ETFs Gaining Ground on Mutual Funds

The percentage of investors that own exchange-traded funds (ETFs) has increased, while the percentage owning mutual funds has decreased over the past four years, according to a recent Cogent Research report.   

As of October 2010, 75% of investors own mutual funds, which is down from 78% a year earlier and a full nineteen percentage points below the 94% of investors who owned at least one mutual fund in October 2006. And within the same 4-year period, the number of investors who report owning ETFs has increased 57%, from 7% to 11%, according to the report.  

Not only is the number of investors who own mutual funds decreasing, but those who have mutual funds are allocating less money to them: since 2006, the average allocation to mutual funds is down from 53% to a present level of 44%. During that time, the average ETF allocation increased 45%, from 11% to 16%. 

“These numbers reflect a dramatic shift in preference among investors for both mutual funds and ETFs,” said Cogent Research Principal John Meunier. “And while it’s impossible to know exactly how things will play out, it’s clear that a major realignment is underway.”