Younger people are more than twice as likely to invest in exchange traded funds (ETF) than those aged over 55s, research has revealed.
Analysis by Invesco found this was, in part, due to a lack of understanding about what ETFs actually are.
ETFs tend to be passively managed and are listed on a stock exchange, so you can buy and sell them at any time that the exchange is open.
ETFs can be more transparent, liquid (meaning you can move money in and out of them easily) and flexible than unit trusts and Oeics.
Growing in popularity in recent years, they've enabled investors to cheaply access new markets, from beauty products to space exploration.
The research found 92 per cent of retail investors aged between 18 and 34 have EFTs in their portfolio compared to just 43 per cent of investors over 55.
It also found that of the younger cohort of EFT investors, the funds make up more than a quarter of their portfolios. For EFT investors over 55 the figure is 33 per cent.
Invesco discovered around 60 per cent of private investors do not know what ETF stands for or what the funds do.
Gary Buxton from Invesco, said it is up to ETF providers to explain the role the products can have on investors’ portfolios.
He said: “While we expect newer investors to need education about the benefits of investing in ETFs, the number of experienced investors that are not realising these benefits, having never invested in ETFs, is surprising.”
The research comes a week after the investment manager launched its own ETF.
Invesco created what it called a low-cost ETF which tracks the performance of the FTSE All-World Index.
Chris Mellor, head of EMEA equity ETF product management at Invesco, said: “We believe our new ETF should be suitable for investors wanting a simple, stand-alone global equity product that doesn’t require them to really do anything else after they’ve invested.
"Alternatively, the ETF could be just as appealing to investors wanting a core base from which they can further diversify their portfolios. They may decide to build on this base over time by adding other ETFs, for example ones investing in bonds or in specific types of companies in which they may be interested.”
tara.o'connor@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
