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Why Investors (Shouldn’t) Hesitate to Include Mutual Funds in Their Investment Portfolio

Updated: Nov 21, 2023

Recently, there has been a notable increase in the volume of assets under management (AUM) in the mutual fund industry in India. The 'Consumer Spending Outlook 2022' research also projects that by 2023, 31% of Indian households will invest in mutual funds. An increase in investor interest is shown by these patterns. It should be noted, however, that India's mutual fund AUM-to-GDP ratio is only about 17%, well below the global average of 76%. The aforementioned disparity highlights the tremendous prospects for expansion present in India's mutual fund sector, which is now underutilised in contrast to conventional banking alternatives like fixed deposits (FDs).

Mutual funds are investment vehicles that combine the capital of multiple participants to make investments in a diverse range of stocks, bonds, and other securities. Many investors still hesitate to include them in their Investment Portfolios, despite their many advantages—such as expert management and diversification.

Investment Portfolio

Why Investors Hesitate to Include Mutual Funds in Their Investment Portfolio


This article will examine the causes of this hesitancy and provide advice on how to address it.

Market Risk and Volatility

In general, the global financial crisis has left long-lasting effects on the investor sentiments. Adding to that, mutual funds are almost always associated with market risks as well, thereby preventing risk-averse investors to not include them in their investment plans. Certain investors may choose to avoid just riskier investments, such as specific mutual fund types, due to their past experiences with market volatility and economic downturns.

Performance Instability

Certain investors harbour doubts over mutual funds' capacity to continuously surpass the market. Although historical data suggests that certain mutual funds have beaten benchmarks over the long run, previous performance does not guarantee future outcomes. However, performance might vary greatly due to the large selection of mutual funds accessible.

Perception of High Fees

The belief that mutual fund fees are expensive is another issue that worries investors. Although management fees and other costs are associated with mutual funds, it's important to weigh the value received in exchange. To accomplish the goals of the fund, qualified fund managers actively manage the Investment Portfolio, make investment decisions, and carry out research. The costs paid can be justified by the possibility of improved risk management and higher profits from this active management.

Control and Adaptability

The feeling of control over their investments is one thing that some investors find very important. Professional fund managers make choices about the purchase or sale of securities and the allocation of assets in mutual funds, which function as collective investment vehicles. Investors who would rather have more direct control over how their money is managed may find this to be a turnoff.

Lack of Understanding

A major deterrent for investors to mutual funds is their ignorance of how these investment vehicles function. Mutual funds invest in a diverse portfolio of stocks, bonds, and other securities by pooling the money of several individuals. Some investors are reluctant to use mutual funds in their investment strategy because they perceive their structure and workings to be complicated.

Absence of Channels for Distribution

The expansion of mutual funds is significantly influenced by the availability of distributors and intermediaries. Sadly, these vital middlemen are still absent from many Indian locales, which restricts mutual fund accessibility and knowledge.

Conclusion: The Power of Financial Literacy

Mutual fund myths and misconceptions need to be dispelled by an informed and involved community. Every person may help the mutual fund investing community in India develop by educating themselves and encouraging financial literacy among those in their social circle.

Become a part of the expanding Indian mutual fund investing community now. Looking ahead, it is evident that mutual funds hold a substantial position in the financial Investment Portfolios of individuals throughout India. Although achieving financial independence takes time and is frequently difficult, with the appropriate investment plan, it could be very rewarding.

Provide Yourself with Tools

If you are a mutual fund distributor, in your quest for optimal investments, you should consider incorporating cutting-edge tools like AssetPlus into your strategy. AssetPlus empowers you with technology, training and support essential for successful distribution. By leveraging its resources, you not only enhance your efficiency but also provide your clients with superior service, cementing your position as a trusted financial advisor.

Armed with knowledge, guided by the right tools and supported by robust technology like AssetPlus, your journey as a mutual fund distributor can be immensely rewarding.

Help others build wealth while you build your own financial empire. Here’s to your prosperous future in the world of mutual fund distribution!


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