Three out of 10 households choose not to invest in mutual funds due to their perceived uncertainty in returns, shows the latest SEBI Investor Survey 2015.
The survey report says that these investors are not sure their investment will be safe in mutual funds.
“There exists a large pool of households, from high to mid income group, who are educated and who save in bank accounts, life insurance, or post offices, and yet do not invest in mutual funds,” the survey says.
Other reasons for not investing in mutual funds are inadequate returns, lack of knowledge and liquidity concerns. While 26% households say that the returns are inadequate, 14% of them cited lack of information for not investing in mutual funds. Another 13% say lack of expertise is the reason for not investing in mutual funds.
Ramesh Bhat, founder of IFA Galaxy, a body of mutual fund distributors, explains how industry can address these fears. “The survey results show that the investor awareness programmes have not yet been able to clear people’s misconceptions. The first thing we need to do is to make it clear that mutual funds do not mean equity alone. There are other asset classes too, which are not as risky as equities and still give decent returns,” he says.
Ramesh also underlines the need to ensure that the investor is better informed through media and investor awareness prohrams. “I think if we ask people to fill a simple feedback form after investor awareness programs, we can evaluate if they have interpreted the message correctly,” he says. “Another measure that can go a long way in ensuring the right message reaches the people through media. Messages given by media houses will be trusted more readily than awareness programmes conducted by interested parties, like IFAs or AMCs, because media houses are neutral entities,” he adds.
Gajendra Kothari, of Etica Wealth Management, though, believes otherwise. The industry needs to change the way it positions mutual funds, he thinks. “When an ad for mutual funds comes out, the only message that stays with the investor is, ‘Mutual funds are subject to market risk.’ In my view, we should have more ads like the ones in AMFI’s mutual fund sahi hai campaign that address misconceptions. If we make sure we talk in a manner investors can relate to, more people will start opting for mutual funds,” he says.
The CEO of Etica Wealth Management also recommends diversification. “An important feature that could go a long way in addressing concerns is having goal based funds, like child plan, retirement fund or marriage fund. More people may feel comfortable investing if they associate mutual funds with a goal,” he adds.
People’s Perception of Mutual Funds
Source: SEBI Investor Survey 2015
