How Investors Select Mutual Funds

The Investment Company Institute issued results from its latest annual mutual fund shareholder tracking survey. The latest report from the survey explores the factors investors consider when selecting mutual funds. Not surprisingly, most look at past performance. About 40% give a high priority to expenses. Not many consider factors such as the amount the managers have invested in the fund, annual taxes, and capital gains.

The survey also asks households about their willingness to take investment risk. Households owning mutual funds are far more willing to take investment risk than US households in general. In mid-2017, 34 percent of households owning mutual funds were willing to take above-average or substantial investment risk, compared with 22 percent of all US households (Figure 3). Forty-six percent of mutual fund–owning households are willing to take average risk with financial investments compared with 32 percent of all US households. Finally, only 20 percent of mutual fund–owning households are willing to take below-average or no risk, compared with 46 percent of all US households.