Survey finds most mutual fund investors rely on past performance

Mutual fund managers and advisors may be repeating that the past performance does not indicate future performance. However, most mutual fund investors rely on past performance. A recent survey revealed that 59% investors still consider past performance as one of the key benchmarks for investing in mutual funds.

“Oftentimes, mainly influenced by market noise, investors tend to redeem their investments even though they are aware of the importance of long-term investing and the power of compounding. According to data by AMFI, 22.2% equity investors stay invested for 12-24 months and in total 48.7% equity investors redeem their portfolio within two years or less,” said a survey conducted by Axis Mutual Fund.

The survey to ascertain ‘Risk Comprehension’ amongst Indian investors received responses from over 1700 Axis Mutual Fund investors from across the country. The objective of the survey was to obtain insights on investors’ attitude and understanding of risks in mutual fund investing.

Even though 89% investors believe that understanding ‘risk appetite’ plays a role in choosing the right mutual fund, only 27% investors said that they actually took their risk appetite into consideration before investing, the survey revealed. In fact, the survey reveals that 53% investors are not very confident of personal risk assessment while choosing a mutual fund.

Around 61% of the respondents said they were not aware of what risk-o-meter indicates. Only 16% of the total respondents were aware of a ‘Riskometer’ and that it indicated ‘Fund’ risk, and checked the ‘Riskometer’ before making an investment. Around 66% investors mentioned that they would like to understand more about the risk-o-meter and its importance in making informed decisions.

Ashish Gupta, CIO, Axis AMC said, “Investing is all about navigating through uncertainties and staying committed to the investment journey. While there has been an increasing influx of investors in the markets today, conversations about ‘risk’ and ‘risk appetite’ are minimal at best. However, on a positive note, the report results highlight that investors want to understand more about the concepts of ‘Riskometer’ and ‘Risk Profiler’.”