Why Mutual Funds Still Matter in 401ks

401k, mutual funds, ICI, retirement

They ain't going anywhere.

They’re maligned, mocked and mistreated anytime a “hot, new thing” comes along promising lower fees, better transparency and tax efficiency, but mutual funds are still the mainstay for most American investors, including 401k participants.

The Investment Company Institute finds that among the 56.2 million mutual fund-owning households in the United States, 81 percent purchased their funds through employer-sponsored retirement plans, such as 401k plans.

Sixty-four percent held mutual funds outside employer-sponsored retirement plans, and 45 percent held mutual funds both inside and outside such plans.

Shareholders purchasing funds outside of employer-sponsored retirement plans use a wide variety of financial services providers. In mid-2017, 50 percent of mutual fund-owning households had purchased mutual funds from an investment professional, such as a full-service broker, independent financial planner, or bank or insurance company representative.

Thirty-six percent of mutual fund-owning households held their funds directly through discount brokers or mutual fund companies.

“Mutual funds are an important component of investor portfolios,” said ICI Senior Director of Retirement and Investor Research Sarah Holden. “The survey results indicate that almost two-thirds of mutual fund-owning households had more than half of their household financial assets invested in mutual funds.”

Overall, the vast majority of American mutual fund shareholders are confident in mutual funds’ ability to help them meet their financial goals, with the number of mutual fund shareholders in the United States at 100 million, representing 44.5 percent of all households.

ICI’s research, released on Tuesday in two studies—“Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2017” and “Characteristics of Mutual Fund Investors, 2017”—also find that mutual fund-owning households represent a full range of ages, incomes, and educational achievement.

Other Key Survey Findings Include:

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