ETFs: Why Boomers Aren’t as Bullish as Young Investors

Recent research from Charles Schwab shows a clear generational split in how investors view exchange-traded funds (ETFs). Younger investors (Gen Z and Millennials) are generally more enthusiastic about ETFs and index products, while many Baby Boomers are comparatively cautious or less bullish. That doesn’t mean ETFs aren’t useful — it means preferences and risk profiles differ by age, goals, and experience. In this article we’ll unpack what ETFs are, why investors like them, the pros and cons, why Boomers may be more wary, and whether ETFs fit today’s economic environment. 

What is an ETF? 

An exchange-traded fund (ETF) is an investment product that pools money from many investors to buy a basket of assets — stocks, bonds, commodities, or combinations — and then lists shares on a stock exchange.

Buying an ETF share gives you exposure to that entire basket in a single trade, just like buying a stock. Many ETFs track an index (for example, the S&P 500), but others are actively managed or focused on specific themes (robotics, clean energy, or frontier markets).

ETFs combine features of mutual funds (diversified exposure) with the intraday tradability of stocks, which is why they’re often described as a hybrid between the two.

Why ETFs became so popular?

A few key reasons explain why ETFs’ are favorites to some investors:

• Low cost: Many index ETFs have very low expense ratios compared with actively managed mutual funds. Cost matters over time. 
• Simplicity and diversification: One trade gives you exposure to dozens, hundreds, or even thousands of securities.
• Liquidity and flexibility: ETFs trade during market hours and can be bought or sold instantly; investors can use limit orders, stop orders, or intraday strategies.
• Tax efficiency: In many jurisdictions, ETFs are more tax-efficient than mutual funds because of the way shares are created and redeemed.
• Product variety: There’s an ETF for almost every theme, sector, or fixed-income slice — from broad market trackers to niche, thematic plays. Recent surveys show growing interest in both broad index ETFs and specialized ETF types. 

These features are especially attractive to younger, self-directed investors who prioritize low fees, ease of use, and thematic bets (like AI, clean energy, or crypto exposure).

ETF pros — why many investors use them?

Here are the main advantages of ETFs:

1. Cost efficiency: Many ETFs have rock-bottom fees compared to active funds, which eats into returns less. 
2. Instant diversification: A single ETF can reduce company-specific risk because you own a slice of many companies or bonds.
3. Transparency: Most ETFs publish holdings daily, so you know exactly what you own.
4. Easy to trade: You can buy and sell ETFs throughout the trading day at market prices.
5. Access to niche markets: ETFs make it easy to access emerging markets, commodities, sector themes, or specific strategies that used to be harder to reach.
6. Tax advantages: For many investors ETFs can be more tax-efficient than mutual funds.
7. Scalability: ETFs work for small investors and institutions alike.

These benefits explain why ETF ownership has climbed steadily in recent years and why many ETF investors say they could imagine moving most or all of their portfolios into ETFs. 

ETF cons — what you should watch out for?

No investment is perfect. ETFs come with tradeoffs and risks:

1. Not all ETFs are equal: Some niche or thematic ETFs have low liquidity and wide bid/ask spreads, which can increase trading costs.
2. Concentration risk: Some ETFs track indices dominated by a handful of big names (e.g., mega-cap tech), which reduces the diversification benefit.
3. Hidden complexity: Leveraged, inverse, and certain active ETFs can be complex and are inappropriate for many buy-and-hold investors.
4. Tracking error: Poorly managed ETFs may not precisely track their intended index, especially in turbulent markets.
5. Overexposure to themes: It’s easy to pile into a favored theme via many overlapping ETFs and unintentionally overweight the same companies.
6. Liquidity under stress: In extreme market stress, some ETF market prices can deviate from the underlying assets’ values, leading to dislocations.
7. False sense of safety: “Diversified” doesn’t mean “risk-free.” A broad market downturn hits many ETFs simultaneously.

Being aware of these downsides helps you pick ETFs that suit your risk tolerance and goals.

Why investors — especially younger ones — like ETFs?

Younger investors gravitate to ETFs for several reasons:

• DIY-friendly: Apps and brokerage platforms make it easy to buy ETFs instantly.
• Cost sensitivity: Younger investors often have less capital and care deeply about low fees.
• Thematic curiosity: Many younger investors want exposure to themes (AI, clean energy, cannabis, crypto) easily accessible via ETFs.
• Long investment horizon: Young investors can tolerate short-term volatility for long-term growth, matching well with passive ETF strategies.
• Educational resources: There’s wide content and social media conversation explaining ETFs, which fuels adoption. Global and academic surveys show younger generations are quicker to embrace self-directed investing and ETFs. 

So, why are Baby Boomers less bullish on ETFs?

Multiple reputable surveys and studies reveal a pattern: Baby Boomers often show less enthusiasm for ETFs than younger cohorts. Several reasons explain this generational gap. (Below, I reference recent surveys that support these findings.) 

1. Different investment goals and time horizons

Many Baby Boomers are retired or near retirement; their priority is capital preservation and reliable income rather than aggressive growth. That can make them prefer income-focused mutual funds, individual bonds, or dividend stocks that feel more predictable than equity ETFs.

2. Comfort with advisors and managed solutions

Surveys show older investors rely more on financial advisors and professionally managed accounts. Boomers may trust human advisers and bespoke strategies more than off-the-shelf ETFs. This preference is reflected in survey data that shows higher advisor satisfaction among Boomers compared with some younger groups. 

3. Familiarity with older products

Baby Boomers built portfolios in an era dominated by mutual funds and individual bonds. Those products were marketed and explained to them through advisors and workplace retirement plans for decades. Newer ETF features may not feel necessary or worth changing a well-understood approach.

4. Income and yield focus

With retirement comes a need for fixed income and yield. While bond ETFs exist, some Boomers prefer owning individual bonds or annuities to ensure cashflow predictability.

5. Aversion to market noise and thematic hype

Baby Boomers can be more skeptical of fast-growing themes, leveraged ETFs, or social-media fueled momentum trades. They may see many modern ETFs as gimmicks or fads, especially thematic products that exploded during the ETF boom. Global surveys find younger investors more open to thematic and niche strategies than Boomers. 

What the data says (brief survey roundup)

Recent industry and institutional studies point to differences in ETF adoption and attitudes across age groups:

• Charles Schwab’s 2025 ETF study finds strong and growing ETF appetite overall, but nuances exist across age groups in how ETFs are used and which types are preferred. 
• FTSE Russell and other retail investor surveys note generational differences in investment behavior, risk perception, and product preference — younger investors trend toward self-directed ETF use while more mature generation retain greater reliance on advisors. 
• Many research sources highlight that younger generations are more likely to embrace new investing tools, including ETFs and AI-enabled advice, compared with Baby Boomers. 

Are ETFs a good fit in the current economic situation? 

Short answer is Yes — but it depends on which ETFs and your investment goals.

The economy in 2025 has been characterized by higher interest rates, ongoing inflation moderation, and rapid technological change. Those conditions change how different ETFs perform and which ones make sense:

Why ETFs can be attractive now?

• Fixed-income ETFs offer convenient exposure to bonds without needing to buy individual issues, and many investors are increasing allocation to bond ETFs as rates remain higher than a few years ago. Recent reports show rising interest in fixed-income ETF allocations. 
• Diversification during uncertainty: ETFs allow investors to shift between broad market exposure, defensive sectors, or inflation-protected strategies quickly.
• Access to growth themes: For investors who want exposure to secular trends (AI, robotics, cloud infrastructure) ETFs remain an efficient vehicle.

Why caution is warranted?

• Rate sensitivity: Some ETFs (especially long-duration bond ETFs or high-growth tech sector ETFs) can be volatile when rates move.
• Thematic overheating: Thematic ETFs that rode a hype cycle may be overvalued; pick carefully and scrutinize holdings.
• Dividend and income needs: Retirees needing predictable income might prefer laddered bonds, annuities, or high-quality dividend stocks in addition to or instead of ETFs.

Practical takeaway

For many investors, a core-satellite approach works: use low-cost broad market ETFs as the core (e.g., broad US equity and bond ETFs) and add satellite positions for thematic exposure or income. For retirees, blend ETF exposure with targeted income instruments to meet cashflow needs.

How to pick the right ETFs?

• Know the objective: Are you seeking broad market exposure, income, or thematic growth?
• Avoid complexity if you don’t understand it: Stay away from leveraged/inverse ETFs.
• Check expense ratio: Lower is generally better for index ETFs.
• Look at liquidity: Average daily volume and assets under management (AUM) matter for trading costs.
• Inspect holdings: Avoid ETFs that hide concentration risk.
• Understand structure: Is it physically replicated, synthetic, or a futures-based commodity ETF? Know the implications.
• Watch tracking error: See how closely the ETF matched index returns historically.
• Consider tax implications: Some ETF structures have tax quirks in certain jurisdictions.

Common myths about ETFs — debunked

• Myth: ETFs are always safer than stocks.
  Reality: ETFs can be concentrated or highly leveraged. Safety depends on the underlying assets and strategy.
• Myth: All ETFs are cheap and identical.
  Reality: Expense ratios vary widely; niche ETFs can have high fees and low liquidity.
• Myth: ETFs eliminate the need for a financial advisor.
  Reality: For many investors, advisors help with asset allocation, tax planning, and income strategies — areas ETFs alone don’t solve. 

Final verdict — are ETFs right for you now?

ETFs are powerful tools that suit many investors, but generational differences in goals and preferences explain why Baby Boomers are on average less bullish than younger cohorts. Boomers’ focus on income, capital preservation, and advisor relationships means they often favor tailored, managed solutions over broad DIY ETF adoption.

That said, ETFs can be a core building block in most portfolios — even for retirees — when chosen thoughtfully and combined with income strategies. In today’s economic environment (higher rates, selective growth opportunities), ETFs offer accessible ways to adjust allocations quickly. The key is matching ETF choice to your personal objectives, not following hype.

Frequently Asked Questions (FAQ)