ETFs Are Way Cooler Than Mutual Funds

by Todd Shriber

Exchange-traded funds are way cooler than mutual funds. At least that’s the sentiment that can be inferred from some recent research published by Cerulli Associates Inc. and the Investment Company Institute (ICI).

As ETFdb.com notes, financial advisers have been slow to warm to ETFs, but the aforementioned research indicates financial advisers may want to change their tune.

The demographics speak for themselves. The Cerulli Associates/ICI research points out that ETF investors are younger, wealthier and better educated than folks that invest in mutual funds, InvestmentNews reports. On top of all that, one source quoted by InvestmentNews says that ETF investors tend to be more “engaged” than their mutual fund counterparts.

The statistics are arguably startling. ICI’s research shows that the median household income of mutual fund investors is $80,000, compared with $130,000 for ETF investors. And the median total of household financial assets for ETF investors is $300,000 compared to $200,000 for mutual fund investors, a gap of 50%, according to InvestmentNews.

Still, the exchange-traded products industry has a long way to go to catch mutual funds when it comes to assets under management. At the end of July, all U.S.-listed exchange-traded products had combined assets under management of over $1.1 trillion, according to data from the National Stock Exchange. At the end of 2010, U.S. mutual funds had $11.8 trillion in assets under management, ICI data show.

Those numbers don’t mean mutual fund issuers can rest on their laurels. In fact, they can’t afford to because U.S. ETF assets are expected to double before the end of 2015, the Financial Times reports. Those assets will have to come from somewhere, and very likely they will come from investors departing mutual funds.

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