The MarketsMay 15, 2019

Fee Considerations Drive Mutual Fund Purchases

Investors also look at historical performance and performance compared to an index, ICI found.

Reported by Lee Barney

In 2018, 90% of mutual fund-owning households considered fees and expenses when selecting a mutual fund, according to research by the Investment Company Institute (ICI) in a new report, “What U.S. Households Consider When They Select Mutual Funds, 2018.” Nearly 40% said this information was “very important.”

More than nine in 10 mutual fund-owning households considered historical performance when making a purchase. Just over half said this information was “very important.” Additionally, 88% consider a fund’s performance compared to an index, with 36% saying this information was “very important.”

“Mutual fund investors are typically saving for retirement, education or other long-term financial goals,” says Sarah Holden, senior director of retirement and investor research at the ICI. “So, it’s no surprise that households carefully consider many factors when choosing mutual funds, making informed choices to save and invest to meet their financial goals.”

Additionally, 90% of mutual fund-owning households considered a fund’s investment objective when making a selection, with 38% saying this information was “very important.” Ninety-one percent consider a fund’s risk level of investments, with 37% saying this information was “very important.” Seventy-five percent look at a fund’s rating from a rating service, with 20% saying this information was “very important.”

ICI also looked at the channels through which investors own mutual funds. The most common, 80%, was through employer-sponsored retirement plans, but another 63% own mutual funds through outside resources. Twenty-seven percent purchased these outside funds through a broker, 24% through a financial planner, 19% through a bank or savings institution, 10% through an insurance agent and 7% through an accountant. On the other hand, 33% make the purchase themselves directly, either from the mutual fund company or a discount broker.

The most common type of fund owned was equity funds (88%), followed by money market funds (57%), bond funds (44%) and balanced funds (36%). Total U.S. household mutual fund assets in 2018 were $15.8 trillion, with 41% of these assets in domestic equity funds, 24% in bond funds, 14% in world equity funds, 12% in money market funds and 9% in balanced funds.