IQ and mutual fund choice

Mark Grinblatt, Seppo Ikäheimo, Matti Keloharju, Samuli Knüpfer

Research output: Contribution to journalArticleScientificpeer-review

25 Citations (Scopus)


We show that cognitive ability influences mutual fund choice: high-IQ investors avoid funds with high management fees. Two competing stories can explain this phenomenon. One is that high-IQ consumers benefit less from costly services, as they find it easier to make informed financial decisions without external help. The alternative story is that these investors are less likely to overpay for the services they receive because they are either better judges of value or more capable of discerning the price charged for these services. A comprehensive data set of Finnish males' fund holdings supports both stories: consistent with the first story, high-IQ investors tend to avoid funds sold via expensive service-intensive channels and prefer a mix of equity and bond funds to expensive readily packaged balanced funds. Consistent with the alternative story, IQ and fees are inversely correlated, even after controlling for many fund services, including any operating at the fund family level.

Original languageEnglish
Pages (from-to)924-944
Number of pages21
JournalManagement Science
Issue number4
Early online date2015
Publication statusPublished - 1 Apr 2016
MoE publication typeA1 Journal article-refereed


  • Education
  • Fees
  • IQ
  • Mutual Fund
  • Portfolio Choice


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