ETFs Are “All The Rage” With Generations X And Y

They’re younger and they’re trendier – and so are the people who use them. Exchange Traded Funds (“ETFs”) may be newer than more traditional investment products, but they’re growing more than 30 percent each year and make up roughly 10 percent of the average Generation X or Y investment portfolio, according to recent client data from TD Ameritrade, Inc. (“TD Ameritrade”), a brokerage subsidiary of TD Ameritrade Holding Corporation.

While most popular among Generations X and Y, who came of age along with ETFs, the overall growth of ETFs spans investors of all ages. According to TD Ameritrade’s client data, all generational groups have higher ETF balances today than six months ago.

And they’re not just using ETFs more often; they’re using them in more sophisticated ways to get broader exposure.

“Retail investors are really embracing the exposure to more specialized markets that ETFs can provide,” said Mike McGrath, director of ETFs, TD Ameritrade. “We’re seeing more investors, young and old, using ETFs in increasingly sophisticated ways – they’re using the entire keyboard rather than just one octave.”

Since its inception nearly 20 years ago, the ETF market has expanded to provide exposure to specific markets, such as international markets, fixed income and commodities, which help round out a diversified long-term investment portfolio.

According to the data, TD Ameritrade clients are using ETFs to move in and out of these spaces, responding to market conditions where they see potential opportunities, as opposed to investing in just one area. Eighteen months ago, ETF holdings in U.S. stocks represented roughly 47 percent of ETF positions. Today that share is roughly 51 percent. Holdings of commodity ETFs have also risen during that time (11% to 14%). However, there was a decrease in holdings of international stock ETFs (18% to 17%), taxable bond ETFs (11% to 10%) and alternative investment ETFs (12% to 7%).

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