Charles Schwab & Co. released the results of its second quarterly Mutual Interest Council survey Feb. 1. The survey was sent out in December, 1998, via e-mail to Schwab customers that belong to the company's Mutual Interest Council. The Mutual Interest Council is a panel of about 2000 Schwab Mutual Fund customers nationwide who are polled on a quarterly basis for their opinions on a variety of investment topics. Schwab received responses from about 800.
The responses showed index investments to be at least as important in the minds of these investors as actively managed investments, if not more so.
According to the survey, an overwhelming 69% of those polled felt that a portfolio should include both index and actively managed funds, while 61% of those polled actually followed this practice. However, while only 2% of those polled were invested in only index funds, 34% owned only actively managed funds.
When asked which of their funds had performed better over the past 36 months, 52% of the 454 respondents to the question said that their index funds had out-performed their actively managed funds. Only 16% believed their actively managed funds had performed better.
Only 17% of those polled stated that they would not invest in index funds in 1999, while 33% weren't sure. The remaining 50% said they intended to increase their holdings in index funds this year.
When asked which asset classes they held index funds in, 58% of the 525 respondents to the question said large-cap index funds and 21% said small-cap index funds, while only 11% said that they held international index funds. Even fewer owned shares of bond funds.
According to respondents, when choosing an index fund they are primarily concerned with the fees associated with the fund, its tax efficiency and its performance within its category. The fund's level of diversification and whether or not it outperforms actively managed funds are of secondary importance, the survey finds.