The local ETF industry is expected to surpass a milestone of two million investors within the next year according to a new report.
The BetaShares/Investment Trends ETF Report found that the number of ETF investors in Australia had grown 33 per cent to 1.73 million over the past year and predicted an additional 275,000 Australians would invest in ETFs in 2022.
Growth is also forecast for existing ETF investors, with 1.46 million or 84 per cent reporting plans to increase their allocation to ETFs during the next year, the highest rate recorded since 2013.
“A growing number of investors continue to be drawn to ETFs as a way of building their wealth and achieving their financial goals,” said BetaShares CEO Alex Vynokur.
“We’re also seeing that ETFs have reached mainstream adoption in Australia, with a notable rise in younger and increasingly female investors, who see value in a simple-to-access, transparent and cost-effective way of building their investment portfolios.”
The proportion of Australians using ETFs as the core of their portfolio surged from 4 per cent in 2019 to 27 per cent in 2021, with BetaShares highlighting increased usage among experienced investors including individuals with an SMSF.
Portfolio diversification was identified as the main reason behind investors choosing to invest in ETFs.
For newer ETF investors who have remained invested for less than 12 months, avoiding individual stock exposure risk and saving time were among the top reasons for investing.
Meanwhile, convenient access to overseas markets and liquidity benefits were among the biggest benefits identified by long-term ETF investors of five years or more.
“Australian investors are continuing to increasingly recognise ETFs as a convenient and cost-effective way to diversify their portfolios away from domestic equities,” said Mr Vynokur.
According to BetaShares, half of ETF investors said they intended to hold their ETF investments for more than 10 years.
The firm recently reported that the market cap of Australian ETFs reached an all-time high in November with the second highest level of monthly trading value ever recorded.
Mr Vynokur added, “2022 is shaping up for another strong year of growth, and I believe the industry is on track to hit $180 billion in FUM by the end of next year, up from approximately $130 billion today”.
