Americans are more highly motivated than ever before to invest in mutual funds, particularly for their retirement, and are interested in staying with these funds for the long-term in spite of market drops, according to a study by MFS Investment Management of Boston.
Roper Starch Worldwide conducted the study, called "The Changing American Investor" for MFS. It surveyed 1,000 individuals, 700 of whom were investors, for the study.
The survey indicated that 62 percent of Americans are investors, with money in mutual funds, annuities, stocks or whole-life insurance. Respondents were also enthusiastic about investing- 83 percent said it is a good thing that more Americans are investing in equity markets.
Of the 62 percent who are investors, nine in ten are saving for at least one of seven major financial goals including paying for children's college educations, mortgages, retirement or achieving complete financial independence, the survey found.
Investors are most motivated by financial independence (66 percent cited this as their reason for investing), followed by preparing for retirement (61 percent).
The study also found that investors are not predominantly middle-aged, affluent males. Fifty percent of investors are female.
The survey further revealed that 53 percent of those surveyed still believe that employers are responsible for helping individuals prepare for retirement. However, 72 percent acknowledged that individuals should also take responsibility for their retirement. But many of the respondents said other institutions should also shoulder the responsibility. Thirty-two percent hold mutual fund companies responsible, 42 percent financial advisors, 27 percent banks, 33 percent insurance companies and 36 percent the government.
The survey also found that shareholders are not likely to withdraw assets when there are dips in the market. In fact, increasingly, people see market drops as buying opportunities. Only seven percent of the respondents said they withdrew money from the market following the declines in the late summer and fall of 1998. Sixty-seven percent said they are invested for the long term and are unconcerned about short-term market drops. Forty-five percent said they like mutual funds specifically because of their risk-reduction and 50 percent said they like mutual funds because they are managed by experts.
Although only 19 percent actually put any money into the market when it fell in the fourth quarter of last year, in theory, 69 percent agreed that a market downturn is a good time to purchase under-valued stock.
The study also indicated that for all the talk about the Internet, most people are distrustful of purchasing mutual funds or conducting other financial transactions over the Web. This is as true of wealthy as of low-income Americans. Roughly 40 percent of the respondents said they are not comfortable purchasing mutual funds or other financial instruments over the Internet.
Despite their overall positive attitudes towards investing and mutual funds, however, there is a lot that investors have to learn about mutual funds and other instruments, the study found. Forty-eight percent of the respondents were unable to correctly define a mutual fund.