A recent article in Investment News highlighted some interesting research conducted by Cerulli Associates Inc – namely, that compared to mutual fund investors, ETF investors tend to be wealthier, younger and better educated. Some interesting data points from the article include:
- The median household income for mutual fund investors is $80,000 vs. $130,000 for ETF investors.
- The median household financial assets for mutual fund investors are $200,000 vs. $300,000 for ETF investors.
- Finally, the median age of the head of the household is 50 for mutual fund investors vs. 46 for ETF investors.
As Christian Magoon, an industry consultant, points out in the article, “You could think of ETFs as digital music, in terms of the way they represent the emerging and disruptive technology”.
Frankly, this research comes as no surprise to us at The ETF Store. We’ve seen a clear shift in the attitudes of investors as they seek lower cost, more transparent, and tax efficient ways to build highly diversified portfolios – a shift towards ETFs. As with any emerging product or technology, the early adopters tend to be younger, wealthier, and more sophisticated. The early adopters have the wherewithal to conduct due diligence on new products and technology to determine whether or not they are fit to compete in the marketplace. Once a new product or technology has been properly vetted, the baton is passed from the early adopters to the mainstream. And judging by the flow of funds to ETFs and away from mutual funds, the early adopters like what they see and we’re now watching the baton being passed to the mainstream.
