While concepts of investment risk differ among recent investors, the study showed most prefer a narrative form of risk disclosure and a graphic presentation consisting of a bar chart showing historical annual return. The Institute submitted the study's findings to the U.S. Securities and Exchange Commission earlier this month in response to the SEC's request for comments regarding the issue of risk disclosure from the professional investment community and individual mutual fund investors. Sixty-nine percent of respondents examined a fund's investment risk before making their most recent purchases. Investors find narrative disclosure useful to their evaluation of risk. Fifty-one percent said they are very confident of their ability to use narrative description to assess a single fund's risk.
Investors also find graphic presentation to be helpful.
Quantitative risk measurements would complicate an evaluation of mutual fund risk for most investors. Most investors, including those who have used quantitative risk measures, are not very confident of their ability to use these methods. The survey indicates that quantitative risk measures have a strong potential to confuse or mislead investors. The Investment Company Institute is the national association of the American investment company industry.