What’s most important for mutual fund investors?

Survey reveals importance of fees as well as performance

What’s most important for mutual fund investors?
Steve Randall

Fees and expenses are an important factor in selecting mutual funds, ranking almost as highly as performance.

A survey of US households by the Investment Company Institute shows that more than 9 in 10 investors consider past performance of mutual funds with more than half ranking this as very important; while 9 in 10 say fees and expenses are considered with 40% saying costs are very important.

Eighty-eight percent of respondents considered a fund’s performance compared with an index, with 36% indicating it was “very important.”

“Mutual fund investors are typically saving for retirement, education, or other long-term financial goals,” said ICI Senior Director of Retirement and Investor Research Sarah Holden. “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, as this report confirms.”

Investment objective is important
The report - "What US Households Consider When They Select Mutual Funds, 2018” – shows that 90% of mutual fund–owning households considered the fund’s investment objective when selecting a mutual fund, with 38% agreeing it was “very important.”

Ninety-one percent considered the risk level of a fund’s investments when selecting mutual funds, with 37% indicating it was “very important” in their fund selection decision.

And 75% of mutual fund-owning households said they consider a fund’s rating from a rating service, with 20% considering such a rating “very important” in their decision making.

Where investors are buying their funds
Of those households that hold mutual fund investments, most (80%) purchased them inside an employer-sponsored retirement plan; 63% outside an employer-sponsored retirement plan; 49% through a sales force or investment professional; 27% through a full-service broker; and 24% through an independent financial planner. Banks and savings institutions were used by 17%.