Fund popular

One in three Americans own common funds

　　By the end of November, 2006, the asset managed by common fund of USA is as high as 10.281 trillion US dollars, which possess 53% of global funds market, equals to 84% of the America GDP in 2005, which makes American keeping the largest financial organization system continuously. But in 1924, when the first common fund “Massachusetts investor trust” appeared in American, its investment scope is only fifty thousand US dollars.

　　After 80 years’ development, common funds have been owned by most families of USA. According to some materials, in 2006, there were 54.9 million USA families own common funds, which take the percentage of 48% of the country; and the number of common fund owner is 96 million, which means that one in three Americans are common funds owners. In financial structure of USA families, common funds take the leading position as high as 47%.

Fund performance is the most important element for why Americans choose it

　　Why common fund is so popular with Americans, the reasons are that its benefit rate is higher than bank deposit and its safety factor is higher than stock investment and pension system. Some materials indicate that, in the ten years from 1997 to 2006, about 80% informants in average express that the excellent performance of common fund is the most important element for why they choose it.

　　According to investigation, the degree of people’s favor to common fund is positively related to the 500 kinds of standards of Poor's Indices of New York. In 2000, 500 kinds of standards of Poor's Indices and satisfaction level of open-end fund investors reached the highest point, and during 2001 to 2003, they descended regularly, after that, they began to ascend since 2004.

　　Surveys show that satisfaction level of the fund company investor is depended on the following factors, but the proportions are different: performance of the fund (44%), how people are familiar with the fund company (15%), opinions of professional financial adviser (14%), present condition of financial market (11%), opinions of families and friends (8%), undulatory property of stock market (6%) and media advertisement of fund company (2%). Therefore, most investors take the fund performance as the most important factor to choose funds.

　　To avoid high risk of stock investment is another important reason why Americans choose common fund. Though benefit rate of stock is higher than fund, but in capital market, risk is highly related to benefit, and many general people are not confident to choose stock and bond by themselves. If they buy fund, they can require professional group to finish value maintenance and increment, and they realize investment diversification by concentration funds, and distribute investment risk.

　　A survey shows that 42% informants of fund owner express that, because the stock risk is too high, so they choose common fund which is safer. Practice improved that performance of common fund comes up to all our expectations. In 2006, average benefit of USA stock fund is as high as 15%, which is the best achievement in recent three years, and among the investment, fund return in Asian new market such as China, India etc is as high as 36.9%, making the owners laughed happily.

Pension is the largest capital recourse of common funds

 　　Vigorous development of common fund is attached to pension system. Since USA carried out “401K” plan in 1981, pension (enterprise annuity) developed quickly. Employees put part of their salary into individual annuity account. Enterprises put a certain proportion of funds into individual account for the employees when they are old. In order to improve development of social security, according to USA tax system, this part of investment enjoy tax preference policy, i.e. the payment for pension by individuals and enterprises should be deducted from tax base. Therefore, to common salaried persons, they will make full use of this policy, if they can invest 1000 US dollars, they would never invest 900 dollars.

　　 Employees could choose investment varieties when they take part in “401K” plan, and among the varieties, money market fund, stock market fund and bond market fund etc common funds are the dominant ones. Among the employees who take part in “401K” plan, 59% people chose fund investment.

　　 As the aging period of baby boom generation after the second war is coming, pension market becomes larger and larger, which needs stable and value added investment method, then common funds become its first choice, at present, pension has been the largest recourse of common fund, which takes the proportion of 65%. So fixed payment pension plan has become the main way for the investors to buy fund, over 60% owners own common fund by these plans. Among the fund owners, 49% are born during1946 to 1964, the baby boom period.

　　“2006 pension protection law” of USA signed in August 17, 2006 stated explicitly，trustee keeper in the plan can choose life cycle fund or living style fund as automatic investment choice of the plan, these largely improved “401K” pension plan to invest stock fund. Accumulation and strength of pension keep supplying long term capital recourse to fund market, then form multi-win situation of pension fund, common fund and stock market.