This chapter takes an in-depth look at the characteristics of mutual fund–owning households, examines where they hold their mutual funds, and explores their attitudes on investment risk and mutual fund investing.

The percentage of U.S. households owning mutual funds grew eightfold in the 1980s and 1990s, and has held steady for the past 15 years, averaging about 45 percent since 2000. In mid-2015, 43 percent of all U.S. households owned mutual funds. The estimated 91 million people who owned mutual funds in mid-2015 belong to all age and income groups, have a variety of financial goals, and buy and sell mutual funds through three principal sources: investment professionals; employer-sponsored retirement plans; and fund companies directly, fund supermarkets, or discount brokers. About half of Baby Boom households owned mutual funds in mid-2015. They accounted for 40 percent of mutual fund–owning households and held 53 percent of households’ mutual fund assets.

Individual and Household Ownership of Mutual Funds 

In mid-2015, an estimated 91 million individual investors owned mutual funds—and at year-end, these investors held 89 percent of total mutual fund assets (Figure 2.2), directly or through retirement plans. Household ownership of mutual funds has remained relatively steady since 2000. Altogether, 43 percent of U.S. households—or about 53.6 million—owned mutual funds in mid-2015, slightly less than the 2000–2015 average of about 45 percent (Figure 6.1). Mutual funds were a major component of many U.S. households’ financial holdings in mid-2015. Among households owning mutual funds, the median amount invested in mutual funds was $120,000 (Figure 6.2). Seventy-one percent of individuals heading households that owned mutual funds were married or living with a partner, more than half were college graduates, and more than seven in 10 worked full- or part-time.

Figure 6.1

43 Percent of U.S. Households Owned Mutual Funds in 2015

Millions of U.S. households owning mutual funds, selected years

Figure 6.1

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* The survey methodology was changed to a dual frame sample of cell phones and landlines in 2014.
Sources: Investment Company Institute and U.S. Census Bureau. See ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2015.”


Figure 6.2

Characteristics of Mutual Fund Investors

Mid-2015

How many people own mutual funds?
90.9 million individuals
53.6 million U.S. households
Who are they?
51 is the median age of the head of household
71 percent are married or living with a partner
51 percent are college graduates
71 percent are employed (full- or part-time)
12 percent are Silent or GI Generation (born 1904 to 1945)
40 percent are Baby Boomers (born 1946 to 1964)
32 percent are Generation X (born 1965 to 1980)
16 percent are Millennial Generation (born 1981 to 2004)*
$87,500 is the median household income
What do they own?
$200,000 is the median household financial assets
$120,000 is the median mutual fund assets
67 percent hold more than half of their financial assets in mutual funds
61 percent own IRAs
84 percent own DC retirement plan accounts
3 mutual funds is the median number owned
88 percent own equity funds
When and how did they make their first mutual fund purchase?
61 percent bought their first mutual fund before 2000
63 percent purchased their first mutual fund through an employer-sponsored retirement plan
Why do they invest?
91 percent are saving for retirement
50 percent are saving for emergencies
49 percent hold mutual funds to reduce taxable income
24 percent are saving for education

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* The Millennial Generation is aged 11 to 34 in 2015; survey respondents, however, must be 18 or older.
Sources: ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2015”; ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2015”; and ICI Research Report, “Profile of Mutual Fund Shareholders, 2015”

Mutual Fund Ownership by Age and Income 

Mutual fund–owning households span all generations, but members of the Baby Boom Generation and Generation X had the highest mutual fund ownership rates in mid-2015. Forty-nine percent of households headed by a Baby Boomer (head of household born between 1946 and 1964) and half of households headed by a member of Generation X (born between 1965 and 1980) owned mutual funds in mid-2015 (Figure 6.3). Thirty-two percent of Millennial Generation households (born between 1981 and 2004) and 33 percent of Silent and GI Generation households (born between 1904 and 1945) owned mutual funds in mid-2015.

Among mutual fund–owning households in mid-2015, 40 percent were headed by members of the Baby Boom Generation, 32 percent were headed by members of Generation X, 16 percent were headed by members of the Millennial Generation, and 12 percent were headed by members of the Silent and GI Generations (Figure 6.4). Heads of mutual fund–owning households had a median age of 51 years (Figure 6.2).

Figure 6.3

Incidence of Mutual Fund Ownership Is Greatest Among the Baby Boom Generation and Generation X

Percentage of U.S. households within each generation group, mid-2015

Figure 6.3

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* The Millennial Generation is aged 11 to 34 in 2015; survey respondents, however, must be 18 or older.
Note: Generation is based on the age of the household sole or co-decisionmaker for saving and investing.
Sources: Investment Company Institute and U.S. Census Bureau. See ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2015.”

Not only were Baby Boomers the largest shareholder group in mid-2015, they also held the largest percentage of households’ mutual fund assets, at 53 percent (Figure 6.4). Households headed by members of Generation X (27 percent), the Silent and GI Generations (15 percent), and the Millennial Generation (5 percent) held the rest. This pattern of asset ownership reflects the fact that Millennials are younger and have not had as much time to save as Baby Boom households that are in their peak earning and saving years.

Figure 6.4

The Baby Boom Generation Is the Largest Shareholder Group and Holds More Than Half of Household Mutual Fund Assets

Percentage of mutual fund–owning households and household mutual fund assets by generation, mid-2015

Figure 6.4

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* The Millennial Generation is aged 11 to 34 in 2015; survey respondents, however, must be 18 or older.
Note: Generation is based on the age of the household sole or co-decisionmaker for saving and investing.
Source: ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2015”

Households with higher annual incomes are more likely to own mutual funds than those with lower annual incomes. In mid-2015, 64 percent of U.S. households with annual income of $50,000 or more owned mutual funds, compared with 19 percent of households with annual income of less than $50,000 (Figure 6.5). In fact, lower-income households tend to have less savings than higher-income households. The typical household with less than $50,000 in annual income had only $10,000 in savings and investments, while the typical household with annual income of $50,000 or more held $200,000 in savings and investments.

Figure 6.5

Ownership of Mutual Funds Increases with Household Income

Percentage of U.S. households within each income group, mid-2015

Figure 6.5

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Note: Total reported is household income before taxes in 2014.
Sources: Investment Company Institute and U.S. Census Bureau. See ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2015.”

U.S. households owning mutual funds had a range of annual incomes in mid-2015: 20 percent had annual income of less than $50,000; 19 percent had between $50,000 and $74,999; 16 percent had between $75,000 and $99,999; and the remaining 45 percent had $100,000 or more (Figure 6.6). The median income of mutual fund–owning households in mid-2015 was $87,500 (Figure 6.2).

Figure 6.6

Most Households That Own Mutual Funds Have Moderate Incomes

Percent distribution of all U.S. households and households owning mutual funds by household income, mid-2015

Figure 6.6

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Note: Total reported is household income before taxes in 2014.
Sources: Investment Company Institute and U.S. Census Bureau. See ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2015.”

Households’ First Mutual Fund Purchase 

Younger generations tend to start investing in mutual funds earlier than older generations did. For example, in 2015, when they were aged 18 to 34, the median age of first mutual fund purchase was 23 for households in the Millennial Generation (Figure 6.7). By comparison, Generation X households made their first mutual fund purchase at age 25 when they were aged 20 to 35 in 2000. Similarly, in 2015, when Generation X households were aged 35 to 50, their median age of first mutual fund purchase was 26, while in 2003, when late Baby Boomers were aged 39 to 47, their median age of first mutual fund purchase was 31. Finally, in 2015, when they were aged 51 to 59, the median age of first mutual fund purchase was 32 for households in the late Baby Boom Generation, while in 2005, when households in the early Baby Boom Generation were aged 50 to 59, their median age of first mutual fund purchase was 37. This pattern reflects the expansion of mutual fund investing, especially as it occurs in employer-sponsored retirement plans.
 

Figure 6.7

Younger Generations Purchased First Mutual Fund Earlier Than Older Generations

Median age of household head when first mutual fund purchase was made by generation group, 2000–2015

Figure 6.7

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* The Millennial Generation is aged 11 to 34 in 2015; survey respondents, however, must be 18 or older.
Note: Generation is based on the age of the household sole or co-decisionmaker for saving and investing. Average age of the household head is the average age of the generation group at the time of the survey.
Source: ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2015”

As 401(k) and other employer-sponsored defined contribution (DC) retirement plans have grown more popular, the percentage of households that make their first foray into mutual fund investing inside these plans has increased. Among the households that bought their first mutual fund shares in 2010 or later, 67 percent did so inside an employer-sponsored retirement plan (Figure 6.8). Among those that bought their first mutual fund shares before 1990, only 57 percent did so inside an employer-sponsored retirement plan.

Figure 6.8

Employer-Sponsored Retirement Plans Are Increasingly the Source of First Mutual Fund Purchase

Percentage of U.S. households owning mutual funds, mid-2015

  Year of household’s first mutual fund purchase   Memo: all
mutual
fund–owning
households
Before
1990
1990 to
1994
1995 to
1999
2000 to
2004
2010 or
later
Source of first mutual fund purchase    
Inside employer-sponsored
retirement plan
57 64 66 65 67 63
Outside employer-sponsored
retirement plan
43 36 35 36 33 37

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Note: Employer-sponsored retirement plans include DC plans (such as 401(k), 403(b), or 457 plans) and employer-sponsored IRAs (SEP IRAs, SAR-SEP IRAs, and SIMPLE IRAs).
Source: ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2015”

Savings Goals of Mutual Fund Investors 

Mutual funds play a key role in the long- and short-term savings goals of U.S. households. In mid-2015, 91 percent of mutual fund–owning households indicated that saving for retirement was one of their financial goals, and 72 percent said it was their primary financial goal (Figure 6.9). Retirement, however, is not the only financial goal for mutual fund–owning households—50 percent reported saving for emergencies as a goal; 49 percent reported reducing taxable income as a goal; and 24 percent reported saving for education as a goal.

Figure 6.9

Majority of Mutual Fund Investors Focus on Retirement

Percentage of U.S. households owning mutual funds, mid-2015

Figure 6.9

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* Multiple responses are included.
Source: ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2015”
 

Where Investors Own Mutual Funds 

The importance that mutual fund–owning households place on retirement saving is reflected in where they own their funds—95 percent of these households held mutual fund shares inside employer-sponsored retirement plans, individual retirement accounts (IRAs), and other tax-advantaged accounts in mid-2015. It also is reflected in the type of funds they choose—households are more likely to invest their retirement assets in long-term mutual funds than in money market funds. Indeed, DC retirement plan and IRA assets held in equity, bond, and hybrid mutual funds totaled $6.8 trillion at year-end 2015, or 53 percent of those funds’ total net assets industrywide. By contrast, DC retirement plan and IRA assets in money market funds totaled just $356 billion, or 13 percent of those funds’ total net assets industrywide.

In mid-2015, 80 percent of mutual fund–owning households held funds inside employer-sponsored retirement plans, with 40 percent owning funds only inside such plans (Figure 6.10). Sixty percent of mutual fund–owning households held funds outside employer-sponsored retirement accounts, with 20 percent owning funds only outside such plans. For mutual fund–owning households without funds in employer-sponsored retirement plans, 56 percent held funds in traditional or Roth IRAs. In many cases, these IRAs held assets rolled over from 401(k) plans or other employer-sponsored retirement plans (either defined benefit or DC plans).

Households owning mutual funds outside employer-sponsored retirement plans buy their fund shares through a variety of sources. In mid-2015, 78 percent of these households owned funds purchased with the help of an investment professional, including registered investment advisers, full-service brokers, independent financial planners, bank and savings institution representatives, insurance agents, and accountants (Figure 6.10). Thirty-six percent of these households owned funds purchased solely with the help of an investment professional, and another 42 percent owned funds purchased from investment professionals and from fund companies directly, fund supermarkets, or discount brokers. Fifteen percent solely owned funds purchased from fund companies directly, fund supermarkets, or discount brokers.

Figure 6.10

80 Percent of Mutual Fund–Owning Households Held Shares Inside Employer-Sponsored Retirement Plans

Mid-2015

Figure 6.10

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1Employer-sponsored retirement plans include DC plans (such as 401(k), 403(b), or 457 plans) and employer-sponsored IRAs (SEP IRAs, SAR-SEP IRAs, and SIMPLE IRAs).
2Investment professionals include registered investment advisers, full-service brokers, independent financial planners, bank and savings institution representatives, insurance agents, and accountants.
Source: ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2015”

In mid-2015, nearly half of mutual fund–owning households held mutual funds through multiple sources: 14 percent held mutual funds both inside employer-sponsored retirement plans and through investment professionals; 6 percent held mutual funds both inside employer-sponsored retirement plans and from fund companies directly, fund supermarkets, or discount brokers; and 8 percent held mutual funds through investment professionals and from fund companies directly, fund supermarkets, or discount brokers (Figure 6.11). Seventeen percent owned mutual funds through all three source categories. Another 3 percent owned funds inside and outside employer-sponsored retirement plans, without specifying their outside purchase source. When owning funds through only one source category, the most common source was employer-sponsored retirement plans, at 40 percent.

Figure 6.11

Nearly Half of Mutual Fund–Owning Households Held Shares Through Multiple Sources

Percentage of U.S. households owning mutual funds, mid-2015

Figure 6.11

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1Employer-sponsored retirement plans include DC plans (such as 401(k), 403(b), or 457 plans) and employer-sponsored IRAs (SEP IRAs, SAR-SEP IRAs, and SIMPLE IRAs).
2Investment professionals include registered investment advisers, full-service brokers, independent financial planners, bank and savings institution representatives, insurance agents, and accountants.
Note: Components do not add to 100 percent because 5 percent of mutual fund–owning households owned mutual funds outside of employer-sponsored retirement plans but did not indicate which source was used to purchase funds. Of this 5 percent, 3 percent owned funds both inside and outside employer-sponsored retirement plans and 2 percent owned funds only outside of employer-sponsored retirement plans.
Source: ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2015”

At year-end 2015, mutual funds held in DC plans and IRAs accounted for $7.1 trillion, or 30 percent, of the $24.0 trillion U.S. retirement market. The $7.1 trillion made up 46 percent of total mutual fund assets at year-end 2015. DC plans and IRAs held 53 percent of total net assets in long-term mutual funds, but a much smaller share of total net assets in money market funds (13 percent). Similarly, mutual funds held in DC plans and IRAs accounted for 55 percent of household long-term mutual funds but only 21 percent of household money market funds (Figure 6.12).

Figure 6.12

Households’ Mutual Fund Assets by Type of Account

Billions of dollars, year-end 2015

Figure 6.12

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1Mutual funds held as investments in 529 plans and Coverdell ESAs are counted in this category.
2IRAs include traditional IRAs, Roth IRAs, and employer-sponsored IRAs (SEP IRAs, SAR-SEP IRAs, and SIMPLE IRAs).
3DC plans include 401(k) plans, 403(b) plans, 457 plans, Keoghs, and other DC plans without 401(k) features.
Note: Components do not add to the total because of rounding.

Shareholder Sentiment, Willingness to Take Investment Risk, and Confidence 

Each year, ICI surveys U.S. households about a variety of topics, including shareholder sentiment. In mid-2015, 67 percent of mutual fund–owning households familiar with mutual fund companies had “very” or “somewhat” favorable impressions of fund companies, nearly the same as in 2014 (Figure 6.13). The share of mutual fund–owning households with “very” favorable impressions of fund companies remained relatively stable at 16 percent.

Figure 6.13

Most Shareholders View the Mutual Fund Industry Favorably

Percentage of mutual fund–owning households familiar with mutual fund companies, selected years

Figure 6.13

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* The survey methodology was changed to a dual frame sample of cell phones and landlines in 2014.
Source: ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2015”

Among all U.S. households, the percentage willing to take above-average or substantial investment risk tends to move with stock market performance. U.S. households tend to become less tolerant of investment risk following periods of poor stock market performance. For example, willingness to take above-average or substantial investment risk fell from 23 percent in mid-2008, during the 2007–2009 financial crisis, to 19 percent in mid-2009 (Figure 6.14). Not until mid-2013, more than four years after the stock market bottomed out, did willingness to take investment risk begin to rebound.

Figure 6.14

Households’ Willingness to Take Investment Risk

Percentage of U.S. households by mutual fund ownership status, 2008–2015

Figure 6.14

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* The survey methodology was changed to a dual frame sample of cell phones and landlines in 2014.
Sources: Investment Company Institute and U.S. Census Bureau. See ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2015.”

Households owning mutual funds are far more willing to take investment risk than other households. In mid-2015, 31 percent of households owning mutual funds were willing to take above-average or substantial investment risk, more than twice the 14 percent of households not owning mutual funds (Figure 6.14).

Mutual fund–owning households tend to have a larger appetite for investment risk, and this is reflected in the types of mutual funds they own. Equity funds were the most commonly owned type of mutual fund in mid-2015, held by 88 percent of mutual fund–owning households (Figure 6.15). In addition, 35 percent owned balanced funds, 42 percent owned bond funds, and 54 percent owned money market funds.
 

Figure 6.15

Equity Funds Are the Most Commonly Owned Type of Mutual Fund

Percentage of U.S. households owning mutual funds, mid-2015

Figure 6.15

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* The Investment Company Institute classifies this fund category as hybrid in its data.
Note: Multiple responses are included.
Source: ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2015”

Mutual fund–owning households’ confidence that mutual funds are helping them reach their financial goals declined in the wake of the financial crisis. In mid-2009, 72 percent of mutual fund–owning households said they were confident in mutual funds’ ability to help them achieve their financial goals, down from 85 percent the year before (Figure 6.16). From mid-2010 through mid-2013, about eight in 10 mutual fund–owning households said they were confident in mutual funds’ ability to help them achieve their financial goals, with more than 20 percent saying they were “very” confident. In mid-2014, confidence increased to 84 percent of mutual fund–owning households and remained there in mid-2015, with 30 percent saying they were “very” confident that mutual funds could help them meet their financial goals.
 

Figure 6.16

More Than Eight in 10 Mutual Fund–Owning Households Have Confidence in Mutual Funds

Percentage of mutual fund–owning households by level of confidence that mutual funds can help them meet their investment goals, 2005–2015

Figure 6.16

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* The survey methodology was changed to a dual frame sample of cell phones and landlines in 2014.
Note: This question was not included in the survey prior to 2005. The question has four choices; the other two possible responses are “not very confident” and “not at all confident.”
Source: ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2015”

Shareholder Use of the Internet 

An overwhelming majority of mutual fund–owning households have Internet access. In mid-2015, 91 percent of U.S. households owning mutual funds had Internet access (Figure 6.17), up from 68 percent in 2000 (the first year for which ICI collected data on shareholder access to the Internet). Internet access traditionally has been greatest among younger people, in both mutual fund–owning households and the general population. Increasing access among older households, however, has narrowed the gap considerably.

Figure 6.17

Internet Access Is Nearly Universal Among Mutual Fund–Owning Households

Percentage of households with Internet access, mid-2015

  All U.S. households Mutual fund–owning
households
Households with
DC plans1
Age of head of household2
Younger than 35 86 93 90
35 to 49 85 95 94
50 to 64 78 92 91
65 or older 59 84 79
Education level
High school diploma or less 61 82 79
Some college or associate’s degree 83 92 92
College or postgraduate degree 91 95 95
Household income3
Less than $50,000 61 79 74
$50,000 to $99,999 88 93 92
$100,000 to $149,999 95 95 97
$150,000 or more 92 96 96
Total 77 91 90

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1DC plans include 401(k), 403(b), 457, and other DC plans.
2Age is based on the sole or co-decisionmaker for household saving and investing.
3Total reported is household income before taxes in 2014.
Note: Internet access includes access to the Internet at home, work, or some other location.
Sources: Investment Company Institute and U.S. Census Bureau. See ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2015.”

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