Getting started building a portfolio, or just looking to fine-tune your allocation? With the millennial generation between their late 20s and early 40s, they’re in the prime age group to start taking investing more seriously. A new Schwab Asset Management Study has some takeaways about millennial investor habits that could intrigue millennial investors and their advisors.
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According to the study, the growth potential of AI has been the key driver of overall interest in ETFs. A frothy tech space has indeed contributed significantly to the market overall. At the same time, ETFs have benefited; 65% of survey respondents plan to increase ETF investments in the next year.
The Millennial Investor & ETFs
That said, the ETF attributes that matter to investors differ by generation. While boomers led the generations in respondents who said cost and low expense ratio were “extremely important,” millennials emphasized index-tracking success and finding ETFs that align with their beliefs. That largely aligns with broader investment trends. It makes sense, for example, that older investors would be more conservative, nearing retirement. Younger investors, meanwhile, often can stomach more risk whether via cost or beliefs.
Perhaps the standout survey result for millennials, however, is their “early adopter” status. Millennial investors responded with greater interest in alts, crypto, smart beta, and fixed income ETFs than other generations.
Fixed income ETFs came in with the smallest disparity from older generations, which could owe to their lack of flashiness. Fixed income remains an important part of investing, however, with ETFs able to provide some exciting opportunities therein.
The Invesco Senior Loan ETF (BKLN ), for example, offers exposure to leveraged loans with potent yields. For a 65 basis point (bps) fee, BKLN tracks the S&P LSTA U.S. Leveraged Loan 100 Index. It focuses entirely on U.S. “junk” exposure, giving it a focus on domestic economic trends that other strategies may not offer. BKLN currently offers a 9.68% distribution rate, per Invesco data.
Elsewhere, the VanEck High Yield Muni ETF (HYD ) provides a slightly different high yield flavor. The ETF charges a 32 bp fee to track the ICE Broad High Yield Crossover Municipal index. It does so via exposure to municipal bonds, which can help limit tax exposure. It also offers some intriguing diversification.
With millennials increasingly getting into the ETF space, plenty of ETFs can appeal, but fixed income shouldn’t be forgotten. For younger investors looking for some more adventurous options therein, BKLN and HYD present just two options in a broader, exciting category.
For more information, please visit VettaFi.com | ETF Trends.
