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60th edition

INVESTMENT COMPANY FACT BOOK

A Review of Trends and Activities in the Investment Company Industry

CHAPTER SEVEN

Characteristics of US Mutual Fund Owners

Ownership of mutual funds by US households grew substantially in the 1980s and 1990s and has held steady for the past two decades, averaging about 45 percent since 2000. In 2019, about 45 percent of all US households owned mutual funds. The estimated 101.8 million people who owned mutual funds in 2019 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 discount brokers or fund companies directly.

IN THIS CHAPTER

Individual and Household Ownership of Mutual Funds

In 2019, an estimated 101.8 million individual investors owned mutual funds—and at year‑end 2019, these investors held 89 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, 45.5 percent of US households—or 58.5 million—owned mutual funds in 2019, nearly identical to the 2000–2019 average of 45 percent (Figure 7.1). Mutual funds were a major component of many US households’ financial holdings in 2019. Among households owning mutual funds, the median amount invested in mutual funds was $150,000 (Figure 7.2). Sixty-eight 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 three-quarters worked full- or part-time.

FIGURE 7.1

About 45 Percent of US Households Owned Mutual Funds in 2019
Percentage of US households owning mutual funds

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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, 2019

FIGURE 7.2

Characteristics of Mutual Fund Investors
2019
How many people own mutual funds?
101.8 million individuals
58.5 million US households
Who are they?
51 is the median age of the head of household
68 percent are married or living with a partner
54 percent are college graduates
77 percent are employed (full- or part-time)
9 percent are Silent or GI Generation (born 1904 to 1945)
34 percent are Baby Boom Generation (born 1946 to 1964)
33 percent are Generation X (born 1965 to 1980)
24 percent are Generation Z or Millennials (born 1981 to 2012)*
$100,000 is the median household income
What do they own?
$250,000 is the median household financial assets
$150,000 is the median mutual fund assets
67 percent hold more than half of their financial assets in mutual funds
65 percent own IRAs
84 percent own defined contribution (DC) retirement plan accounts
4 mutual funds is the median number owned
88 percent own equity funds
When and how did they make their first mutual fund purchase?
51 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
50 percent are saving for emergencies
48 percent hold mutual funds to reduce taxable income
24 percent are saving for education

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* Generation Z (born 1997 to 2012) and the Millennial Generation (born 1981 to 1996) are aged 7 to 38 in 2019; survey respondents, however, must be 18 or older.

Sources: ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2019”; ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2019”; and ICI Research Report, “Profile of Mutual Fund Shareholders, 2019

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 2019. Forty‑seven percent of households headed by a Baby Boomer (born between 1946 and 1964) and 55 percent of households headed by a member of Generation X (born between 1965 and 1980) owned mutual funds in 2019 (Figure 7.3). Forty-one percent of Generation Z and Millennial households (born between 1981 and 2012) and 32 percent of Silent and GI Generation households (born between 1904 and 1945) owned mutual funds in 2019.

Among mutual fund–owning households in 2019, 34 percent were headed by members of the Baby Boom Generation, 33 percent were headed by members of Generation X, 24 percent were headed by members of Generation Z and Millennials, and 9 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, 2019

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* Generation Z (born 1997 to 2012) and the Millennial Generation (born 1981 to 1996) are aged 7 to 38 in 2019; 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, 2019

Baby Boomers held the largest percentage of households’ mutual fund assets, at 51 percent (Figure 7.4). Households headed by members of Generation X (33 percent), the Silent and GI Generations (7 percent), and Generation Z and Millennials (9 percent) held the rest. This pattern of asset ownership reflects the fact that Generation Z and Millennial households are younger and have not had as much time to save as Baby Boom households, which are in their peak earning and saving years.

FIGURE 7.4

The Baby Boom Generation Holds More Than Half of Household Mutual Fund Assets
Percentage of US households owning mutual funds and household mutual fund assets by generation, 2019

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* Generation Z (born 1997 to 2012) and the Millennial Generation (born 1981 to 1996) are aged 7 to 38 in 2019; 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, 2019

US households owning mutual funds had a range of annual household incomes: 14 percent had annual household income of less than $50,000; 17 percent had between $50,000 and $74,999; 16 percent had between $75,000 and $99,999; and the remaining 53 percent had $100,000 or more (Figure 7.5). The median household income of mutual fund–owning households in 2019 was $100,000 (Figure 7.2).

FIGURE 7.5

About 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, 2019

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Note: Total reported is household income before taxes in 2018.

Source: ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2019

Savings Goals of Mutual Fund Investors

Mutual funds play a key role in the long- and short-term savings goals of US households. In 2019, 92 percent of mutual fund–owning households indicated that saving for retirement was one of their financial goals, and 73 percent said it was their primary financial goal (Figure 7.6). Mutual fund–owning households often purchase their first mutual fund through employer-sponsored retirement plans. In 2019, across all mutual fund–owning households, 63 percent had purchased their first fund through that channel (Figure 7.2). Retirement, however, is not the only financial goal for mutual fund–owning households—50 percent reported saving for emergencies as a goal; 48 percent reported reducing taxable income as a goal; and 24 percent reported saving for education as a goal.

FIGURE 7.6

Majority of Mutual Fund Investors Focus on Retirement
Percentage of US households owning mutual funds, 2019

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* Multiple responses are included.

Source: ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2019

Where Investors Own Mutual Funds

The importance that mutual fund–owning households place on retirement saving is reflected in where they own their funds—in 2019, 95 percent of these households held mutual fund shares inside employer-sponsored retirement plans, individual retirement accounts (IRAs), or variable annuities. It is also 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 $9.5 trillion at year-end 2019, or 54 percent of those funds’ total net assets industrywide (Figure 8.19). By contrast, DC retirement plan and IRA assets in money market funds totaled just $461 billion, or 13 percent of those funds’ total net assets industrywide.

In 2019, 82 percent of mutual fund–owning households held funds inside employer-sponsored retirement plans, with 35 percent owning funds only inside such plans (Figure 7.7). Sixty-five percent of mutual fund–owning households held funds outside employer-sponsored retirement accounts, with 18 percent owning funds only outside such plans. For mutual fund–owning households without mutual funds in employer-sponsored retirement plans, 61 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 2019, 77 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 7.7). Forty percent of these households owned funds purchased solely with the help of an investment professional, and another 37 percent owned funds purchased from investment professionals and from fund companies directly or discount brokers. Thirteen percent solely owned funds purchased from fund companies directly or discount brokers.

FIGURE 7.7

Mutual Fund Investments Outside Retirement Plans Are Often Guided by Investment Professionals
2019

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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, 2019

In 2019, 82 percent of mutual fund–owning households held mutual funds through employer-sponsored retirement plans, and 65 percent owned mutual funds outside such plans (Figures 7.7 and 7.8). This latter group purchased funds through two sources: investment professionals and the direct market channel. In 2019, half of households owning mutual funds held funds purchased through an investment professional and almost one-third owned funds purchased through the direct market channel.

FIGURE 7.8

Mutual Fund Investors Purchase Mutual Funds Through a Variety of Channels
Percentage of US households owning mutual funds, 2019

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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 Seven percent of households owning mutual funds outside of employer-sponsored retirement plans did not indicate which source was used to purchase funds. Of this 7 percent, 5 percent owned funds both inside and outside employer-sponsored retirement plans and 2 percent owned funds only outside of employer-sponsored retirement plans.

Note: Multiple responses are included.

Source: ICI Research Perspective, “Characteristics of Mutual Fund Investors, 2019

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 2019, 39 percent of Generation Z and Millennial households that owned mutual funds held them only inside employer-sponsored retirement plans, compared with 30 percent of mutual fund–owning households in the Baby Boom Generation (Figure 7.9). Sixty-one percent of Generation Z and Millennial households that owned mutual funds held them outside of employer-sponsored retirement plans, compared with 70 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 hold them both inside and outside employer-sponsored retirement plans than younger or older generations. In 2019, 49 percent of Generation X households and 51 percent of Baby Boom households that owned mutual funds held them both inside and outside employer-sponsored retirement plans, compared with 43 percent of Generation Z and Millennial 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 7.9

Mutual Fund Ownership Inside and Outside of Employer-Sponsored Retirement Plans
Percentage of US households owning mutual funds by generation, 2019

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* Generation Z (born 1997 to 2012) and the Millennial Generation (born 1981 to 1996) are aged 7 to 38 in 2019; 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. 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, 2019

At year-end 2019, mutual funds held in DC plans and IRAs accounted for $9.9 trillion (31 percent) of the $32.3 trillion US retirement market (Figures 8.5 and 8.19) and 47 percent of total mutual fund assets. DC plans and IRAs held 54 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 8.19). Similarly, mutual funds held in DC plans and IRAs accounted for 57 percent of household long-term mutual fund assets but only 20 percent of household money market fund assets (Figure 7.10).

FIGURE 7.10

Households’ Mutual Fund Assets by Type of Account
Billions of dollars, year‑end 2019

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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 and Confidence

Each year, ICI surveys US households about a variety of topics, including shareholder sentiment. In 2019, 66 percent of mutual fund–owning households familiar with mutual fund companies had “very” or “somewhat” favorable impressions of fund companies, similar to 2018 (Figure 7.11). The share of mutual fund–owning households with “very” favorable impressions of fund companies was 15 percent.

FIGURE 7.11

Most Shareholders View the Mutual Fund Industry Favorably
Percentage of US households owning mutual funds familiar with mutual fund companies

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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, 2019

Mutual fund–owning households’ confidence that mutual funds are helping them reach their financial goals rebounded in the wake of the 2007–2009 financial crisis. In 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 2007 (Figure 7.12). From 2011 through 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. From 2015 to 2017, around 85 percent of mutual fund–owning households said they were confident in mutual funds’ ability to help them achieve their financial goals, rising to 88 percent in 2018. In 2019, 89 percent of mutual fund–owning households had confidence in mutual funds, with 32 percent indicating they were “very” confident in mutual funds’ ability to help them achieve their financial goals.

FIGURE 7.12

Nearly Nine 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

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Note: The survey methodology was changed to a dual-frame sample of cell phones and landlines in 2014. 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, 2019

Willingness to Take Investment Risk

The ICI survey 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 2019, 35 percent of households owning mutual funds were willing to take above-average or substantial investment risk, more than two and a half times the 13 percent of households not owning mutual funds (Figure 7.13).

FIGURE 7.13

Households’ Willingness to Take Investment Risk
Percentage of US households owning mutual funds by generation, 2019

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* Generation Z (born 1997 to 2012) and the Millennial Generation (born 1981 to 1996) are aged 7 to 38 in 2019; 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: ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2019” and ICI Research Report, “Profile of Mutual Fund Shareholders, 2019

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 2019, 40 percent of Generation Z and Millennial mutual fund–owning households and 44 percent of Generation X mutual fund–owning households were willing to take above-average or substantial investment risk (Figure 7.13). This willingness to take risk drops to 28 percent for mutual fund–owning households in the Baby Boom Generation and 15 percent for mutual fund–owning households in the Silent and GI Generations.

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 2019, held by 88 percent of mutual fund–owning households (Figure 7.14). In addition, 39 percent owned balanced funds, 45 percent owned bond funds, and 57 percent owned money market funds.

FIGURE 7.14

Equity Funds Are the Most Commonly Owned Type of Mutual Fund
Percentage of US households owning mutual funds, 2019

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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, 2019

How Households Select Mutual Funds

The ICI survey also asked mutual fund–owning households about the importance of a variety of factors when making their mutual fund purchase decisions. In 2019, 89 percent of mutual fund–owning households considered a fund’s investment objective when making their purchase decision (Figure 7.15). Similarly, 90 percent of mutual fund–owning households reviewed the risk level of a fund’s investments. More than nine in 10 mutual fund–owning households said that they reviewed the historical performance of a fund. Eighty-nine percent of mutual fund–owning households indicated that they considered a fund’s performance compared with an index, and 76 percent of mutual fund–owning households considered a fund’s rating from a rating service. About nine in 10 mutual fund–owning households indicated they reviewed the fund’s fees and expenses.

FIGURE 7.15

Most Mutual Fund–Owning Households Research Fund Investments
Percentage of US households owning mutual funds, 2019

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Shareholder Use of the Internet

An overwhelming majority of mutual fund–owning households have internet access. In 2019, 94 percent of US households owning mutual funds had internet access (Figure 7.16), up from 68 percent in 2000. 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 7.16

Internet Access Is Nearly Universal Among Mutual Fund–Owning Households
Percentage of US households with internet access, 2019
 All US
households
Mutual fund–owning
households
Households with
DC plan accounts1
Age of head of household2
Younger than 35 93 97 98
35 to 49 88 97 95
50 to 64 82 95 94
65 or older 65 86 84
Education level
High school diploma or less 65 86 86
Some college or associate’s degree 86 93 93
College or postgraduate degree 93 97 96
Household income3
Less than $50,000 65 81 83
$50,000 to $99,999 89 93 93
$100,000 to $149,999 96 98 97
$150,000 or more 95 97 97
Total 81 94 93

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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 2018.

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, 2019