End of the year surveys of mutual fund investors found that while Internet use has increased significantly from previous years, the ultimate user universe will be finite and relatively small.
The third annual Internet Adoption Study by American Century Investments, Kansas City, Mo., found 50% of the 250 mutual fund owners surveyed use the Internet, compared with 33% in 1997 and 18% in 1996.
Investors seem to be using the Internet as a tool, rather than for entertainment, with 90% accessing the Web for research and e-mail, two-thirds for news and more than half for financial services. Mutual fund owners said they most frequently used the Internet to check account balances, 41% in 1998, compared with 26% in 1997 and 13% in 1996.
Privacy and security issues still seem to be holding mutual fund investors back from fully using the Internet's online transaction capabilities, although that concern is diminishing. About 52% of investors in 1998 told American Century that privacy, theft and security were their major concerns about Internet transactions, compared with 74% in 1997 and 68% in 1996.
Analysis of the growth potential of Internet use by mutual fund consultant The Spectrem Group, Windsor, Conn., led researcher Eli Neusner to a fairly negative conclusion.
Online investing has clearly been a success, Mr. Neusner found, with more than 10% of all retail mutual fund brokerage transactions flowing through online brokerages.
Online brokerage firms will experience continued growth, primarily from conversion of offline discount brokerage users, who have a similar demographic profile to that of current online investors. And while pundits project more than 20% of online households will invest electronically by 2002, overall, only 4.6% of retail investment assets will be managed online by 2002.
Spectrem predicts the great majority of investors, who tend to seek advice from financial intermediaries, will not change their habits and will not become a vast, new class of Internet investment do-it-yourselfers.
