Millennial Investors Want Bond ETFs: Schwab Study

Sixty-three percent of ETF investors overall said the 60/40 portfolio was the right mix to meet their goals. Their portfolios largely reflect that point of view, with 61% of their portfolios in equities and 39% in fixed income, on average, according to the study. 

Newcomers

In the years ahead, a significant driver of growth for ETFs may come from investors who have yet to buy their first ETF, according to Schwab Asset Management. Forty-eight percent of non-ETF investors said they were likely to purchase an ETF in the next two years, up from 41% last year. 

Thirty-four percent of respondents said they were extremely interested in learning more about ETFs, up from 27% in 2022. Among non-ETF investors who are likely to buy an ETF in the next two years, 62% said the reason for doing so is to diversify their portfolios, while 47% said it is because ETFs are easy to buy and sell. 

“We are at a moment where ETF investing has matured, and many investors are very comfortable using these products to execute their long-term plans,” Botset said. “At the same time, there is a contingent of investors who haven’t tried ETFs yet and their interest is on the rise, so there is still significant runway for future education and adoption.” 

Draw of Personalization 

Schwab Asset Management said in the statement that it continued to see strong interest in more personalized investment offerings among ETF investors.

Eighty-eight percent of survey participants said they were somewhat or very likely to personalize their portfolios more in 2023. Seventy-eight percent plan to make investments that align with their personal values. 

Millennial respondents stand out as being the cohort most likely to personalize their portfolios in the year ahead and believe it is important to align their investments with their values and beliefs. 

Two-thirds of ETF investors said that it is extremely important to them to have more control over their investments and greater ability to customize investments, and that their investments are managed to optimize tax liabilities. 

The study found that interest in direct indexing — an approach to personalized investing that is quickly gaining traction, according to Schwab Asset Management — remains strong, particularly among younger generations. Eighty-seven percent of ETF investors indicated familiarity with direct indexing, up from 80% last year. 

Sixty-nine percent who are not already invested in a direct indexing solution said they are likely to invest in one in the next year, rising to 80% for millennials. In addition, 53% of millennials said they are extremely interested in learning about direct indexing, compared with 34% of Gen Xers and 22% of boomers. 

“Demand for personalization will be met by different types of products and solutions to meet different investor preferences — there won’t be one silver bullet solution,” Botset said. “The takeaway: Expect to see new innovations to help investors get where they want to go in the way they want to get there.”