SURVEY OF MUTUAL FUND SHAREHOLDERS JANUARY 1966

EXPLANATORY NOTES

This report presents a summary of the findings of a nationwide mail survey of mutual fund shareholders. The study was undertaken by Benson & Benson, Inc. for the Investment Company Institute.

Objectives

The objectives of this study are to investigate:

1. The size of the mutual fund shareholders' present investment holdings in mutual funds and other forms of investments.

2. Shifts in investment patterns that may have occurred in the last year and/or are anticipated in the next 12 months.

3. The importance to the shareholder of the various appeals that mutual funds offer as an investment medium.

4. The investment objectives for which mutual funds are considered suitable.

Questionnaire

The questionnaire was based in part on the questionnaire which the Investment Company Institute used in their earlier shareholder study. A number of new questions were developed by Benson & Benson, Inc. and were approved by the Investment Company Institute.

A copy of the questionnaire is in the Appendix.

Sample

Two major types of mutual fund investors were sampled in this study: the regular account holder and the accumulation plan holder.

Each of these major samples was divided into two sub-samples. The regular accounts are divided between those having automatic reinvestment of dividends and/or capital gains distributions, and those without automatic reinvestments. The accumulation plan holders are divided between the voluntary plan group and the contractual group.

The Research Department of the Investment Company Institute arranged for the cooperation of member companies to supply names; obtained the names from the participating member companies, randomly drew samples from the names they received, eliminated duplicated names, and eliminated accounts held in trust. The selected samples were sent to Benson & Benson. The type of account was designated for each name, but Benson & Benson has no knowledge as to which fund is associated with any specific name.

It had been planned to draw approximately 2100 names of regular account shareholders and 2100 names of accumulation plan shareholders. However, it was realized that for about 25% of the names provided, information as to the type of account would not be available. Thus, a sample of "account unspecified" names had to be drawn, to be allocated later to the several samples of account types, according to answers given to pertinent survey questions. The Research Department of the Investment Company Institute reduced the number of names to be drawn for the samples of specific account types in proportion to their estimate of how the "account unspecified" names would eventually divide among the various types of accounts.

Eliminating the undeliverables returned by the Post Office, a net mailout of 4,216 was made. Completed questionnaires were received from 2,185 respondents for a return of 53.0%. However, 122 respondents claimed not to own mutual funds at the time of the survey and were eliminated from the study, reducing the net return to 2,063. The following table shows the distribution of the net mailout and net return among the five samples, as well as the distribution of the “account unspecified" sample among the other four groups.

The accumulation plan sample obtained for tabulation divides 55% voluntary and 45% contractual. This division is very close to what was anticipated from pre-survey estimates. However, in the regular account sample, the proportion with automatic reinvestment (48%) is considerably higher than in the pre-survey estimate (32%). This results from the fact that respondents in the "unspecified" sample who reported having automatic reinvestment in any of their funds, had to be placed in the reinvestment category. Thus, it is very likely that a number of persons who were drawn from a fund in which they do not have automatic reinvestment, have ended up in the reinvestment sub-sample because of having automatic reinvestment in some other fund.

Survey Methods

All mailings were made by Benson & Benson, Inc. from Princeton, New Jersey. Each questionnaire was accompanied by a covering letter on Benson & Benson letterhead bearing the signature of Lawrence E. Benson, President. Copies of the covering letters are in the Appendix.

Three mailings were made. The first and third mailings were closed out three weeks after the mailout. The second mailing was left open for five weeks to avoid making the third mailout during the Christmas and New Year holidays.

The second and third mailings carried an inducement to encourage respondents to fill out the questionnaire-a shiny new quarter. The second and third mailings were sent only to persons who had not responded to a previous mailing.

Commemorative stamps were used on the outgoing and return envelopes.

Rate of Return

The table on the next page shows the rate of return for each of the five subsamples.

It might be noted that an additional 371 respondents (9.0% of the total net mailout) returned the questionnaires blank (indicative of refusal) or so incomplete as to be useless.

1 Of the total mailout of 4,232 the Post Office returned 106 as undeliverable; 17 from the without automatic reinvestments, 9 from the with automatic reinvestments, 13 from the voluntaries, 52 from the contractuals, and 15 from the unspecifieds. The figures for mailouts are net figures.

STATEMENT OF THE PRINCIPAL FINDINGS

This section summarizes what we feel to be the highlights of the findings of the 1966 Shareholder Survey. This report is primarily intended as an Executive

Summary, and omits the bulk of the detailed tabulations. The full details in tabular form have been provided for the Research Department of the Investment Company Institute for study and for such dissemination as they deem desirable.

CHARACTERISTICS OF THE MUTUAL FUND SHAREHOLDER

The average mutual fund shareholder appears to be a married man around 50 years of age with at least some college education. He is an executive or professional man with an income over $11.000 a year. He has a broad-based investment plan including life insurance, a bank account, savings bonds, mutual funds, and common stock. He owns his home and is likely to own other real estate. Age

The median regular account holder was 10 years older than the accumulation plan holder. Among regular accounts, the median was considerably younger for those with automatic reinvestment than for those without automatic reinvestment, the latter group being affected by retired persons who need their income for daily living. Within the accumulation group, a higher age was found for the voluntary accounts than for the contractual.

The largest proportion of all the shareholders are in the professional and managerial occupational categories. These two groups account for 52% of the accumulation plan holders and 44% of the regular accounts.

Retired persons and housewives (primarily widows) comprise only 7% of accumulation plan holders as against 26% of regular account holders-36% of the regular accounts without automatic reinvestment.

It is noteworthy that 21% of the contractual plan holders are in the skilled and semi-skilled occupational category. This is twice as high a proportion as was found in the other three types of shareholders.

For both regular and accumulation accounts, over 6 shareholders in 10 have some college education, and about 4 in 10 are college graduates. The sub-groups showed little variation on this score.

Income

As would be expected, median income for both regular and accumulation shareholders has risen since the previous study, running over $11,000 for both groups. Highest income was found for the voluntary accumulation plan holders, lowest for the regular accounts without automatic reinvestment. Following are the medians:

Higher proportions of women, particularly the widowed, are found among regular account holders than in the accumulation plan group. This was especially true of the regular accounts without automatic reinvestment.

A substantial majority of shareholders, both regular account and accumulation plan, also have life insurance, bank accounts, savings bonds, common stock and real estate.

Among regular accounts, those without automatic reinvestment were less likely to have life insurance (79%) and more likely to own common stocks (79%) than was true of those with automatic reinvestment. Again this reflects higher incidence of older people, retired persons and widows in the group without automatic reinvestment.

As for accumulation plan holders, those with contractual plans were more likely to have insurance (95%), but less likely to own real estate (82%), savings bonds (59%), and especially common stock (47%) than those with voluntary plans. This reflects the younger age level and higher proportion of married people in the contractual group. Also, this group had relatively many in the skilled and semi-skilled occupation group.

Mutual Funds

Regular accounts were more likely to hold shares of more than one mutual fund, and also reported a higher median holding in mutual funds, than accumulation plan holders. On both scores, the medians for regular accounts without reinvestment were higher than for those with reinvestment.

Voluntary plan holders averaged over twice as much invested in mutual funds as the contractual plan holders. Actually, one-fourth of the contractuals reported holding less than $1,000 in mutual funds, and almost 7 in 10 hold shares in only one fund.