November 16, 2016

E*TRADE Study of Experienced Investors Bucks the Traditional Understanding of ETF Use

(Photo: Business Wire)

Traditionally thought of as buy-and-hold investing products, in reality, many ETFs are created to be—and exclusively used as—vehicles for active traders

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 many investors do not equate ETFs with long-term investing:

  • Two out of five investors believe ETFs are better suited for short-term trading than long-term investing.
  • Only about one in four investors believe ETFs are entirely or mostly better suited for long-term investing over short-term trading.
  • Millennials are more likely than Boomers to gravitate towards the less popular, yet more opportunistic ETFs like foreign currency, derivative, and inverse ETFs.
  • The top three types of ETFs selected by the total surveyed population remained consistent q/q with U.S. market index ETFs, dividend ETFs, and sector- and industry-specific ETFs.

"While ETFs are traditionally associated with long-term investing solutions that mirror indexes, the data suggests a far more nuanced picture," said Rich Messina, SVP of Investment Product Management at E*TRADE Financial. "Many investors are also using ETFs opportunistically for short-term trading strategies. Additionally, as these products are increasingly being developed to serve a wide variety of purposes, investors are wise to research them closely to learn how they might fit into their long-term investing and short-term trading goals."

 

Mr. Messina offered the following observations on ETF strategies:
  • U.S. market index ETFs remain popular for investors and traders alike. U.S. market index ETFs remain the most popular ETF sector for the second straight quarter, according to the survey. These ETFs often serve as the core foundation of a balanced portfolio, offering investors broad access to the U.S. market, and often come with relatively low expense ratios. However, while U.S. market index ETFs are often used as passive vehicles, they are also among the most frequently traded,1 favored by active investors for their liquidity and efficiency.
  • ETF usage is not either/or. Three out of five investors feel ETFs are either somewhat long-term or somewhat short-term vehicles, which suggest many may be employing a hybrid strategy, in which they utilize passive ETFs to capture general market returns, as well as vehicles like sector, volatility, and style ETFs to capitalize on short-term themes.
  • For younger investors, time is on their side to seize opportunity. Foreign market index, foreign currency, derivative, and inverse ETFs are more popular among younger investors than older investors. This could be attributable in part to the higher risk tolerances developed by some younger investors as a result of their longer time horizons.

Visit E*TRADE's Newsroom for the full Q4'16 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 October 1 to October 10 of 2016 among an online U.S. sample of 954 self-directed active investors who manage at least $10,000 in an online brokerage account. The survey has a margin of error of ±3.18 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, do you believe that ETFs are more for short-term trading or long-term investing strategies?
    TOTAL Q4'16   AGE: 25-34   AGE: 35-54   AGE: 55+
Long-term (Net)   60%   59%   62%   61%
Entirely long-term   3%   4%   2%   2%
Mostly long-term   23%   23%   25%   22%
Somewhat long-term   34%   32%   35%   37%
Somewhat short-term   28%   29%   28%   26%
Mostly short-term   10%   10%   9%   12%
Entirely short-term   2%   2%   1%   1%
Short-term (Net)   40%   41%   38%   39%
                 
In what types of ETFs of are you most interested?
    TOTAL Q4'16   TOTAL Q3'16   AGE: 25-34   AGE: 35-54   AGE: 55+
U.S. market index ETFs   48%   48%   40%   50%   54%
Dividend ETFs   42%   43%   34%   44%   51%
Sector- and industry-specific ETFs   30%   31%   27%   30%   39%
Bond ETFs   22%   20%   22%   22%   17%
Foreign market index ETFs   19%   15%   24%   19%   14%
Commodity ETFs   18%   19%   19%   19%   12%
Style or market cap ETFs   13%   13%   15%   12%   13%
Actively managed or smart beta ETFs   13%   12%   14%   13%   13%
Leveraged ETFs   12%   11%   15%   14%   6%
Foreign currency ETFs   12%   10%   15%   12%   4%
Derivative ETFs   9%   7%   15%   9%   3%
Inverse ETFs   8%   8%   12%   8%   3%
ETNs (exchange-traded notes)   7%   6%   8%   6%   3%
Other (i.e., vol. ETFs, ETFs of ETFs, equal weight ETFs)   2%   3%   3%   1%   3%
                     

"Millennials" defined as age 25-34 // "Gen X" defined as age 35-54 // "Baby Boomers" defined as age 55+

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.

1 http://www.marketwatch.com/tools/screener?exchange=Nyse&report=MostActive

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

Source: E*TRADE Financial Corporation