Why one person invests in mutual funds and another does not, depends largely on the number of dependants, and not the bank balance or age.
A recent study by Final Mile and FIFA found that an important life event, such as marriage or birth of a child, disposes an investor to shoulder more responsibility towards the new member and plan for their long-term financial well-being.
The study shows that investing in mutual funds has a direct correlation with the number of dependants instead of surplus money.
A surprising 69% of the respondents with one dependant and 65% of the respondents with two dependants want to invest in mutual funds as against 41% of respondents with no dependants.
“The presence of dependant alters the perception that makes mutual funds more relevant. Mutual funds, in this respect, offer a means to enhance their savings to generate returns, which could cover their additional financial responsibilities,” the study says.
Vinod Jain, of Jain Investments, thinks achieving financial goals is the key motivation for investing in mutual funds. “Addition of a dependant makes an individual responsible. Even if someone starts to invest without having financial goals, they shift their focus to long-term investment after marriage or children,” Vinod said.
Seconding Vinod Jain, Bharat Bagla, of Bees Network, said, “Investors who have dependants are more stable financially and emotionally. As their focus is on their children’s future, they also get prudent about spending.”
However, having dependants does not necessarily translate into a higher wallet share. “Increase in the number of dependants is a necessary trigger to engage with mutual funds, but for some it may not be sufficient to result in investments,” the study says.
It also gives suggestions on how advisors should approach investors who have engagement with mutual funds because of higher responsibility. “This section of people is fraught with anxiety and uncertainty about how to go about securing the well-being of their dependant(s),” the study adds. It recommends one-on-one counselling and engagement as these are the best ways to impart knowledge and facilitate investment.