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New ICI Research Focuses on Mutual Fund Investors

Three ICI research publications released in October examine mutual fund shareholder sentiment, take a look at the incidence of mutual fund ownership in U.S. households, provide a detailed overview of mutual fund investor characteristics and preferences, and report on trends in fund ownership over the past several years.

The trading scandals uncovered beginning in September 2003 and market uncertainty have had an impact on shareholder sentiment, but investors retain a very favorable view of fund companies according to an annual tracking survey conducted by the Investment Company Institute and released at an October 27 media briefing in New York City.

The Institute highlighted several key findings about fund households and shareholders:

  • The average American mutual fund shareholder is a middle-income and middle-aged investor who buys and holds funds to reach retirement objectives.
  • Despite the recent bear market and recession, mutual fund shareholders continued to exhibit a “buy and hold” investment strategy.
  • In 2003, other than automatic contributions, 60 percent of investors made no transactions with the mutual funds they hold. Of those who did make transactions, fund purchases outnumbered fund redemptions by more than two to one.
  • Eighty-two percent of fund owners indicated they were not concerned about short term market fluctuations, and 84 percent indicated they were willing to take at least average investment risk for comparable gain. 

Investors Have a Favorable View of Fund Companies

Mutual fund investors continue to have a favorable view of fund companies, although the number of investors with a ‘very' favorable impression has dropped in recent years, according to “Shareholder Sentiment of the Mutual Fund Industry,” the latest issue of Fundamentals. "Fortunately, the number of investors at the polar opposite - `very' unfavorable - has ranged from only one to two percent," said ICI President Paul Schott Stevens. In the past few years, it appears that the bear market has adversely affected shareholders' views of funds, and that the recent scandals have had an additional impact."

“In spite of the [recent fund] scandal … mutual fund flows were up dramatically for the 12-month period ending May 2004.”—ICI President Paul Schott Stevens.

More Households Own Mutual Funds in 2004

Nearly half of all U.S. households (48.1 percent) own mutual funds, according to the Institute’s annual tracking study of mutual fund ownership. “U.S. Household Ownership of Mutual Funds in 2004,” finds that 53.9 million U.S. households and 92.3 million individuals own mutual funds.

Mutual Fund Owners at a Glance
48 years old (median age)77 percent employed$125,000 in household financial assets (median)$48,000 in mutual fund assets (median)92 percent saving for retirement

The 2004 figures indicate that fund ownership continues to trend upward, increasing from 51.7 million households and 89.7 million individual fund owners in 2000.

Ownership of Mutual Funds Among Individuals and U.S. Households, 2000 - 2004
(millions)

Key Findings About Mutual Fund Investors Revealed in New Report

Profile of Mutual Fund Shareholders takes a detailed look at individual fund owners, relying on in-depth surveys of more than 3,500 fund owners. The report includes age, income, and other information about respondents as well as a detailed analysis of their investment goals, strategies, and risk tolerance.

“The average mutual fund owning household is middle-income and investing in funds with an eye toward retirement.”—said Sandy West, ICI’s Director of Market Policy Research.

How Have Fund Shareholders Changed Over the Past Six Years?
The Profile report also compares this year’s survey results with those of surveys conducted in 1998 and 2001, and notes several trends in shareholders’ characteristics and decisionmaking:

  • The median age of a fund shareholder has increased from 44 to 48 years, and household assets in mutual funds have nearly doubled from $25,000 in 1998 to $48,000 in 2004.
  • More shareholders are buying their first fund through a defined-contribution plan, and more fund owners also own Individual Retirement Accounts in 2004 (69 percent) than in 1998 (57 percent).
  • Most shareholders continue to invest to fund their retirement, furthermore, and are not concerned with short-term market fluctuations.

What Does the Average American’s Fund Portfolio Look Like in 2004?

Seventy percent of fund owners bought their first mutual fund more than 10 years ago. Fund owners hold a median of four funds, 58 percent purchased their first fund mutual fund through a defined contribution retirement plan, and 80 percent own equity funds. In addition, the 2004 Profile report finds that 64 percent of fund owners also own individual stocks, individual bonds, or annuities and 20 percent also own some type of education savings vehicle: Coverdell Education Savings Account, Section 529 College Savings Plan, or Section 529 Prepaid Tuition Plan.

 

Related Links

In addition to the links below, this website includes a complete list of research on U.S. mutual fund shareholdersand their decisionmaking.