Mutual funds remain the most popular investment vehicle among U.S. households.
According to the latest Annual Mutual Fund Shareholder Tracking Survey from the Investment Company Institute, just over 56 million households, or 45% of all U.S. households, owned mutual funds in mid-July. By comparison, 7.8 million households owned ETFs and 3.6 million owned closed-end funds, but roughly 80% of ETF and closed-end fund shareholders also owned mutual funds.
“Mutual funds are an important component of investor portfolios,” said Sarah Holden, senior director of retirement and investor research, in a statement. “Shareholders choose funds to help them reach a variety of financial goals, including saving for retirement, education, a home, or for an emergency.”
Among mutual fund owners, fund assets account for more than half their household financial assets.
Most of those households (81%) purchased funds through employer-sponsored retirement plans, but 64% also own shares outside those plans and 45% owned funds both inside and outside retirement plans, according to the ICI.
The survey by the mutual fund industry trade association does not explain the popularity of mutual funds in retirement plans over ETFs, but a primary reason is the fact that ETFs are sold as whole shares while investors usually buy fractional mutual fund shares in retirement plans, which can more easily handle random-dollar regular contributions. Mutual funds have approximately $18 trillion in assets versus $3 trillion held by ETFs.
Half of the households who bought fund shares outside their retirement channel did so through an investment professional, primarily a financial planner or full-service broker. Thirty-six percent bought fund shares directly through a fund company or discount broker.
Households headed by baby boomers own about half of all mutual fund assets while those headed by Gen Xers own about 30%. The median age of mutual fund owners is 51, and half of those households have incomes below $100,000. About 50% of mutual fund-owning households also invest in three or fewer funds; half invest in four or more and 15% own 11 or more funds, according to the ICI.
Equity funds were the most popular asset category, owned by 87% of these households, followed by money market funds (54%), bond funds (44%) and balanced funds (37%).
For the survey, the ICI contacted 5,000 U.S. households, half by landline and half by cell phone, and found that 44.5% owned mutual funds. Those households served as the basis for the survey findings.
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