Thrifty investors champion low cost ETFs

Low costs are the key attraction for ETF investors and for the majority the main reason they would recommend them as investment products.

Thrifty investors champion low cost ETFs


A total 91% of those already investing in ETFs consider cost to be important, while just under three-quarters of those considering making their first ETF investment feel the same, according to research compiled by the Morningstar ETF Centre.

When it comes to making an investment in an ETF the majority, 85%, have a preference for physically replicated over synthetic and 84% are concerned about the counterparty risk of investing in swap-based products, those that use synthetic replication.

Other key features of ETFs that are championed by investors are the ease of diversification across asset classes (82%), intraday liquidity (61%) and the ability to diversify for smaller allocations.

Respondents included both private investors and investment advisers, and the graph below shows how appropriate they believe ETFs are for a range of investment purposes.


The report also revealed that investors in ETFs tend to invest with a long term view, with 43% anticipating trading every few months or in a year and 20% stating that they would buy once and hold onto the investment for years.

For those that are yet to invest in an EFT, the most common reason for reluctance is lack of knowledge; 49% stated that they wished to learn more about ETFs before making a commitment.

A range of new ETFs were brought to market last week, including Europe’s first US energy infrastructure ETF, Vanguard’s range of four physically-backed ETFs and two Lyxor funds, including one emerging market currency ETF.


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