2018 Investment Company Fact Book
A Review of Trends and Activities in the Investment Company Industry

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Chapter Seven

Characteristics of US Mutual Fund Owners

The percentage of US households owning mutual funds grew eightfold in the 1980s and 1990s, and has held steady for the past 17 years, averaging about 45 percent since 2000. In mid-2017, nearly 45 percent of all US households owned mutual funds. The estimated 100 million people who owned mutual funds in mid-2017 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 or discount brokers. Forty-eight percent of Baby Boom households owned mutual funds in mid-2017. They accounted for 37 percent of mutual fund–owning households and held half of households’ mutual fund assets.

Individual and Household Ownership of Mutual Funds

In mid-2017, an estimated 100 million individual investors owned mutual funds—and at year-end 2017, these investors held 90 percent of total mutual fund assets (Figure 3.3), directly or through retirement accounts. Household ownership of mutual funds has remained relatively steady since 2000. Altogether, 44.5 percent of US households—or about 56.2 million—owned mutual funds in mid-2017, nearly identical to the 2000–2017 average of about 45 percent (Figure 7.1). Mutual funds were a major component of many US households’ financial holdings in mid-2017. Among households owning mutual funds, the median amount invested in mutual funds was $120,000 (Figure 7.2). Seventy-two percent of individuals heading households that owned mutual funds were married or living with a partner, about half were college graduates, and 74 percent worked full- or part-time.

Figure 7.1

44.5 Percent of US Households Owned Mutual Funds in 2017

Percentage of US households owning mutual funds, selected years

   

Note: The survey methodology was changed to a dual frame sample of cell phones and landlines in 2014.

Sources: Investment Company Institute and US Census Bureau. See ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2017.”

Figure 7.2

Characteristics of Mutual Fund Investors

Mid-2017

How many people own mutual funds?
100.0 million individuals
56.2 million US households
Who are they?
51 is the median age of the head of household
72 percent are married or living with a partner
51 percent are college graduates
74 percent are employed (full- or part-time)
10 percent are Silent or GI Generation (born 1904 to 1945)
37 percent are Baby Boomers (born 1946 to 1964)
33 percent are Generation X (born 1965 to 1980)
20 percent are Millennial Generation (born 1981 to 2004)*
$100,000 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
65 percent hold more than half of their financial assets in mutual funds
64 percent own IRAs
85 percent own DC retirement plan accounts
3 mutual funds is the median number owned
87 percent own equity funds
When and how did they make their first mutual fund purchase?
53 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?
92 percent are saving for retirement
47 percent are saving for emergencies
49 percent hold mutual funds to reduce taxable income
23 percent are saving for education

* The Millennial Generation is aged 13 to 36 in 2017; however, survey respondents must be 18 or older.

Sources: ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2017”; ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2017”; and ICI Research Report, “Profile of Mutual Fund Shareholders, 2017”

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‑2017. Forty‑eight percent of households headed by a Baby Boomer (head of household born between 1946 and 1964) and 53 percent of households headed by a member of Generation X (born between 1965 and 1980) owned mutual funds in mid-2017 (Figure 7.3). Thirty‑eight percent of Millennial Generation households (born between 1981 and 2004) and 31 percent of Silent and GI Generation households (born between 1904 and 1945) owned mutual funds in mid-2017.

Among mutual fund–owning households in mid-2017, 37 percent were headed by members of the Baby Boom Generation, 33 percent were headed by members of Generation X, 20 percent were headed by members of the Millennial Generation, and 10 percent were headed by members of the Silent and GI Generations (Figure 7.4). Heads of mutual fund–owning households had a median age of 51 years (Figure 7.2).

Figure 7.3

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

Percentage of US households within each generation owning mutual funds, mid-2017

   

* The Millennial Generation is aged 13 to 36 in 2017; however, survey respondents 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, 2017”

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Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2017

Not only were Baby Boomers the largest shareholder group in mid-2017, they also held the largest percentage of households’ mutual fund assets, at 50 percent (Figure 7.4). Households headed by members of Generation X (32 percent), the Silent and GI Generations (10 percent), and the Millennial Generation (8 percent) held the rest. This pattern of asset ownership reflects the fact that Millennial households 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 7.4

The Baby Boom Generation Is the Largest Shareholder Group and Holds Half of Households’ Mutual Fund Assets

Percentage of US households owning mutual funds and mutual fund assets by generation, mid-2017

   

* The Millennial Generation is aged 13 to 36 in 2017; however, survey respondents 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, 2017”

Households with higher annual incomes are more likely to own mutual funds than those with lower annual incomes. In mid-2017, 66 percent of US households with annual income of $50,000 or more owned mutual funds, compared with 16 percent of households with annual income of less than $50,000 (Figure 7.5). In fact, lower-income households tend to have less savings of any kind than higher-income households. The typical household with less than $50,000 in annual income had $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 7.5

Ownership of Mutual Funds Increases with Household Income

Percentage of US households within each income group owning mutual funds, mid-2017

   

Note: Total reported is household income before taxes in 2016.

Source: ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2017”

US households owning mutual funds had a range of annual incomes in mid-2017: 16 percent had annual income of less than $50,000; 17 percent had between $50,000 and $74,999; 17 percent had between $75,000 and $99,999; and the remaining 50 percent had $100,000 or more (Figure 7.6). The median income of mutual fund–owning households in mid-2017 was $100,000 (Figure 7.2).

Figure 7.6

Half of Households Owning Mutual Funds Have Moderate or Lower Incomes

Percent distribution of all US households and US households owning mutual funds by household income, mid-2017

   

Note: Total reported is household income before taxes in 2016.

Source: ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2017”

Households’ First Mutual Fund Purchase

Mutual fund–owning households often purchase their first mutual fund through employer-sponsored retirement plans. In mid-2017, across all mutual fund–owning households, 63 percent had purchased their first fund through that channel (Figure 7.7). Households that made their first mutual fund purchase more recently were more likely to have done so through employer-sponsored retirement plans. Among households that bought their first mutual fund in 2010 or later, 78 percent bought that first fund through such a plan, compared with 49 percent of households that first purchased mutual funds before 1990.

Figure 7.7

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

Percentage of US households owning mutual funds, mid-2017

   

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, 2017”

Savings Goals of Mutual Fund Investors

Mutual funds play a key role in the long- and short-term savings goals of US households. In mid-2017, 92 percent of mutual fund–owning households indicated that saving for retirement was one of their financial goals, and 75 percent said it was their primary financial goal (Figure 7.8). Retirement, however, is not the only financial goal for mutual fund–owning households—49 percent reported reducing taxable income as a goal; 47 percent reported saving for emergencies as a goal; and 23 percent reported saving for education as a goal.

Figure 7.8

Majority of Mutual Fund Investors Focus on Retirement

Percentage of US households owning mutual funds, mid-2017

   

* Multiple responses are included.

Source: ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2017”

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Focus on Funds: Latest Data Underscore Importance of 401(k)

Where Investors Own Mutual Funds

The importance that mutual fund–owning households place on retirement saving is reflected in where they own their funds—94 percent of these households held mutual fund shares inside employer-sponsored retirement plans, individual retirement accounts (IRAs), and variable annuities in mid-2017. 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, defined contribution (DC) retirement plan and IRA assets held in equity, bond, and hybrid mutual funds totaled $8.5 trillion at year-end 2017, or 53 percent of those funds’ total net assets industrywide (Figure 8.24). By contrast, DC retirement plan and IRA assets in money market funds totaled just $364 billion, or 13 percent of those funds’ total net assets industrywide.

In mid-2017, 81 percent of mutual fund–owning households held funds inside employer-sponsored retirement plans, with 36 percent owning funds only inside such plans (Figure 7.9). Sixty-four percent of mutual fund–owning households held funds outside employer‑sponsored retirement accounts, with 19 percent owning funds only outside such plans. For mutual fund–owning households without mutual funds in employer-sponsored retirement plans, 55 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-2017, 79 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 7.9). Thirty-seven 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 or discount brokers. Fourteen percent solely owned funds purchased from fund companies directly or discount brokers.

Figure 7.9

Mutual Fund Investments Outside Retirement Plans Are Often Guided by Investment Professionals

Mid-2017

   

1 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).

2 Investment 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, 2017”

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Focus on Funds: Individual Retirement Accounts Serve a Diverse Range of Investors

In mid-2017, 81 percent of mutual fund–owning households held mutual funds through employer-sponsored retirement plans, and 64 percent owned mutual funds outside such plans (Figures 7.9 and 7.10). This latter group purchased funds through two sources: investment professionals and the direct market channel (Figure 7.10). In mid-2017, half of households owning mutual funds held funds purchased through an investment professional and 36 percent owned funds purchased through the direct market channel.

Figure 7.10

Mutual Fund Investors Purchase Mutual Funds Through a Variety of Channels

Percentage of US households owning mutual funds, mid-2017

   

1 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).

2 Four percent of households owning mutual funds outside of employer-sponsored retirement plans did not indicate which source was used to purchase funds. This 4 percent includes 3 percent owning funds both inside and outside employer-sponsored retirement plans and 1 percent owning funds only outside of employer-sponsored retirement plans.

Note: Multiple responses are included.

Source: ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2017”

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Characteristics of Mutual Fund Investors, 2017

Younger generations are more likely to own mutual funds only inside employer-sponsored retirement plans, while older generations are more likely to own funds outside such plans. In mid-2017, 43 percent of mutual fund–owning households in the Millennial Generation owned funds only inside employer-sponsored retirement plans, compared with 31 percent of mutual fund–owning households in the Baby Boom Generation (Figure 7.11). Fifty-seven percent of mutual fund–owning households in the Millennial Generation owned funds outside of employer-sponsored retirement plans, compared with 69 percent of mutual fund–owning households headed by a Baby Boomer. Baby Boom and Generation X households that own mutual funds are more likely to own funds both inside and outside employer-sponsored retirement plans than younger or older generations. In mid-2017, 46 percent of Generation X households and 50 percent of Baby Boom households that owned mutual funds owned mutual funds both inside and outside employer-sponsored retirement plans, compared with 40 percent of Millennial Generation households and 32 percent of Silent and GI Generation households. Although Silent and GI Generation households are the least likely to own mutual funds, those that do are the most likely to hold mutual funds only outside employer-sponsored retirement plans.

Figure 7.11

Mutual Fund Ownership Inside and Outside of Employer-Sponsored Retirement Plans

Percentage of US households owning mutual funds by generation, mid-2017

   

* The Millennial Generation is aged 13 to 36 in 2017; however, survey respondents must be 18 or older.

Note: Generation is based on the age of the household sole or co-decisionmaker for saving and investing. 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, 2017”

As discussed earlier, where households own mutual funds tends to vary with the generation of the head of household. In mid‑2017, 83 percent of mutual fund–owning households in the Millennial Generation held mutual funds inside employer-sponsored retirement plans (Figures 7.11 and 7.12).* Forty‑three percent held mutual funds only inside employer-sponsored retirement plans, 43 percent owned mutual funds through investment professionals, and 32 percent held funds directly through fund companies or discount brokers.

* This includes 3 percent of Millennial households owning mutual funds both inside and outside employer-sponsored retirement plans that did not indicate which source was used to purchase funds outside employer-sponsored retirement plans.

Figure 7.12

Millennial Mutual Fund–Owning Households Are More Likely to Hold Funds Through Employer-Sponsored Retirement Plans

Percentage of US households owning mutual funds in the Millennial Generation,1 mid-2017

   

1 Generation is based on the age of the household sole or co-decisionmaker for saving and investing. The Millennial Generation (head of household born between 1981 and 2004) is aged 13 to 36 in 2017; however, survey respondents must be 18 or older.

2 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).

3 Investment professionals include registered investment advisers, full-service brokers, independent financial planners, bank and savings institution representatives, insurance agents, and accountants.

Note: Figure does not add to 100 percent because 4 percent of mutual fund–owning households in the Millennial Generation owned funds outside of employer-sponsored retirement plans, but did not indicate which source was used to purchase funds. This 4 percent includes 3 percent owning funds both inside and outside employer-sponsored retirement plans and 1 percent owning funds only outside of employer-sponsored retirement plans.

In contrast, in mid-2017, 81 percent of mutual fund–owning households that are members of the Baby Boom Generation held mutual funds inside employer-sponsored retirement plans (Figures 7.11 and 7.13).* Thirty‑one percent held mutual funds only inside employer-sponsored retirement plans. Fifty‑five percent of these older households owned mutual funds through investment professionals, and 40 percent held funds directly through fund companies or discount brokers.

* This includes 3 percent of Baby Boom households owning mutual funds both inside and outside employer-sponsored retirement plans that did not indicate which source was used to purchase funds outside employer-sponsored retirement plans.

Figure 7.13

Baby Boom Mutual Fund–Owning Households Are More Likely Than Millennials to Hold Funds Outside Employer-Sponsored Retirement Plans

Percentage of US households owning mutual funds in the Baby Boom Generation,1 mid-2017

   

1 Generation is based on the age of the household sole or co-decisionmaker for saving and investing. The Baby Boom Generation consists of heads of household born between 1946 and 1964.

2 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).

3 Investment professionals include registered investment advisers, full-service brokers, independent financial planners, bank and savings institution representatives, insurance agents, and accountants.

Note: Figure does not add to 100 percent because 4 percent of mutual fund–owning households in the Baby Boom Generation owned funds outside of employer-sponsored retirement plans, but did not indicate which source was used to purchase funds. This 4 percent includes 3 percent owning funds both inside and outside employer-sponsored retirement plans and 1 percent only owning funds outside of employer-sponsored retirement plans.

At year-end 2017, mutual funds held in DC plans and IRAs accounted for $8.8 trillion, or 31 percent, of the $28.2 trillion US retirement market (Figures 8.5 and 8.25). The $8.8 trillion made up 47 percent of total mutual fund assets at year-end 2017. 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) (Figure 8.24). Similarly, mutual funds held in DC plans and IRAs accounted for 56 percent of household long-term mutual funds but only 21 percent of household money market funds (Figure 7.14).

Figure 7.14

Households’ Mutual Fund Assets by Type of Account

Billions of dollars, year-end 2017

   

1 Mutual funds held as investments in 529 plans and Coverdell ESAs are counted in this category.

2 IRAs include traditional IRAs, Roth IRAs, and employer-sponsored IRAs (SEP IRAs, SAR-SEP IRAs, and SIMPLE IRAs).

3 DC plans include 401(k) plans, 403(b) plans, 457 plans, and other DC plans without 401(k) features.

Shareholder Sentiment, Willingness to Take Investment Risk, and Confidence

Each year, ICI surveys US households about a variety of topics, including shareholder sentiment. In mid-2017, 66 percent of mutual fund–owning households familiar with mutual fund companies had “very” or “somewhat” favorable impressions of fund companies, similar to 2016 (Figure 7.15). The share of mutual fund–owning households with “very” favorable impressions of fund companies remained around 15 percent.

Figure 7.15

Most Shareholders View the Mutual Fund Industry Favorably

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

   

Note: 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, 2017”

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Profile of Mutual Fund Shareholders, 2017

The ICI survey also asked households about their willingness to take investment risk. Households owning mutual funds are far more willing to take investment risk than other households. In mid-2017, 34 percent of households owning mutual funds were willing to take above-average or substantial investment risk, more than three times the 11 percent of households not owning mutual funds (Figure 7.16).

Risk tolerance varies with the age of the head of household, and younger households tend to be more willing to take investment risk than older households. In mid-2017, around 40 percent of mutual fund–owning households in the Millennial Generation and Generation X were willing to take above-average or substantial financial risk (Figure 7.16). This willingness to take risk drops to 29 percent for mutual fund–owning households in the Baby Boom Generation and 19 percent of mutual fund–owning households in the Silent and GI Generations.

Figure 7.16

Households’ Willingness to Take Investment Risk

Percentage of US households owning mutual funds by generation, mid-2017

   

* The Millennial Generation is aged 13 to 36 in 2017; however, survey respondents must be 18 or older.

Note: Generation is based on the age of the household sole or co-decisionmaker for saving and investing.

Sources: ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2017” and ICI Research Report, “Profile of Mutual Fund Shareholders, 2017”

Mutual fund–owning households’ willingness to take investment risk is reflected in the types of mutual funds they own. Equity funds were the most commonly owned type of mutual fund in mid-2017, held by 87 percent of mutual fund–owning households (Figure 7.17). In addition, 37 percent owned balanced funds, 44 percent owned bond funds, and 54 percent owned money market funds.

Figure 7.17

Equity Funds Are the Most Commonly Owned Type of Mutual Fund

Percentage of US households owning mutual funds, mid-2017

   

* 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, 2017”

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 84 percent in mid-2007 (Figure 7.18). From mid-2011 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 around that level through mid‑2017. In mid-2017, 30 percent of mutual fund–owning households said they were “very” confident in mutual funds’ ability to help them achieve their financial goals.

Figure 7.18

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

Percentage of US households owning mutual funds by level of confidence that mutual funds can help them meet their investment goals, selected years

   

Note: The survey methodology was changed to a dual frame sample of cell phones and landlines in 2014. 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, 2017”

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More People Are Building Nest Eggs with Their IRAs

Shareholder Use of the Internet

An overwhelming majority of mutual fund–owning households have internet access. In mid‑2017, 95 percent of US households owning mutual funds had internet access (Figure 7.19), 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 7.19

Internet Access Is Nearly Universal Among Mutual Fund–Owning Households

Percentage of US households with internet access, mid-2017

 All US householdsMutual fund–owning householdsHouseholds with
DC plan accounts1
Age of head of household2
Younger than 35 92 99 97
35 to 49 87 97 96
50 to 64 83 97 96
65 or older 60 86 82
Education level
High school diploma or less 64 87 85
Some college or associate’s degree 87 96 94
College or postgraduate degree 92 98 97
Household income3
Less than $50,000 64 88 81
$50,000 to $99,999 90 95 95
$100,000 to $149,999 94 96 97
$150,000 or more 97 99 99
Total 80 95 93

1 DC plans include 401(k), 403(b), 457, and other DC plans.

2 Age is based on the sole or co-decisionmaker for household saving and investing.

3 Total reported is household income before taxes in 2016.

Note: Internet access includes access to the internet at home, work, or some other location.

Source: Investment Company Institute Annual Mutual Fund Shareholder Tracking Survey. See ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2017.”