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Why Mutual Funds Are Unpopular Among Investors

by Olufisayo
Mutual Funds

Not many in India are comfortable with investing in mutual funds. Though mutual funds are not a new concept and many have invested in the same, but still, larger population still sticks to traditional investment.

Whether it is lack of knowledge, lack of confidence in mutual funds for performance, management or risk, below are a few apprehensions of investors who deem mutual funds as not a dependable choice for investing their hard earned money:

1. People have a set mind frame and notion about mutual funds. Topped with lack of knowledge, investors cannot accept that mutual funds can offer anytime investment and withdrawal of funds. They consider mutual funds to be a bounded way of parking their money, where as there are mutual funds available based on maturity period and open-ended funds offer this ease.

Mutual Funds

2. Huge paperwork associated with mutual funds is another reason people fret it much, but nowadays to make life of investors simple folios are created, which are simply investor accounts and have made building long-wealth really easy.

3. Though everything that we do or get involved in has its risks attached, but people perceive mutual funds to be riskier because of the disclaimer that says “Mutual funds are subject to market risk, please read the offer document before investing”.

4. Just because investors are asked that past performances are only indicators of fund’s performance and investors should not invest solely considering the same, they find mutual funds are not dependable way to invest.

5. The stories associated with a random investor who almost made a jackpot by investing a petty amount in mutual funds over a long-term, doesn’t connect well with the investors. They get the bit of growing funds but don’t get the compound annual growth rate that mutual funds are required to publish.

6. Investors get nerved up as the markets turn unfavorable, thus panicking and withdrawing their funds. This portrays that most people have little knowledge of market and less faith in fund managers.

7. People often are not clear on which fund to invest matching their financial goals and other constraints. And when they lose money for once, they turn their back towards investments in mutual funds. While it might just be the case of investing in a wrong fund at the wrong time.

8. People are not aware of the right conduct and process of investing. They attempt all sorts of mid-ways to earn money and sometimes greatly avoid investing in equity completely, and on the other they indulge in day trading with derivatives to make a windfall.

Often investors have queries and need help in paperwork to invest or redeem their funds, or maybe switch to another and have no one to turn up to for a sound advice. Little knowledge and help from someone trusted leaves them to give up on considering mutual funds for investing and they rather choose other popular ways to invest money.

In order to get the investors to develop faith in investing in mutual funds, there’s dire need of providing them sound knowledge of mutual funds and to gain their trust by offering them sound and unbiased advice by experts.

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