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This chapter looks at the characteristics of individual and institutional owners of U.S. mutual funds and examines how these investors purchase fund shares.

Ownership of mutual funds by U.S. households grew significantly in the 1980s and 1990s and has remained steady over the past decade. On average, the household ownership rate of mutual funds has been 45 percent since 2000. In 2012, 44 percent of all U.S. households owned mutual funds. The estimated 92 million individuals who owned mutual funds in 2012 included many different types of people across all age and income groups with a variety of financial goals. These fund investors purchase and sell mutual funds through four principal sources: investment professionals (e.g., registered investment advisers, full-service brokers, independent financial planners), employer-sponsored retirement plans, fund companies directly, and fund supermarkets.

Individual and Household Ownership of Mutual Funds

In 2012, an estimated 92 million individual investors owned mutual funds and held 89 percent of total mutual fund assets at year-end. Altogether, 53.8 million households, or 44 percent of all U.S. households, owned mutual funds (Figure 6.1). Household ownership of mutual funds has remained steady over the past decade. Mutual funds represented a significant component of many U.S. households’ financial holdings in 2012. Among households owning mutual funds, the median amount invested in mutual funds was $100,000 (Figure 6.2). Three-quarters of individuals heading households that owned mutual funds were married or living with a partner, and 48 percent were college graduates. Seventy-two percent of these individuals worked full- or part-time.

Figure 6.1

44 Percent of U.S. Households Owned Mutual Funds in 2012

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

Figure 6.1

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Sources: Investment Company Institute and U.S. Census Bureau. See ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2012.”


Figure 6.2

Characteristics of Mutual Fund Investors

May 2012

How many people own mutual funds?
92.4 million individuals
53.8 million U.S. households
Who are they?
51 is the median age of the head of household
75 percent are married or living with a partner
48 percent are college graduates
72 percent are employed (full- or part-time)
14 percent are Silent or GI Generation
44 percent are Baby Boomers
25 percent are Generation X
17 percent are Generation Y
$80,000 is the median household income
What do they own?
$190,000 is the median household financial assets
68 percent hold more than half of their financial assets in mutual funds
68 percent own IRAs
80 percent own DC retirement plan accounts
4 mutual funds is the median number owned
$100,000 is the median mutual fund assets
79 percent own equity funds
When and how did they make their first mutual fund purchase?
52 percent bought their first mutual fund before 1995
63 percent purchased their first mutual fund through an employer-sponsored retirement plan
Why do they invest?
93 percent are saving for retirement
50 percent hold mutual funds to reduce taxable income
48 percent are saving for emergencies
27 percent are saving for education

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Sources: Investment Company Institute and U.S. Census Bureau. See ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2012”; ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2012”; and ICI Research Report, “Profile of Mutual Fund Shareholders, 2012.”

Mutual Fund Ownership by Age and Income

The incidence of mutual fund ownership in 2012 was greatest among households in their peak earning and saving years, that is, between the ages of 35 and 64 (Figure 6.3). About half of all households in this age group owned mutual funds. Thirty-four percent of households younger than 35 owned mutual funds and for households aged 65 or older, 34 percent owned mutual funds.

Figure 6.3

Mutual Fund Ownership Is Greatest Among 35- to 64-Year-Olds

Percentage of U.S. households within each age group, May 2012

Figure 6.3

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Note: Age is based on the sole or co-decisionmaker for household saving and investing.
Sources: Investment Company Institute and U.S. Census Bureau. See ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2012.”

Among mutual fund–owning households in 2012, 66 percent were headed by individuals between the ages of 35 and 64 (Figure 6.4). Seventeen percent of mutual fund–owning households were headed by individuals younger than 35, and 17 percent were headed by individuals 65 or older. The median age of individuals heading households that owned mutual funds was 51 (Figure 6.2). Like the U.S. population as a whole, the population of mutual fund–owning households is aging. Thirty-nine percent of mutual fund–owning households were headed by individuals 55 or older in 2012 compared with 26 percent in 1994 (Figure 6.4).

Figure 6.4

The U.S. Population and Mutual Fund Shareholders Are Getting Older

Percentage of households by mutual fund ownership status and age group, May 1994 and May 2012

Figure 6.4

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Note: Age is based on the sole or co-decisionmaker for household saving and investing.
Sources: Investment Company Institute and U.S. Census Bureau. See ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2012.”

Although individuals across all income groups own mutual funds, households with higher incomes are more likely to own mutual funds than lower-income households. In 2012, 69 percent of all U.S. households with incomes of $50,000 or more owned mutual funds, compared with 20 percent of households with incomes of less than $50,000 (Figure 6.5). In fact, lower-income households are less likely to have any type of savings. The typical household with income less than $50,000 had $15,000 in savings and investments, while the typical household with income of $50,000 or more held $155,000 in savings and investments.

Figure 6.5

Ownership of Mutual Funds Increases with Household Income

Percentage of U.S. households within each income group, May 2012

Figure 6.5

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Note: Total reported is household income before taxes in 2011.
Sources: Investment Company Institute and U.S. Census Bureau. See ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2012.”

U.S. households owning mutual funds represent a range of incomes. Twenty-two percent of mutual fund–owning households had household incomes of less than $50,000; 21 percent had household incomes between $50,000 and $74,999; 18 percent had incomes between $75,000 and $99,999; and the remaining 39 percent had incomes of $100,000 or more (Figure 6.6). The median household income of mutual fund–owning households was $80,000 (Figure 6.2).

Savings Goals of Mutual Fund Investors

Mutual funds play a key role in achieving both the long- and short-term savings goals of U.S. households. In 2012, 93 percent of mutual fund–owning households indicated that saving for retirement was one of their household’s financial goals (Figure 6.2). Seventy-three percent indicated that retirement saving was their household’s primary financial goal. Ninety-two percent of households that owned mutual funds held shares inside workplace retirement plans, individual retirement accounts (IRAs), and other tax-deferred accounts. Households were more likely to invest their retirement assets in long-term mutual funds than in money market funds. Defined contribution (DC) retirement plans and IRA assets held in equity, bond, and hybrid mutual funds totaled $5.0 trillion in 2012 and accounted for 48 percent of those funds’ assets industrywide, whereas retirement account assets in money market funds were $380 billion, or 14 percent of those funds’ assets industrywide.

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, May 2012

Figure 6.6

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Note: Total reported is household income before taxes in 2011.
Sources: Investment Company Institute and U.S. Census Bureau. See ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2012.”

Retirement is not the only financial goal for households’ mutual fund investments. Half of mutual fund–owning households reported that reducing their taxable income was one of their goals; 48 percent listed saving for emergencies as a goal; and 27 percent reported saving for education among their goals (Figure 6.2).

Where Investors Own Mutual Funds

The importance of retirement saving among mutual fund investors also is reflected in where they own their funds. As 401(k) and other employer-sponsored DC retirement plans have become increasingly popular in the workplace, the fraction of households that make their first foray into mutual fund investing inside their employer-sponsored retirement plans has increased. Among those households that made their first mutual fund purchase in 2005 or later, 69 percent did so inside an employer-sponsored retirement plan (Figure 6.7). Among those households that made their first purchase before 1990, 58 percent did so inside an employer-sponsored retirement plan.

In 2012, 72 percent of mutual fund–owning households owned funds inside employer-sponsored retirement plans, with 35 percent owning funds only inside such plans (Figure 6.8). Sixty-five percent of mutual fund–owning households owned funds outside of employer-sponsored retirement accounts, with 28 percent owning funds only outside such plans. For mutual fund–owning households without funds in workplace retirement accounts, 63 percent held funds in traditional or Roth IRAs, and in many cases, these IRAs held assets rolled over from 401(k)s or other employer-sponsored retirement plans (either defined benefit or DC plans).

Figure 6.7

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

Percentage of U.S. households owning mutual funds, May 2012

  Year of household’s first mutual fund purchase
  Before 1990 1990 to 1994 1995 to 1999 2000 to 2004 2005 or later Memo:
all mutual fund–owning households
Source of first mutual fund purchase
Inside employer-sponsored retirement plan 58 65 64 66 69 63
Outside employer-sponsored retirement plan 42 35 36 34 31 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).
Sources: Investment Company Institute and U.S. Census Bureau. See ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2012.”

Sources of Mutual Fund Purchases

Households owning mutual funds outside of workplace retirement plans purchased their funds through a variety of sources. Indeed, 82 percent of those that owned mutual funds outside workplace retirement plans held funds purchased with the help of an investment professional (Figure 6.8). Investment professionals include registered investment advisers, full-service brokers, independent financial planners, bank and savings institution representatives, insurance agents, and accountants. Forty-seven percent of investors who owned funds outside employer-sponsored retirement plans purchased their funds solely with professional financial help, while another 35 percent owned funds purchased from investment professionals and fund companies directly, fund supermarkets, or discount brokers. Eleven percent solely owned funds purchased directly from fund companies, fund supermarkets, or discount brokers.

Figure 6.8

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

May 2012

Figure 6.8

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1Employer-sponsored retirement plans include DC plans (such as 401(k) plans, 403(b) plans, 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, 2012”

Nearly half (48 percent) of mutual fund–owning households held mutual funds through multiple sources. In May 2012, 17 percent of mutual fund–owning households held mutual funds both inside employer-sponsored retirement plans and through investment professionals; 5 percent owned mutual funds both inside employer-sponsored retirement plans and directly through fund companies, fund supermarkets, or discount brokers; and 10 percent held mutual funds through investment professionals and fund companies, fund supermarkets, or discount brokers (Figure 6.9). Another 13 percent owned mutual funds through all three source categories. When owning funds through only one source category, the most common route to fund ownership was employer-sponsored retirement plans: 35 percent of mutual fund–owning households owned funds only through their employer-sponsored retirement plans.

Figure 6.9

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

Percentage of U.S. households owning mutual funds, May 2012

Figure 6.9

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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: Figure does not add to 100 percent because 5 percent of households owning mutual funds outside of employer-sponsored retirement plans 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, 2012”

Shareholder Sentiment, Willingness to Take Investment Risk, and Confidence

Each spring, ICI surveys U.S. households about a variety of topics, including shareholder sentiment. Shareholder sentiment generally moves with stock market performance, largely because of the impact on mutual fund returns. For example, mutual fund companies’ favorability rose in the late 1990s along with stock prices (measured by the S&P 500), declined between 2000 and 2003 as stock prices fell, increased between 2003 and 2007 as the stock market gained, and fell following the market decline in 2008 and 2009 (Figure 6.10). As the stock market gained in 2010 and 2011, mutual fund favorability rebounded. Mutual fund favorability edged down in 2012 as the stock market moved down in April and May 2012 and remained essentially flat compared with the previous year.

Figure 6.10

Mutual Fund Shareholder Sentiment Rises and Falls with Stock Market Performance

Percentage of mutual fund shareholders familiar with mutual fund companies, 2000–2012

Figure 6.10

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1The mutual fund industry favorability rating is the percentage of mutual fund shareholders familiar with the mutual fund industry who have a “very” or “somewhat” favorable impression of the fund industry. The survey question on mutual fund industry favorability had five choices; the other three possible responses were “somewhat unfavorable,” “very unfavorable,” and “no opinion.”
2The S&P 500 is an index of 500 stocks chosen for market size, liquidity, and industry group representation.
Sources: Investment Company Institute and Standard & Poor’s. See ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2012.”

Among all U.S. households, the percentage willing to take above-average or substantial investment risk also tends to move with stock market performance (Figure 6.11). U.S. households become less tolerant of investment risk in times of poor stock market performance. For example, willingness to take investment risk was lower from 2008 to 2012, compared to periods of higher stock market gains. Households owning mutual funds also have expressed less willingness to take investment risk in recent years. In May 2008, 36 percent of mutual fund–owning households were willing to take above-average or substantial risk with their investments (Figure 6.12). By May 2012, this fraction had fallen to 28 percent of mutual fund–owning households.

Figure 6.11

Households’ Willingness to Take Investment Risk Tends to Move with the S&P 500 Index

Percentage of U.S. households willing to take above-average or substantial investment risk, 1988–2012

Figure 6.11

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Note: The S&P 500 is an index of 500 stocks chosen for market size, liquidity, and industry group representation.
Sources: ICI Annual Mutual Fund Shareholder Tracking Survey, Federal Reserve Board Survey of Consumer Finances (SCF), and Standard & Poor’s


Figure 6.12

Households’ Willingness to Take Investment Risk

Percentage of U.S. households by mutual fund ownership status; May, 2008–2012

Figure 6.12

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Source: ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2012”

Investors’ confidence that mutual funds are helping them reach their financial goals has a similar pattern to shareholder sentiment. For instance, investor confidence declined in the wake of the financial market crisis. In 2009, 72 percent of fund shareholders said they were confident in mutual funds’ ability to help them achieve their financial goals, compared with 85 percent in 2008 (Figure 6.13). Over 2010 and 2011, confidence rose. In 2012, 80 percent of all fund shareholders said they were confident in mutual funds’ ability to help them achieve their financial goals. Indeed, nearly one-quarter of fund investors in 2012 were “very” confident that mutual funds could help them meet their financial goals.

Figure 6.13

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

Percentage of all mutual fund shareholders by level of confidence that mutual funds can help them meet their investment goals; May, 2005–2012

Figure 6.13

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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, 2012”

Shareholders’ Use of the Internet

A vast majority of shareholders use the Internet to access financial accounts and other investment information. In 2012, 91 percent of U.S. households owning mutual funds had Internet access (Figure 6.14), up from 68 percent in 2000—the first year in which ICI measured shareholders’ access to the Internet. Similar to all U.S. households and households owning DC plans, the incidence of Internet access traditionally has been greatest among younger mutual fund shareholders. Increases in Internet access among older shareholder segments, however, have narrowed the generational gap considerably. In addition, more than eight in 10 mutual fund–owning households with Internet access used the Internet daily.

Figure 6.14

Internet Access Is Widespread Among Mutual Fund–Owning Households

Percentage of households with Internet access, May 2012

  All U.S. households Mutual fund–owning
households
Households with
DC plans1
Age of head of household2
Younger than 35 88 93 96
35 to 49 88 95 96
50 to 64 79 92 90
65 or older 57 77 78
Education level
High school graduate or less 64 78 83
Some college or associate’s degree 84 92 93
College or postgraduate degree 92 96 96
Household income3
Less than $50,000 65 75 81
$50,000 to $99,999 90 93 94
$100,000 to $149,999 92 96 97
$150,000 or more 96 98 98
Total 78 91 92

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1DC plans include 401(k) plans, 403(b) plans, 457 plans, Keoghs, and other DC plans without 401(k) features.
2Age is based on the sole or co-decisionmaker for household saving and investing.
3Total reported is household income before taxes in 2011.
Note: Internet access includes access to the Internet at home, work, or some other location.
Source: ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2012”


Figure 6.15

Most Mutual Fund Shareholders Used the Internet for Financial Purposes

Percentage of U.S. households with Internet access by mutual fund ownership and online activities in the past 12 months,1, 2 May 2012

  Households owning
mutual funds
Households not
owning mutual funds
Accessed email 93 85
Used Internet for a financial purpose (total) 86 60
Accessed any type of financial account, such as bank or investment accounts 81 55
Obtained investment information 56 21
Bought or sold investments online 21 13
Used Internet for a nonfinancial purpose (total) 92 78
Obtained information about products and services other than investments 83 65
Bought or sold something other than investments online 85 63

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1Online activities are based on the sole or co-decisionmaker for household saving and investing.
2For this survey, the past 12 months were June 2011 through May 2012.
Note: Internet access includes access to the Internet at home, work, or some other location.
Source: ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2012”

In 2012, 86 percent of shareholders with Internet access went online for financial purposes, most often to obtain investment information or check their bank or investment accounts (Figure 6.15). In addition, mutual fund–owning households were much more likely than households not owning mutual funds to engage in common online activities, such as accessing email, obtaining information about products and services other than investments, or purchasing products and services other than investments. Younger shareholders, shareholders with higher education levels, and shareholders with higher household incomes all reported the highest levels of Internet use (Figure 6.16). Within these groups, about nine in 10 used the Internet for financial and nonfinancial purposes.

Figure 6.16

Mutual Fund Shareholders’ Use of the Internet by Age, Education, and Income

Percentage of U.S. households with Internet access by mutual fund ownership and online activities in past 12 months,1, 2 May 2012

  Accessed email Used Internet for a
financial purpose
Used Internet for a
nonfinancial purpose
Age of head of household3
Younger than 35 89 86 95
35 to 49 99 93 94
50 to 64 94 84 93
65 or older 86 72 82
Education level
High school graduate or less 83 73 86
Some college or associate’s degree 95 86 93
College or postgraduate degree 96 90 94
Household income4
Less than $50,000 83 72 87
$50,000 to $99,999 94 83 90
$100,000 to $149,999 99 92 96
$150,000 or more 95 96 97
Total 93 86 92

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1Online activities are based on the household’s sole or co-decisionmaker for saving and investing.
2For this survey, the past 12 months were June 2011 through May 2012.
3Age is based on the sole or co-decisionmaker for household saving and investing.
4Total reported is household income before taxes in 2011.
Note: Internet access includes access to the Internet at home, work, or some other location.
Source: ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2012”

Institutional Ownership of Mutual Funds

Nonfinancial businesses, financial institutions, nonprofit organizations, and other institutional investors held 11 percent of mutual fund assets at year-end 2012 (Figure 6.17). Institutional investor data exclude mutual fund holdings by fiduciaries, retirement plans, and variable annuities, which are considered to be held primarily by individual investors (households).

Figure 6.17

Institutional and Household Ownership of Mutual Funds

Billions of dollars, year-end 2012

Figure 6.17

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1Mutual funds held as investments in variable annuities and 529 plans are counted as household holdings of mutual funds.
2Long-term mutual funds include equity, hybrid, and bond mutual funds.
3This category includes state and local governments and other institutional accounts not classified.
Note: Components may not add to the total because of rounding.

As of year-end 2012, nonfinancial businesses were the largest segment of institutional investors in mutual funds, holding $640 billion in corporate and similar accounts (Figure 6.17). These firms primarily use mutual funds as a cash management tool, and 72 percent of their mutual fund holdings were money market funds. Business investments in funds do not include assets held by funds in retirement plans on behalf of employees in employer-sponsored retirement plans, since those assets are considered employee assets rather than employer assets.

Financial institutions—which include credit unions, investment clubs, banks, and insurance companies—were the second-largest component of institutional investors in mutual funds. Financial institutions held $549 billion in fund assets at year-end 2012 (Figure 6.17). Nonprofit organizations and other institutional investors held $133 billion and $107 billion, respectively, in mutual fund accounts. Institutional investors overwhelmingly held money market funds as their primary type of mutual fund. Across all types of institutional investors, 63 percent of investments in mutual funds were in money market funds at year-end 2012.


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