Investors need to become better educated about exchange-traded funds (ETFs), according to new research.
ETFs are still approached in "quite a passive way", according to Morningstar, which recently conducted a survey to understand the appetite for and knowledge of the funds among investors.
The findings indicate that country and sector-specific ETFs are currently the most favoured, while low-costs remain a key attraction.
Trading is infrequent and the ability to short securities is not viewed as a priority.
Commenting on the findings of the survey, of over 1,000 professional and individual investors, Morningstar associate director of European ETF Bradley Kay explained: "Even among active investors, we found ETFs are being used in quite a passive way, for example to overweight in a particular asset class and with infrequent trading thereafter.
"In all, it would seem that ample room remains to engage investors and advisers on this investment option."
Speaking to Reuters recently Julie Patterson of the Investment Management Association warned investors that there is still not a regulatory definition of ETF, which could mean they hold hidden risks.
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