IQ and Mutual Fund Choice

This study analyzes IQ’s influence on mutual fund choice. Using a comprehensive dataset of Finnish males, it finds that high-IQ investors are less likely to own balanced funds, actively managed funds, and funds marketed through a retail network. This behavior tends to reduce highIQ investors’ fund fees. Moreover, within each asset class and service category, and controlling for other investor attributes, high-IQ investors prefer the lowest-fee funds, further reducing the fees incurred. IQ’s effect on fees is robust to the addition of fund family dummies, which help control for unobservable service attributes. IQ also influences the fee sensitivity of even the most affluent investors, ruling out wealth-related access to low-fee funds as the explanation for IQ’s relationship to fees.