Axis Mutual Fund, a rapidly expanding mutual fund institution in India, recently undertook a comprehensive investor survey aimed at gauging the level of ‘Risk Comprehension’ among Indian investors. This survey garnered feedback from more than 1700 investors who are part of Axis Mutual Fund from various regions across the nation. The primary goal of this survey was to gain valuable insights into the attitudes and comprehension levels of investors regarding the risks associated with mutual fund investments.
Commenting on the inferences drawn from the survey, B. Gopkumar, MD & CEO, Axis AMC said, “The mutual fund industry is at an interesting inflection point today, underscored by the increasing influx of investors in the category. While we continue to grow as an industry, enabling investors to make informed investment decisions is also our responsibility. To that end, this survey was conducted to get insights into investor’s understanding of risk, and awareness of the tools available to investors to assess risks associated with mutual fund investments. At Axis Mutual Fund, we value our role as responsible investment partners to not only help investors navigate their investment journey but also help them understand various aspects of their mutual fund investments, so they are well-equipped to make thought-through decisions and fulfill their financial goals.”
The survey results unveiled several intriguing trends. Thanks to the concerted efforts of regulatory bodies, fund management companies, and financial advisors, investors have gained a heightened awareness of the significance of deploying their hard-earned capital for potential growth, with mutual funds emerging as an increasingly favoured investment avenue.
However, it is worth noting that 59 per cent of investors still consider past performance to be a pivotal factor when deciding to invest in mutual funds. Unfortunately, market noise often exerts undue influence on investors, prompting premature redemptions despite their awareness of the benefits of long-term investment and the compounding effect.
As per data from AMFI (Association of Mutual Funds in India), 22.2 per cent of equity investors maintain their investments for a duration of 12 to 24 months, and a total of 48.7 per cent of equity investors redeem their portfolios within two years or less.
Ashish Gupta, CIO, Axis AMC added, “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’.”
Despite 89 per cent of investors acknowledging the importance of gauging their ‘risk appetite’ in selecting the right mutual fund, only 27 per cent of them claimed to have actually factored in their risk tolerance before making an investment decision. Astonishingly, the survey underscores that 53 per cent of investors lack confidence in their ability to accurately assess their personal risk preferences when choosing a mutual fund.
It is crucial to recognise that every investor possesses a distinct risk appetite determined by their investment profile, financial objectives, and individual needs. Moreover, investments remain significantly influenced by behavioural factors, underscoring the necessity of cultivating a well-informed, educated, and aware approach to shaping these attitudes.
Comprehending risk profiling
Out of the 27 per cent of respondents who claimed to consider their risk appetite, a significant 64 per cent were unaware of the existence of a tool called “Risk Profiler” for assessing their risk tolerance. Among the entire pool of survey participants, only 30 per cent were familiar with the concept of Risk Profiler. This highlights that investors recognise the importance of risk profiling but may lack awareness of the specific tool called “Risk Profiler” for evaluating their personal risk preferences.
This knowledge gap could potentially lead to a mismatch between an individual's risk tolerance and the risk associated with a particular fund. Furthermore, a mere 12 per cent of all respondents who were aware of the “Risk Profiler” expressed confidence, either fully or to some extent, in their ability to assess their risk-taking capacity.
A striking 61 per cent of the survey participants lacked awareness regarding the significance of the "risk-o-meter." Among the entire respondent pool, only 16 per cent were not only aware of the "Riskometer" but also checked it before making an investment, which is a relatively low figure. However, there is a glimmer of hope as 66 per cent of investors expressed their interest in learning more about the risk-o-meter and recognising its importance in facilitating informed investment decisions.