May 12, 2016

E*TRADE Study Reveals That for Most Retail Investors, Active versus Passive Management is Not Either/Or

Majority favor a hybrid approach to their investing - rather than one consisting solely of active or passive management

NEW YORK--(BUSINESS WIRE)-- E*TRADE Financial Corporation (NASDAQ:ETFC) today announced results from the most recent wave of StreetWise, E*TRADE's quarterly tracking study of experienced investors. Results indicate that while passive management is more popular among retail investors than active management, for the majority of investors, the debate between the two is irrelevant, as they prefer a combination. When asked to choose from three portfolio designs:

  • 8 percent chose a higher-cost, purely active approach that aims to beat the market.
  • 31 percent chose a low-cost, purely passive approach that aims to follow the market.
  • 61 percent chose a moderately-priced approach that uses passive management to track broader, more efficient segments of the market, while leveraging active management that aims to seek outperformance in narrower and less liquid segments of the market.

"As the world of investing vehicles continues to expand, retail investors are seeking the best of both worlds in weighing passive against active management," commented Lena Haas, SVP of Retirement, Investing and Savings at E*TRADE Financial. "And while the findings support what many say about the rise of passive over active strategies, they also uncover a deeper reality: It's not about simply choosing between the two philosophies, but thinking tactically about how best to combine them."

Ms. Haas noted that the following factors can play a role in why investors would gravitate towards a portfolio with both active and passive management:

  • To stay ahead of the class: When considering active versus passive management, neither is necessarily the best fit for every asset class. Many investors feel passive strategies work better for more efficient and broad asset classes like domestic large-cap, while active managers may be able to add value for less liquid and narrow categories like international small-cap.
  • To factor in fees: Many investors feel it's wise to understand when it makes sense to pay up for active management and when sticking to lower-cost passively-managed vehicles such as ETFs and index funds is more appropriate. As hybrid portfolios evolve, many investors are developing a better understanding of what may or may not be worth a potentially higher fee.
  • To capitalize on customization: Combining active with passive management in one portfolio creates a larger world of possible solutions than focusing on one versus the other. The hybrid approach may better enable investors to build portfolios that closely align with their individual goals, risk tolerances, and time horizons.

Visit E*TRADE's Newsroom for the full Q2'16 StreetWise study results.

E*TRADE helps investors balance today's needs with tomorrow's goals, through pioneering digital tools coupled with guidance online and from financial consultants. To learn more about E*TRADE's trading and investing platforms and tools, visit etrade.com.

For useful insight from E*TRADE and third-party investment professionals, follow the Company on Twitter, @ETRADE.

About the Survey

This wave of the survey was conducted from April 1 to April 8 of 2016 among an online U.S. sample of 907 self-directed active investors who manage at least $10,000 in an online brokerage account. The survey has a margin of error of ±3.25 percent at the 95 percent confidence level. It was fielded and administered by ResearchNow. The panel is broken into thirds of active (trade more than once a week), swing (trade less than once a week but more than once a month), and passive (trade less than once a month). The panel is 65 percent male and 35 percent female with an even distribution across online brokerages, geographic regions, and age bands.

Referenced Data

 
If you had to choose, which of the following approaches would you be most interested in for your portfolio?
        TOTAL   AGE 25-34   AGE 35-54   AGE: 55+

A moderately-priced approach that combines active and passive
management to track broader, more efficient segments of the markets,
while seeking outperformance in parts of the markets that are less
broad and efficient

      61%   62%   63%   57%
                     
A low-cost, purely passive approach that aims to follow the markets       31%   32%   29%   34%
                     
A higher-cost, purely active approach that aims to beat the markets       8%   6%   9%   9%
                     

About E*TRADE Financial and Important Notices

E*TRADE Financial and its subsidiaries provide financial services, including online brokerage and banking products and services to retail customers. Specific business segments include Trading and Investing and Balance Sheet Management. Securities products and services, including stocks, bonds, mutual funds, options, and ETFs are offered by E*TRADE Securities LLC (Member FINRA/SIPC). Managed Account Solutions are offered through E*TRADE Capital Management, LLC, an investment adviser registered with the Securities and Exchange Commission. Bank products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries and affiliates. More information is available at www.etrade.com.

The information provided herein is for general informational purposes only and should not be considered investment advice. Past performance does not guarantee future results. ETFC-G

E*TRADE Financial, E*TRADE, and the E*TRADE logo are trademarks or registered trademarks of E*TRADE Financial Corporation.

© 2016 E*TRADE Financial Corporation. All rights reserved.

E*TRADE Financial Corporation and ResearchNow are separate companies that are not affiliated. E*TRADE Financial Corporation engages ResearchNow to program, field, and tabulate the study.

About ResearchNow

ResearchNow, a leading digital data collection provider, powers market research insights. They enable companies to listen to and interact with the world's consumers and business professionals through online panels, as well as mobile, digital, and social media technologies. Their team operates in over 20 offices globally and is recognized as the market research industry's leader in client satisfaction. They foster a socially-responsible culture by empowering their employees to give back. To find out more or begin a conversation, visit www.researchnow.com.

E*TRADE Media Relations
Thayer Fox, 646-521-4418
thayer.fox@etrade.com
or
E*TRADE Investor Relations
Brett Goodman, 646-521-4406
brett.goodman@etrade.com

Source: E*TRADE Financial Corporation

 

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