A Dalbar survey found that one in five investors believe they lost money when mutual fund companies engaged in inappropriate behavior such as allowing special clients to market time or late trade their funds. Also in the August 2004 survey, 13% said they would cut back or cut out their reliance on mutual funds as investing tools and just 13% said they have already made investment changes as a result of the scandal.
But there were bright spots in the survey showing that investors are apparently able to distinguish between the behavior of the various fund company players. For example, on of a 100-point scale, The Vanguard Group garnered the most votes of confidence for its ability to attract new investors at 77.6 with Fidelity Investments just behind at 76.6.
Rounding out the top five highest ranked fund companies for new investors were:
- American Funds (75.5)
- Franklin-Templeton (74.6)
- HartfordMutual Funds (73.6).
While rating fund firms’ ability to hang onto existing shareholders, respondents specified their top five picks as:
- TIAA-CREF (86.7)
- JP Morgan / American Century (85.7)
- Franklin-Templeton (82.6)
- HartfordMutual Funds (82.6)
- American Funds (82.4).
When negotiating their way through the rubble left by the scandal, it apparently helps to have a financial advisor on hand. Investors with advisors had a confidence level of 72.6 while those doing it alone had a 63.2 confidence level, according to the Dalbar survey.
In any event, the scandal apparently hasn’t prompted a big change in investors’ knowledge level about the fund industry. Nearly seven in 10 said they aren’t fund knowledgeable, while three quarters said they were clueless when it came to naming a fund company sucked into the scandal. Fewer than 50% said they intend to learn more about fund investing.
Finally, if they were going to star their own education campaign, four in 10 respondents said they were use a fund’s annual report, a third would rely on the media, 16% said they would use analyses from a financial advisor and about a quarter would head straight for a fund’s prospectus.
The survey summary is at http://www.dalbarinc.com/content/showpage.asp?page=mfconfidence .
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