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Who Is the Typical Fund Owner?

Investing: A poll finds many aren't newcomers, but another points to a lack of basic knowledge.

August 01, 1996|TOM PETRUNO | TIMES STAFF WRITER

The average mutual fund owner is 44, has household income of $60,000 and owns three funds from two different companies, according to a survey released Wednesday.

Another poll, meanwhile, said most fund owners can't answer even the most basic questions about the funds they own.

The "typical fund owner" study, released by the funds' chief trade group--the Investment Company Institute--seemed in part to be an effort to dispel the idea that mutual fund owners are naive Johnny-and-Joan-come-latelys to stock and bond investing.

The ICI phone survey of 1,165 households found that nearly 70% of fund owners bought their first fund before 1990.

But that first fund may have been a relatively risk-free money market fund, rather than a stock or bond fund. Moreover, the ICI survey excluded those households that own mutual funds solely through 401(k) employer-sponsored retirement plans, which is the route many Americans have taken into the stock market in recent years.

Still, the ICI poll provided some interesting tidbits on the habits and holdings of investors who have taken the time to buy funds on their own, rather than simply through a company plan:

* 63% of the investors surveyed own at least two of the three basic types of funds (stock, bond and money market). In all, 73% own stock funds, 52% own money market funds and 49% own bond funds.

Forty-three percent of fund investors own four or more funds.

* Most fund investors get help in choosing a fund. Nearly 60% own funds purchased only through a broker, insurance agent, financial planner or bank representative.

In contrast, 22% are pure do-it-yourselfers, owning funds purchased only through the direct-market channel, i.e., directly from the fund companies themselves or through discount brokerages.

* Men make the investment decisions in 47% of fund-owning households. Women make the investment decisions in 32% of households. Decision making is shared in 21% of the households.

* The average fund owner's fund assets total $18,000. The typical Generation X (ages 18 to 30) fund owner, for example, has $6,000 in funds; the average baby boomer (ages 31 to 49), $12,000.

In the "Silent Generation," the ICI's designation for those between 50 and 70, fund assets average $42,000; in the 70-and-above age group, fund assets average $49,000.

* 49% of fund owners say they are willing to take "average risk for average gain," whereas 27% say they will take "above-average risk for above-average gain." Only 16% said they take "no risk at all," and just 8% said they take "substantial risk for substantial gain."

Meanwhile, fund giant Vanguard Group on Tuesday said it presented results of a separate fund-owner survey to the Securities and Exchange Commission's consumer affairs advisory committee, and the data wasn't especially encouraging in terms of investor knowledge.

The firm posed 20 true-false and multiple-choice questions to 1,467 Americans late last year. Among the questions: What is dollar-cost averaging? What is a 12b-1 fee?

"Overall, investors fared poorly on the test, with more than three in five failing to answer even half the questions correctly," Vanguard said. The average score: 49%. Only 3% scored 85% or higher.

For the record, dollar-cost averaging is investing a set dollar amount in a fund each month. A 12b-1 fee is a fee funds charge to cover marketing expenses.

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