Various demographics are driving the growth of the U.S. exchange-traded funds industry, but issuers of such products seem particularly enamored by Baby Boomers and Millennials. Fortunately for ETF issuers, Millennials are embracing ETFs in significant fashion.
As Benzinga reported in September, Schwab's 2015 ETF Investor Study showed the prominence of ETFs within an overall investment strategy is particularly pronounced among younger ETF investors. Millennials (aged 25-35) say that ETFs currently make up an average of 41 percent of their portfolios, compared to a 21 percent share among all investors. Sixty-one percent of Millennials plan to increase their investments in ETFs in the next year, according to the Schwab study.
Though ETF issuers swoon for Baby Boomer and Millennial cash, data also suggest Gen Xers are major contributors to the growth of the U.S. ETF business. Released earlier this month, the 2015 Investor Brandscape study by Cogent Reports showed ETFs are a hit among Gen X and for some of the largest ETF issuers, whether they know and/or like it or not, Gen X is the demographic representing the highest user penetration.
Millennials' Top Picks
For advisors and ETF issuers, it is also important to know which ETFs are popular among the various groups. A new study from TD Ameritrade Holding Corp. (NYSE:AMTD) sheds some light on that topic.
According to TD Ameritrade data, the most popular ETF among Millennials is the Vanguard Total Stock Market ETF (NYSE:VTI). In what may be a sign that Millennials are taking fees seriously, seven of the 10 most popular ETFs in this age demographic are Vanguard funds.
Millennials have also embraced the Vanguard Emerging Markets Stock Index Fd (NYSE:VWO), the largest emerging markets ETF; the Vanguard 500 Index Fund (NYSE:VOO) and the Vanguard Value ETF (NYSE:VTV), among other Vanguard ETFs, according to the TD Ameritrade data.
The data set shows that while all three age groups share some of the more common ETFs (VTI, SPY, QQQ) Millennials are diversifying with real estate while Generation X and Boomers are more traditional and looking at gold. Millennials and Gen X are also lending more of a priority to emerging markets while Boomers are putting more money into growth and value.
With a constant threat of market volatility and risk, Millennials are opting for emerging markets as they are projected to have higher returns over the long-term. Similarly, it seems boomers are moving away from traditional U.S. bonds, which are trading at historically low yields, and are choosing bond ETFs, according to TD Ameritrade.
Gen X, Baby Boomers' Top Picks
The SPDR S&P 500 ETF Trust (NYSE:SPY), the world's largest ETF, is the most popular ETF among Gen Xers, followed by VTI, according to TD Ameritrade. The PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ), the NASDAQ-100 tracking ETF, is the third most popular ETF among both Gen Xers and Millennials. Six of the top 10 ETFs used by Gen X ETF investors are Vanguard funds, according to TD Ameritrade data.
Gen X and Baby Boomers both show loyalty to the SPDR Gold Trust (ETF) (NYSE:GLD), as the world's largest gold ETF is a top 10 ETF holding among both demographics. SPY and QQQ are the two most popular ETFs among Baby Boomers.
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