Wealthy hold few assets in indexed funds
Wealthy investors who use registered investment advisers are only indexing 3.8% of their marketable securities.
Wealthy investors who use registered investment advisers are only indexing 3.8% of their marketable securities, according to a study.
Compared to individual investors who hold 10% to 15% of their assets in index funds, wealthy investors index 1.0% to broad-based U.S. markets and 2.8% to international markets and subsets of the U.S. markets, according to the study by Advisor Perspectives.
Seeking performance that exceeds market indices, these high net worth clients opt for a combination of separately managed accounts and actively managed mutual funds.
Advisor Perspectives, a Lexington, Mass.-based investor account database, also found that larger accounts (average size of $3.7 million) were more likely to use index funds than smaller accounts (average size of $15,000).
Exchange traded funds were another favorite of larger investors, making up 3% of their total assets, compared to their smaller counterparts who had 0.6% of total assets in ETFs.
On the other hand, smaller accounts prefer non-indexed ETFs, holding 13.3% of ETF assets in these funds, versus 1.4% for larger accounts.
These funds allow smaller accounts to diversify effectively, while larger accounts diversify through individual securities.
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