Investors’ preferences for exchange-traded funds (ETFs) vary by age, a StreetWise study by E*TRADE Financial Corporation shows.
According to the study, Millennials are more likely than Boomers to show interest in a range of less mainstream ETFs, including commodity, style, and foreign currency ETFs.
Boomers, meanwhile, prefer dividend ETFs over any other type.
The top three ETFs for the total surveyed investor population are US market index ETFs, dividend ETFs, and sector- and industry-specific ETFs.
“The strong interest in US market index ETFs suggests investors have faith in the domestic markets post-Brexit,” says Rich Messina, senior vice president of investment product management at E*TRADE Financial. “While US market index ETFs are by far the most popular choice, investors are exploring additional asset classes in search of yield, downside protection, and income generating positions.”
Messina says dividend ETFs are popular for income. In a market characterised by uncertainty, geopolitical headwinds, and low fixed income yields, investors of all ages are turning to dividend ETFs as a possible source of income streams.
Non-traditional ETFs, meanwhile, gain traction as investors search for yield. In today’s unprecedented low interest rate environment, investors hunting for yield are stalking an increasingly elusive prey, as traditional fixed income yields continue to be under pressure. Investors with larger risk appetites, like some Millennials, are looking to take advantage of lower prices in places like commodity and bond ETFs.
ETFs focused on non-cyclical sectors can be used to mitigate risk. Sector-specific ETFs such as utilities, consumer staples, and REITs are seen as non-cyclical sectors that can help protect against market volatility, which can be particularly attractive to older investors nearing retirement, E*TRADE says.