There is a lot of noise and news about rising contributions into equity mutual funds each passing month, yet if one goes by the findings of SEBI Investor Survey 2015 results, mutual funds are not as preferred as one may perceive. The survey found that 33 per cent households prefer not to invest in mutual funds because they are not sure their money will be safe. The findings state: “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 was conducted when the investor education initiative by the mutual fund industry had picked up and may be if the survey is repeated today, the numbers may look better. However, it is not just about the safety of investments that drives potential investors away from mutual funds; many feel the returns are not guaranteed, some have liquidity concerns and many still don’t understand about the workings of mutual funds. And 26 per cent households reported that the returns were inadequate.
One of the biggest concerns among those who do understand the concept of mutual funds is the disclaimer—Mutual fund investments are subject to market risks. Please read the Statement of Additional Information (SAI) and Scheme Information Document (SID) carefully before investing stays on with investors. In fact this one-liner that appears at the end of every mutual commercial has a higher recall than any other message. Many people stay away from investing after reading or listening to this one liner as it creates misconceptions about their investments in mutual funds.
One way to improve the perception of investing in mutual funds is to emphasise that not all mutual fund investments are into equities. Moreover, by taking a goal-based approach to investing, the communication and sales of mutual funds is likely to be better understood than talking about mutual funds as an only investment product. As for the investor education initiatives – the journey is much longer and needs to be focused in bringing in more people into the investing culture in an easy and convenient way.