Retail investors are embracing ETFs and the exposure they can provide to more specialized markets, according to recent client data from TD Ameritrade, Inc. (“TD Ameritrade”), a brokerage subsidiary of TD Ameritrade Holding Corporation.
“When we set out to develop a better commission-free offering, our goal was to help investors build long-term portfolios more cost effectively while staying true to our core philosophy of doing the right thing for the client”
Close to 30 percent of ETF holdings among TD Ameritrade retail clients provide exposure to commodities and alternatives. Around 45 percent of ETF holdings provide exposure to US equities, about 15 percent provide international equity exposure and bond ETFs make up 10 percent of ETF positions.
“Over the past five years, our retail client ETF holdings have more than doubled,” said Lule Demmissie, managing director of investment products and retirement, TD Ameritrade. “And, more than ever, we’re seeing investors take advantage of the exposure to more specialized markets that ETFs can provide. More investors, young and old, are using ETFs in increasingly sophisticated ways.”
There is a correlation between age and the likelihood of having ETFs in a portfolio, and a slight difference in what type of ETFs might be held:
| Age 26-35 | 12.7% of assets are held in ETFs, and more likely than other age groups to hold international ETFs | |||
| Age 36-45 | 11.3% of assets are held in ETFs | |||
| Age 46-55 | 8.6% of assets are held in ETFs | |||
| Age 56-65 | 7.3% of assets are held in ETFs, less likely to hold US stock ETFs; and more likely to hold bond and metals ETFs | |||
| Age 66-75 | 6.2% of assets held in ETFs, even less likely to hold US stock ETFs; and even more likely to hold bond and metals ETFs | |||
Since its inception nearly 20 years ago, the ETF market has expanded to provide exposure to specific markets, such as international markets, fixed income and commodities, which, while having unique risks, can help round out a diversified long-term investment portfolio, and investors are increasingly taking advantage of the possibilities.
This evolution and the demand from clients was the impetus for TD Ameritrade to, in 2010, create the first-ever commission-free ETF list with more than 100 ETFs, objectively selected by investment experts at Morningstar Associates, LLC, a registered investment advisor and unit of Morningstar. The list is made up of a wide selection of ETFs from among the largest and most well-known issuers of ETFs in today’s market. TD Ameritrade receives no special compensation or fees from any of the ETF providers included on the list.