Millennial’s are giving more preference to ETFs as compared to stocks, in a clear indication that the former is gradually gaining the upper hand in terms of investment options. In a survey conducted by Charles Schwab, 96% said that ETFs are an essential part of their investment outlook. Per a survey by Schwab, among 1500 respondents, 32% said that they have replaced all their stocks with ETFs, while 58% has replaced a portion.
In the survey, 55% of respondents (including 79% millennials and 14% matures) consider ETFs a “primary investment type,” in their future portfolio. In terms of gender, 57% women and 54% men have said that they would be looking to increase allocations in ETFs. This is primarily on account of trading flexibility, lower annual expense, safety on account of multiple industry exposures and protection from sudden financial downturn.
ETF: Soaring in Popularity
There are more ETFs being launched every year and 2017 saw 5,400 ETFs traded globally, up from about 4,800 at the end of 2016, as per ETFGI data. In the past decade, riding on high popularity, the combined assets of the ETF industry have surged from $531 billion in 2008 to $3.4 trillion in 2017 as per data revealed by Statista (read: First Artificial Intelligence ETF Soars in Popularity).
ETFs are tax efficient and profitable compared to stock investments as stock gains fall under the ambit of capital gains tax. But in case of ETFs, the stocks rebalance and they don’t need to sell. Transparency is another key factor as every single fund holding can be clearly viewed. As per Hortense Bioy, Director of Passive Fund Research, Europe at Morningstar: “Many studies show that investors would be better off investing in ETFs rather than [actively] managed funds because over the long term only a minority of active managers beat their benchmark.”
Amid the surge in popularity, we have highlighted five passively managed ETFs that topped the list of inflows per etf.com.
IShares Core MSCI EAFE ETF (IEFA - Free Report)
The fund seeks investment results of the MSCI EAFE Investable Market Index. The fund comprises 2535 holdings and has an asset base of $59.6 billion. It charges an annual fee of 8 basis points has an average daily trade volume of 7.7 million shares. Nestle (NESN), HSBC (HSBA) and Novartis (NOVN) are the largest individual stocks with none holding more than 2%. As for sector outlook, Financials, Industrials and Consumer Discretionary are the top three with weights of 18.6%, 15.45 and 13% respectively. The fund has attracted assets of $17.2 billion this year. In terms of country exposure Japan and United Kingdom are the bigger markets controlling about 40%, while 10 other countries control the remaining 60%. The fund has a Zacks ETF Rank #3 (Hold) with a Low risk outlook.
IShares Core MSCI Emerging Markets ETF (IEMG - Free Report)
The fund tracks the results of MSCI Emerging Markets Investable Market Index. It has amassed assets of $888 million and has an average daily trade volume of 11 million shares. The fund has 1925 holdings in its portfolio. Tencent Holdings (TCEHY), Alibaba group (BABA) and Samsung Electronics (SSNLF) are the prominent stocks in this fund with none holding more than 5%. Also Information Technology, Financials and Consumer Discretionary are the top sector exposures with weights of 27%, 21.1% and 10.6%, respectively. China, South Korea and Taiwan are the top three country exposures with each holding 31.2%, 15.5% and 12.5%, respectively. The fund has attracted assets of $7.96 billion this year. It has an expense ratio of 0.14% and a Zacks ETF Rank #3 with a Medium risk outlook(read: 5 Hottest Small-Cap ETFs of 2018).
IShares Core S&P 500 ETF (IVV - Free Report)
The fund has exposure to top 500 U.S. companies and seeks investment results of the U.S. large-cap stocks. It has 505 stocks in its basket and AUM of $152.8 billion. As for individual stocks Apple (AAPL), Microsoft (MSFT) and Amazon (AMZN) are the top three with none holding more than 5%. IT, Financials and Healthcare are the top sectors with weights of 26%, 14.2% and 14%, respectively. The fund has attracted assets of $7.89 billion this year. It has average daily trade volume of 4.6 million shares. It charges a nominal fee of 4 basis points annually. The fund has a Zacks ETF Rank #3 with a Medium risk outlook.
Vanguard S&P 500 ETF (VOO - Free Report)
The fund tracks the S&P 500 Index, representing 500 of the largest U.S. companies. It has AUM of $93.2 billion and 508 holdings in its basket. Information Technology, Financials and Healthcare are the top sectors with weights of 24.8%, 14.7% and 14.1% respectively. It has average daily trade volume of 2.9 million shares. The fund has attracted assets of $5.7 billion this year. It charges a nominal fee of 4 basis points annually and has a Zacks ETF Rank #3 with a Medium risk outlook(read: 5 Tech Stocks Pushing Nasdaq ETF to New Highs).
Vanguard FTSE Developed Markets ETF (VEA - Free Report)
The fund seeks the investment results of the FTSE Developed All Cap ex US Index. It has assets worth $73.4 billion and consists of 3890 stocks in its basket. Royal Dutch Shell (RDSA), Samsung (SSNLF) and Nestle SA (NESN) are the top stocks with none holding more than 2%. The fund has average daily trade volume of 9.6 million shares and attracted assets of $4.7 billion this year. It has a Zacks ETF Rank #3 with a Low risk outlook.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>