Retirement Funds Lead the Way With Equity Investments: Study

September 27, 2002 ( - Employer-sponsored retirement plans have dramatically increased individual ownership of mutual funds and interest in the stock market, according to a new survey.

Conducted for trade industry groups the Investment Company Institute (ICI) and the Securities Industry Association (SIA), the Boston Research Group found that ownership of stock mutual funds in employer-sponsored retirement plans increased from 28.5 million US households to 33.2 million households between 1999 and 2002, an increase of 16.5% during a rough equity market. 

 On the other hand, ownership of stock mutual funds outside of those programs rose just 3.2% during that same period, to 28.7 million households.

Retirement “Trends”

Additionally, the 2002 ICI/SIA study, Equity Ownership in America, found that nearly half (48%) of US households that owned stocks in January 2002 made their first stock purchase inside an employer retirement plan. 

Overall, two-thirds of investors in January 2002 owned stock mutual funds in retirement plans, while 17% owned individual stock, including employer stock, in retirement plans.

However, ownership of individual stock declined between 1999 and 2002, dipping 4.9% during that period to 25.4 million households.  That decline was reflected in both employer-sponsored retirement plans and in accounts outside these plans, according to the study.

Perhaps reflecting that retirement plan influence, while the vast majority (89%) of US equity investors held stock mutual funds, just 49% held individual stocks directly.  BRG noted that among US equity investors:

  • 52% held only stock mutual funds
  • 11% held only individual stocks
  • 38% held both stock mutual funds and individual stocks.

BRG noted this dispersion was comparable to 1999 data.

Equity Able

Nearly half of all US households, some 52.7 million, owned stocks at the beginning of the year, according to the research – a 7.1% gain from January 1999.

The study noted that most equity owners have owned stocks for several years.  Nearly half (44%) made their first stock purchase before 1990, compared with 26% who did so between 1990 and 1995.  Roughly two-thirds of equity investors cite retirement as their primary financial goal, and a full 87% say they are investing in stocks (including stock mutual funds) to finance retirement.

Trading Places

The study found that 40% of equity investors conducted equity transactions in 2001, a year in which stock prices fell, while a nearly identical 42% did so in 1998, a year of rising stock prices. 

The percentage of equity investors buying equities was lower in 2001 than in 1998 (31% versus 39%), and somewhat fewer sold in 2001 than in 1998 (24% compared with 27%).

However, on a net basis 37% of individual stock investors bought individual stocks, while just 30% sold stock during 2001.  Among sock mutual fund investors, 22% bought stock mutual funds in 2001 while 16% sold stock mutual funds during that period.

The BRG report offered a demographic composite of the “typical” equity investor – married, employed, college-educated, late 40s and has a median household income in the low $60,000’s.  Nearly half (48%) are Baby Boomers, while 25% are Gen Xers.  Roughly 23% are members of the so-called “Silent Generation,” those born between 1926 and 1945, while 4% were born before 1926.

Nearly half of US equity investors had equity assets of less than $50,000, while just 7% had portfolios in excess of $500,000, both findings relatively identical to 1999 data.

Co-decisionmakers, usually married couples, share the responsibility for making financial decisions in 57% of equity-owning households, while 58% say they rely on advice from professional financial advisors in making stock investment decisions.

On “Lines”

Roughly a third (33%) used the Internet to buy/sell securities outside their retirement plan, while 33% did so within their retirement plans in 2001.  That’s up significantly from the 15% who did so outside their retirement plans in 1998, according to BRG.  During 2001, 46% used the Internet to check stock and 38% used it to read online financial publications. 

In contrast, very few used the Internet to send email to professional financial advisers or brokers, or to seek specific investment recommendations.

The results are based on 4,009 interviews of financial decisionmakers, conducted in January and February 2002 on behalf of ICI and SIA by the Boston Research Group.