In recent years, “passive investing” has been the rage; as investment experts promote passive investing’s advantages, the number of shareholders buying Exchange Traded Funds (ETF) has significantly increased. According to TDCC’s big data analysis, ETFs are held by 990,000 shareholders out of a total of 6.77 million, and the proportion of ETF holdings has reached 15%, which is 6% higher than the 9% in 2019.

What’s worth mentioning is that from 2011 to 2014, ETF shareholders only made up 2% of the total shareholder number, showing hardly any increase. The annual growth from 2015 to 2019 was only a mere 1% to 2%; however, ETF holdings witnessed an explosive growth last year. The promotion of intraday odd lot trading and dollar-cost averaging is expected to boost the proportion of ETF holdings to total inventory even higher.

Over the past years, the growth in ETFs resulted from each leading investment trust companies’ launch of a wide range of thematic ETFs, such as 5G, next-generation technology, and sustainability high dividend. Not only have these companies jumped on the bandwagon, but options for investors have also become more diverse. Therefore, an increasing number of shareholders have been drawn to hold ETFs. What’s worth noticing is that not all ETFs are under the passive investing category; Yuanta Taiwan Dividend Plus ETF (0056), along with the recently emerging ESG ETFs and 5G ETFs, are the Smart Beta ETF that includes active investing factors.

The so-called Smart Beta ETF means a fund manager uses a specific kind of indicator for investment. For example, 0056 utilizes the projected dividend yield as its indicator. Cathay MSCI Taiwan ESG Sustainability High Dividend Yield ETF (00878), issued by Cathay Securities Investment Trust, uses MSCI ESG rating as its standard for its stock portfolio.

However, this kind of ETF is not the same as Yuanta Taiwan Top 50 ETF, whose constituents are the top 50 listed companies with the highest market weight, and it belongs to the index investing category with passive investment strategy. Smart Beta ETF retains the elements of active investing. Hence, investors need to understand this investment product well enough and make sure these ETFs correspond to their own investment strategies before starting their investment.

In terms of proportion for ETF shareholders’ age, according to TDCC’s big data, younger generations account for a higher percentage. As high as 27% of shareholders aged 20-29 hold ETFs; 22% of shareholders aged 30-39 hold ETFs. Regarding shareholders over 40 years old, the proportion experiences a dramatic drop to under 15%. It is interesting to note that the percentage of ETF shareholders aged 0-19 takes up almost 20%.

Of course, this distribution has to do with the timing when ETFs were introduced into the market. As the older generations started buying stocks, there was not a wide selection of ETFs. Even “the most senior” ETF, Yuanta Taiwan Top 50 ETF (0050), was established in 2003, and it has not reached two decades old so far. Consequently, in the early years, the only option for shareholders was individual stocks. Even if they have started to buy ETFs afterward, the proportion wouldn’t be too high.

As for minors, their accounts are opened mainly by parents to manage finances and make investments for their children. Parents’ selection is generally of blue-chip stocks with moderate risk tolerance and a timed-deposit concept. Therefore, ETFs that spread out risks and give stable dividends have become a quality investment instrument for parents to conduct long-term investments for children.

It is certain that compared with two decades ago, investors now have a more comprehensive selection of investment products. Those who prefer full replication of market performance can buy traditional ETFs that track an index; those who are optimistic about the prospects of 5G and high-technology stocks can buy Smart Beta ETFs. This clearly shows the Authority’s down-to-earthness and dedication to creating diversity and openness in Taiwan’s capital market. Whatever products investors want to invest in, they can find the related one in the capital market.