ETF Watch: Retail Investors Still Shy Away From ETFs

(RTTNews) - The exchange-traded funds or ETFs, are lagging in popularity among retail investors due primarily to the lack of familiarity with the investment products, according to a new study.

While the ETF industry in the U.S. has grow at a breakneck pace to more than $2 trillion in assets in just more than two decades, most of that interest has come from institutional investors.

Two-thirds of retail investors have not yet moved ETFs in their portfolios.

This was revealed in a new study from investment firms Fidelity Investments and BlackRock, inc. (BLK) of more than 1,000 individual investors and 250 advisors.

The study revealed that the key to further growth for ETF adoption among retail investors and advisors lies in educating them on ETF basics.

"While ETF investments have more than doubled in the last five years , there is still significant opportunity to raise awareness as more than two-thirds of investors report they have yet to tap the potential benefits of ETFs in their portfolios," said Andrew Brownsword, SVP Fidelity retail brokerage. "ETF adoption will keep growing."

The study showed that current ETF owners are increasingly turning to ETFs for long-term holdings, while 80 percent of them see benefit in combining ETFs and mutual funds in a portfolio.

According to the new study, just 32 percent of individual investors currently own ETFs in their portfolio. Meanwhile, 61 percent of those who do not own ETFs, just did not know about them. However, 20 percent of those who do not own ETFs plan to purchase their first ETF in the coming year.

The study showed that 46 percent of investors who have ETFs plan to increase the amount invested over the next three years. It also found that 72 percent of advisers expect to increase their allocation to ETFs in the next three years, with 25 percent of then projecting significant increase their allocation to ETFs.