Mutual fund shareholders are more likely than all Americans to have Internet access, according to a new report from the Investment Company Institute of Washington. In 2005, 88% of mutual fund shareholders had access to the Web, compared to 79% of all Americans. This is up from 2000, when 68% of mutual fund shareholders had access to the Web, versus 57% of all Americans.

Mutual fund shareholders also use the Internet often, according to the ICI. About 66% go online at least once a day and nearly 25% once a week or more. Only 10% with Internet access go online once a week or not at all.

The nearly four out of five Americans today with Internet access is up from less than one quarter in 1997, and the number is increasing, regardless of age, income or educational level, according to the ICI. The rise in access to the Internet has grown since the 1990s and is a direct result of the decreasing costs of personal computers and users' increasing confidence and trust in Internet transactions. The number of government, retail and commercial services offered online is also a factor that has influenced the rise in Internet use.

ICI President Paul Schott Stevens identified today's Internet advances as a great opportunity to help investors better understand mutual funds and also to improve disclosure. "There is a growing recognition that the time has come to take greater advantage of the Internet to provide investors and other market participants with more timely and more useful information about mutual funds," Stevens said.

When it first came about, the Internet was aimed toward a small fragment of the U.S. population, and only over time has it grown to include a much broader segment.

"The first recorded description of the social interactions that could be enabled through networking was a series of memos written by J.C.R. Licklider of MIT in August 1962 discussing his Galactic Network Concept,'" according to a study called "Internet History and Growth," by William Slater III.

The earliest Internet users were young, high-income, highly educated individuals. Today, use of the Internet is virtually universal among people with some post-secondary education, those with incomes of $50,000 or more and those who are under 55. Among mutual fund shareholders, for instance, 97% of those with household incomes of $150,000 or more, 93% of those with a college or postgraduate degree and 93% of those age 55 or younger have Internet access. Nonetheless, Web access is increasing among people with less formal education or lower income, and at the same time, almost two thirds of adults age 55 or older now have Internet access, up from a mere 8% in 1997.

Stevens called today's mutual fund investor very "logged on" and said that mutual fund companies should be tuned into this by improving the Internet and other technologies as a way of delivering information to investors.

"The Internet offers the ultimate al la carte menu," Stevens said. "Those who want more extensive information, can get it. Those who don't can access or be provided the essential information they need, in a form they are likely to use. So, it's no longer a question of less versus more. Thanks to the Internet, we can provide both less and more."

Practically all mutual fund investors with Internet access went online at least once between June 2004 and May 2005, the ICI found. Only 4% of shareholders with Internet access did not go online during this period.

Only one out of every 10 fund owners with Internet access went online in this period less than once a week or not at all.

"The Securities and Exchange Commission has begun to recognize the potential of the Internet to offer a superior way to convey information to many investors and other market participants," Stevens pointed out. "Chairman Cox has suggested that the time is now ripe for the SEC to craft a regulatory framework that takes far better advantage of the potential of electronic communication."

Nonetheless, Stevens emphasized that efforts to make greater use of the Internet should not handicap those investors who do not rely on it, or cannot log on. "We recognize that any disclosure framework must accommodate people who do not have Internet access. We cannot ignore their needs," he said.

Another important fact revealed in the study is that many mutual fund shareholders seek financial information online. They are more likely than non-fund owners to go online and access an investment or bank account, with 75% of mutual fund shareholders turning to the Internet to manage their money and only 46% of non-fund owners doing so. In addition, more mutual fund owners than non-fund owners engage in common online activities, such as accessing e-mail or obtaining information about non-financial products. Nearly 90% of shareholders with Internet access use the Internet to access e-mail.

(c) 2006 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.