Few Americans know what exchange-traded funds are or how they can add value to a diversified portfolio, a recent TD Ameritrade survey shows.
The brokerage – which offers 100 commission-free ETFs on its website – found that just 34 percent of investors have heard of ETFs, even though the funds have been around for two decades. And only 15 percent of the 852 people polled by the company trade ETFs in their own portfolios.
It's a shame that more people aren't apprised of the investment products' benefits, TD Ameritrade suggests. Among the investors it surveyed who were uncertain about buying ETFs, reducing risk through diversification was the most important feature an investment product could have – and ETFs are ideal for diversification purposes.
They work like fungible mutual funds, letting investors buy stakes in a variety of assets and trade them freely. Using ETFs, an investor could amass positions in precious metals, Japanese large-cap stocks and oil companies based in Eastern Europe – all in the same, easy-to-manage portfolio.
"ETFs may fulfill many of the stated needs that investors have told us are important to them," TD Ameritrade ETFs director Mike McGrath said