ensure retail investors are making the most of their savings and investments while positioning themselves appropriately in different economic conditions’.

His investment firm found that just under a fifth of respondents without capital in ETFs claimed they had never heard of them, while around a third cited a lack of knowledge.

However, more than three-quarters stated they could join a new digital broker or platform if it provided more research material, indicating the potential for greater uptake.

Reasons to invest: Adria Beso, WisdomTree's head of platforms distribution in Europe, said ETFs 'are easily traded, offer diversification and more transparency, and are low cost'

Reasons to invest: Adria Beso, WisdomTree’s head of platforms distribution in Europe, said ETFs ‘are easily traded, offer diversification and more transparency, and are low cost’

Another crucial factor people told the survey when deciding where to invest was costs and fees, with 18 to 34-year-olds seeking out either zero or low-fee trading accounts.

A massive 88 per cent of this demographic additionally said that their choice of investment platform would be influenced by the presence of a mobile app – compared to just 32 per cent amongst the over-55s.

More mature adults also tend to be less swayed by a brand’s popularity, yet despite the significant generational divide, ETFs investors tend to pour a large share of their capital into them – 36 per cent on average. 

This could pose some problems should the world economy take another downturn in the coming year, something many economists are predicting is more likely given the surge in inflation and oil prices.

Yet interest in ETFs shows no signs of slowing down, and might even be an ideal investment amidst the present uncertainty. 

As Adria Beso remarked: ‘They are easily traded, offer diversification and more transparency, and are low cost, all of which are important in the current economic backdrop.’ 

 

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