Market Insider

Schwab: Most Investors Don’t Understand ETFs

New Schwab study on exchange traded funds. Pretty much same old, same old—individual investors intend to increase their use of ETFs.

But in a sign of great candor, the press releaseannouncing the study said, in effect, with ETFs most investors don’t know what they’re buying:

"Forty-six percent of investors surveyed call themselves ETF 'novices,' and one-fourth of all respondents indicate that they do not understand their costs or how to best use them. Thirty-one percent of all investors say they don’t know how to use ETFs across asset classes, and more than 25 percent know nothing about the difference between actively managed and index-based ETFs.

“Individual investors are attracted to the efficiency and flexibility of ETFs, but many do not have a solid grasp on how they work,” said Beth Flynn, vice president of ETF Platform Management at Charles Schwab. “As more flavors of ETFs come to market, it is clear that the emphasis on education will be more important than ever.”

Me: Uh oh.

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