It appears that investors are becoming more comfortable with the Internet, giving reason for the mutual fund industry to believe that its significant investment in Web technology will eventually pay off.

A new study by American Century Investments found that concerns about online privacy are decreasing and that people are using the Internet more to purchase goods and services. And while most people are still using mutual fund websites merely to get share prices and prospectuses, it seems probable that gradually more people will use the Internet to buy and sell fund shares.

The third annual Investor Internet Adoption Study,' was released in December. Sixteen percent of survey respondents said they did banking online, up from nine percent in 1997. Forty-two percent said they bought something online, up dramatically from 28 percent in 1997.

Much of that change may arise from consumers' increased confidence in the technology. Fifty-two percent said their main reservation about conducting transactions on the Internet was security concerns. That was down from 74 percent in 1997. Nearly 30 percent said they had no concerns at all, up from just 11 percent in last year's study.

That bodes well for the fund industry, says Chris Doyle, a spokesperson for American Century.

"The concern level has dropped significantly. Now it's just a matter of creating an incentive (to do transactions online)," Doyle said.

Still, even though consumers are growing more confident about using the Internet, there are still many who do not use it at all and still more who do not use it for their finances. The study found that 50 percent of mutual fund investors use the Internet - an estimated 30 million people. Those who are using the Web are using it mainly for getting information and for e-mail. Fifty-three percent of users are going online to gain access to financial services, up from 44 percent in 1997.

"This suggests that mutual fund investors are beginning to see the Internet as less of a toy and more as a tool," Mary Witwer, vice president of electronic commerce for American Century said in a statement.

Still, most investors are not ready to transact their mutual fund business online. The study found that most people would check share prices and account balances and download prospectuses but would not buy or sell funds or open a new account. In fact, only eight percent said they would open an account online if they were given the option, while 38 percent said they would check share prices and account balances. Only 14 percent said they would buy funds online.

The study also found that use of the Internet among 401(k) participants is increasing. Forty-three percent of respondents said they had Internet access to their 401(k) plan, and 55 percent said they took advantage of that access.

Predictably, those who use the Internet the most in their daily lives are the most likely to use the Internet to gain access to their 401(k) plans, the study found. Sixty-nine percent of heavy users, defined as those who go online more than 15 hours per month, call up their plan websites, while only 42 percent of those who go online less than 15 hours seek 401(k) information online.

u Vanguard Group is enabling customers to use the Web for more than just mutual fund transactions and marketing. Vanguard is now giving its most web-savvy customers access to online tax-filing services. Through an agreement with Intuit, Vanguard investors who use the Web to gain access to their accounts, including those who have 401(k) accounts, can use WebTurboTax, an online version of TurboTax, Intuit's tax filing software. That software usually costs about $45 retail.

"We're allowing them to do it free and online," said Brian Mattes, a principal with Vanguard. Vanguard says it is the first mutual fund company to offer tax-filing services free online.

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