Exchange-traded funds may be “here to stay” but the need for education continues, according to the 2012 ETF Investor Study by Charles Schwab.

Specifically, the study revealed that 41% of investors plan to invest more in ETFs in the coming year, with sector and equity funds topping the list as the types of ETFs under consideration. Energy, healthcare and technology are the sector funds investors are most interested in buying. Of those surveyed who have an employer-sponsored retirement account, 55% want the ability to access ETFs through them. Currently only 12% said they can select ETFs through their employer’s retirement account now.

Not surprisingly, cost is the number one factor investors look at when selecting ETFs, according to the study. Investors surveyed say they pay most attention to expense ratios, followed by trade commissions. Thirty-eight percent believe that the ability to trade ETFs commission-free is important, and of this group, 40% call it ‘most important’ while the remaining 60% say this ability is ‘very important.’ An additional 46% say commission-free trades are somewhat important, but not the only factor they consider.

But while 39% of respondents claim to be better versed in ETFs than they were last year, 53% of investors who are considering but have not yet purchased an ETF claim that their lack of understanding is the main reason they have not done so. Although 57% of those who own ETFs rate their understanding of the products at the intermediate level, a full 63% of those considering ETFs classify their knowledge base as ‘novice’.

“We’ve made some gains in educating investors, but clearly there is still room to grow,” stated Beth Flynn, vice president of ETF platform management at Charles Schwab.

The study is an online survey of more than 1,000 individual investors between the ages of 25-75 with at least $25,000 in investable assets and some familiarity with ETFs.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.