Mutual Funds Prominent Investment Vehicle for Retirement Savers

Members of the Baby Boom Generation and Generation X had the highest rates of mutual fund ownership in mid-2014, according to a survey by the Investment Company Institute (ICI).

The annual survey found three times as many U.S. households owned mutual funds through tax-deferred accounts as owned mutual funds outside such accounts. Among mutual fund–owning households, 43% invested in mutual funds solely inside employer-sponsored retirement plans, which include defined contribution (DC) plans and employer-sponsored individual retirement accounts (IRAs).

Eighteen percent owned funds solely outside these plans, and 39% had funds both inside and outside employer-sponsored retirement plans. Altogether, 82% of mutual fund–owning households owned funds through employer-sponsored retirement plans, and 57% owned funds outside of these plans. Among households owning mutual funds outside of employer-sponsored retirement plans, 80% owned funds purchased from an investment professional.

Almost all mutual fund investors were focused on retirement saving. Saving for retirement was one of the financial goals for 91% of mutual fund–owning households, and nearly three-quarters (74%) indicated retirement saving was the household’s primary financial goal.

Mutual fund–owning households often purchase their first mutual fund through employer-sponsored retirement plans. In mid-2014, across all mutual fund–owning households, 64% had purchased their first fund through that channel.

The survey found mutual fund–owning households often held several funds, and equity funds were the most commonly owned type of mutual fund. Among households owning mutual funds in mid-2014, 83% held more than one fund, and 86% owned equity funds.

Of the many factors that shape shareholders’ opinions of the fund industry, performance of fund investments continues to be the most influential. Two-thirds of mutual fund shareholders indicated that fund performance was a “very” important factor influencing their views of the industry, and more than four in 10 cited fund performance as the most important factor.

ICI’s annual survey, released in two studies, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2014” and “Characteristics of Mutual Fund Investors, 2014,” showed 51% of U.S. households headed by a Baby Boomer—born between 1946 and 1964—owned mutual funds, as did 49% of households headed by a member of Gen X—born between 1965 and 1980.

The studies also report that in mid-2014, 32% of households headed by an adult Millennial (born 1981 to 1996), and 31% of Silent and GI Generation households (born 1904 to 1945) owned mutual funds. Among all U.S. households, an estimated 53.2 million households, or 43.3%, owned mutual funds in mid-2014. ICI estimates that more than 90 million individual investors owned mutual funds.

Members of the Baby Boomer generation were the largest share of mutual fund–owning households in mid-2014, representing 42% of all mutual fund–owning households. Baby Boomer households also held the largest share of households’ mutual fund assets at that time, with 51% of the total.

Most U.S. mutual fund shareholders had moderate household incomes and were in their peak earning and saving years. More than half of U.S. households owning mutual funds had incomes between $25,000 and $99,999, and nearly two-thirds were headed by individuals between the ages of 35 and 64.

Forty-nine percent listed saving for an emergency as a goal, and 23% reported saving for education among their goals. Nearly half of mutual fund–owning households reported that reducing their taxable income was one of their goals.

For the survey, interviews were conducted among 6,003 households over the telephone with the member of the household age 18 or older who was the sole or co-decisionmaker most knowledgeable about the household’s savings and investments.