Why Are Mutual Funds Still Not a Part of the Portfolio of Many Investors?

Financial independence is the ultimate goal for any investor. Additionally, a growing number of people are drawn to accumulating riches and being wealthy quickly these days. It can be annoying, though, when you discover how long the process takes.

For many years, mutual funds have been regarded as a reliable option for investors. With them, you can make a variety of stock investments that fit your requirements and interests.

Why should you prefer investing in mutual funds?

The interest of investors has increased along with the AUM of Indian mutual funds. Mutual fund assets have experienced a dramatic boost over the past few years due to a multiplication in growth. We have seen with great attention as mutual funds gradually find their way into an investor’s portfolio. Investing in mutual funds is now simple and available to anyone.

The mutual fund sector in India is expanding, but there is still more work to be done before it reaches the degree of development we hope for. India has a relatively low ratio of money invested to GDP—roughly 17%—compared to the global average of 76%. The U.S., Canada, and Australia are among the nations with ratios over 100%. 

This means that while bank FDs are at about 75%, India’s investment programs are only about five times that of their GDPs. Without a doubt, the mutual fund business in India is ripe for much greater expansion, yet it is nothing like bank FDs in terms of size. A statistical analysis titled “Consumer Spending Outlook 2022” projects that by 2022–2023, 31% of Indian consumers will probably invest in mutual funds. Only one-third of the investing population—who are restricted in many ways—will be motivated to invest in funds over the next four years. In this post, we’ll go over a few of the reasons why some people are reluctant to invest in mutual funds.

The reasons you might want to keep your assets in cash or other assets instead of investing in mutual funds.

Lots of people don’t know much about mutual funds.

Even though the mutual fund sector has been around in India for more than 25 years, only tier 1 and tier 2 cities are aware of it. Even among the educated population, millions of Indians are still ignorant about mutual fund operations. The only reason people even know these things exist is because of recent mainstream media efforts. Because of India’s customs and culture, most people still avoid having open conversations about investing methods or money management. Put differently, we’re not too keen to experiment with new goods or take chances. Still, the last several years have been a positive move. But there’s still a very long way to go.

Confidence in market-linked products can be low

One of the biggest obstacles for many investors is the risk involved in investing in mutual funds. Actually, investor reluctance is primarily caused by volatility and unknown area, which means that raising awareness and educating people about this fantastic investment vehicle is also a struggle. Knowing the advantages of investing in mutual funds is not as crucial as realising the range of risks associated with these kinds of ventures. Even when the benefits could exceed the expenses, consumers feel more confidence when they have all the information they need to make an educated choice up front.

Poor distributors/intermediaries reach

Accessibility is among the most crucial elements in influencing the growth and success of an investment opportunity. Although fewer people have access to intermediaries, more people are now aware of the advantages it offers. Indians feel most at ease among someone they can easily get along with and trust. Intermediaries can fulfil this role by teaching investors how to invest in goods that pique their interest; this takes handholding and developing a relationship of trust. Sadly, mutual fund distributors are hard to come by in India, and many cities still lack one. This is significant because distributors influence the level of investor confidence, mutual fund knowledge, and attraction to potential new investors.

Mutual fund investing may appear like a daunting endeavor, but there are several approaches available that are suited for various investment requirements. You should be aware of all the potential dangers and rewards before making an investment. Possessing the appropriate information, training, and digital literacy is crucial.

Conclusion

Ultimately, it takes a knowledgeable community to dispel myths and prejudices through fervent discussions. By dispelling some of these myths, you can assist. You are changing the financial literacy of our society by educating yourself and those in your vicinity. Together, let’s make wise choices and assist others in doing the same. Join the expanding Indian mutual fund investing community.