Millennial Show More Love for ETFs
By Saghir Aslam
Rawalpindi, Pakistan

 

(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live with dignity and fulfill their moral obligations towards charitable activities)

Here is another way of investing which you may want to consider. This will give you an opportunity to diversify. Keep in mind my philosophy of investment which I have written about month, year after year matter of fact for decades that whatever sector you want to invest in you must first do your homework I repeat do your homework thoroughly. Without the homework it is dangerous to invest. I am sharing with you another option to invest but make sure you use all the tools available either on net or otherwise with your full attention before you decide to invest .You will be rewarded according to the time and effort that you put into before investing.

Exchange-traded funds are increasingly a young investor’s game.

Millennials, the youngest generation of investors, are enamored of ETFs more than older investors are. And ETFs are increasingly being designed with a millennial angle.

In the latest annual survey of ETF investors being released this week, 66% of millennials, or Generation Y, say they expect to boost their holdings of exchange-traded funds over the next year. That’s up from 61% in last year’s survey—and well above the 43% of investors in general who say this year that they plan to buy more ETFs.

They are already putting 36% of their investments into ETFs on average, which is down from the 41% in last year’s survey but still well above the 23% allocation reported this year by all investors surveyed.

The millennials’ preferences could in coming years help shrink the gap in size between the market for traditional mutual funds and the smaller market for their ETF cousins.

Definitions differ, but a millennial generally is considered to be anyone born from the early 1980s until at least the mid-1990s, with some definitions pushing the limit to the early years of this century. Millennials’ numbers in the US stand at 75.4 million—making them the nation’s biggest generation, According to the Pew Research Center’s analysis of recent data from the Census Bureau. Pew defines millennials as those who were age 18 to 34 in 2015. To qualify for the Schwab survey, investors had to be at least 25; for the survey results, millennials are defined as those between 25 and 35.

Millennials are often eager to invest in specific themes, says Dave Gedeon, head of research and development at Nasdaq Global Indexes. They can do this with an ETF, while also reducing risk because of the diversification that index investing provides, he says.

Some experts believe the appeal of ETFs to millennials also has to do with a difference among generations in how they go about investing. Ben Johnson, director of global ETF research at Morningstar, notes that ETFs are often marketed in a “generationally friendly setting”—a robo-advice app on a smartphone, for example. “It’s not something that’s being sold to them across an old oak desk by one of their dad’s friends.”

Millennials have basically grown up with ETFs, which were launched in the 1990s and have expanded rapidly in recent years. This may have affected their attitudes toward the funds, says Rich Messina, senior vice president and head of investment products at financial-services provider E*Trade.

“They’re seeing more of that growth, there’s more about it in the news, so I think they’re adopting it a lot more,” he says.

Meanwhile, fund companies are eagerly concocting a number of ETFs that have a millennials angle—funds that aim to benefit from the areas where young consumers are spending their money.

Principal Global Investors launched Principal Millennials Index ETF (GENY) in August. While millennials aren’t the biggest spenders on a per capita basis, the sheer size of the generation gives them clout, says Paul Kim, Principal’s managing director, ETF strategy. He adds that their spending habits tend to be focused on certain companies or categories, from technology giants like Amazon.com and Google parent Alphabet to consumer-goods firms like Nike, all of which are among the fund’s holdings.

Millennials spend money differently than other generations in other ways, as well, says Jay Jacobs, director of research at Global X, which runs Global X Millennials Thematic ETF (MILN). For example, they tend to move around a lot for college or jobs, so they rent for longer on average than earlier generations, and tend to rent in urban centers rather than suburbs. The housing stocks in MILN, therefore, tend to be apartment REITs.

(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)

 

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