Diversification or distortion? The role of ETFs in retail investor portfolios and performance
Abstract
We examine how ETF adoption affects retail investor performance using a comprehensive panel of 524,181 Finnish investors tracked from 2007 to 2022. ETF adopters tend to be older, predominantly male, and more active, holding smaller but better-diversified portfolios. Importantly, first-time use of ETFs yields statistically significant improvements in risk-adjusted returns. ETF users also demonstrate greater portfolio resilience during financial crises. Our findings confirm that ETFs serve as effective tools for enhancing performance and managing risk for retail investors.
Fields of Study & Subjects
Financial Markets and Investment Strategies
Financial Literacy
Pension
Retirement Analysis
COVID-19 Pandemic Impacts
Publication details
- Journal / source
- Journal of Financial Stability
- Publisher
- Elsevier BV
- Volume
- 83
- Pages
- 101514–101514
- Publication date
- 18 February 2026
- Language
- EN