Are Pictures Worth a Thousand Words? Infographics and Investment Decision Making

Abstract

We use an incentivized survey experiment to test how visualizing key information of mutual funds helps investors to follow the minimum-cost investment strategy. Respondents can invest in three ETFs tracking the same index and we find that adding a net expected return graph reduces the amount of additional (preventable) fees incurred by up to 20 percent. Moreover, the effectiveness of visualizations depends on experience and familiarity with investing. More literate and higher educated respondents and those that find fees important incur lower fees irrespective of the inclusion of visualizations in disclosure. The importance of these background factors suggests that a one-size-fits-all approach is likely to be suboptimal.

Keywords: Infographics, mutual fund disclosure, individual investor decision making

JEL Classification: G11, M31, D12, D91, G18