The Habits of ETF Investors

Exchange-traded funds have long had the reputation of being a vehicle that's most popular with frequent traders, but they've been moving more into the mainstream lately. According to a recent Vanguard study, the majority of their customers’ trades in ETFs – 62 percent of them – were the result of strategic allocation decisions and were expected to be held for more than a year. That’s less than the 83 percent of all mutual funds trades that fell into the same category, but it’s in the same ballpark.

But they still remain a very popular vehicle for day-traders. Vanguard found that State Street’s widely held SPDR S$P 500 ETF – a huge fund that contains nearly 10 percent of all ETF assets – has a turnover ratio of greater than 30 percent a day. That suggests that the average holding period for SPDRs is just three days.

Here’s another fact that is indicative of the mindset of the average ETF investor: About 16 percent of all people who are invested in Vanguard’s mutual funds log on to Vanguard.com every day. But more than twice as many – 36 percent – of Vanguard’s ETF clients log on to the site daily.