Over the past decade, India has witnessed remarkable growth in the number of investors entering the mutual fund industry. As per data from AMFI (Association of Mutual Funds in India), the Assets Under Management (AUM) of the Indian Mutual Fund Industry has surged sixfold from Rs 7.66 trillion as of August 31, 2013, to Rs 46.63 trillion as of August 31, 2023. Additionally, the total number of folios as of August 31, 2023, reached 15.42 crore.
Despite this tremendous growth potential in the mutual fund industry in India, a significant number of investors are unaware of a crucial tool that can help them avoid losses— the Risk-O-Meter. This tool aids in understanding a fund’s risk, enabling investors to make informed decisions based on their risk appetites.
However, a survey conducted by Axis Mutual Fund found that 61% of respondents were not aware of what the Risk-O-Meter indicates. Furthermore, only 16% of those aware of the Risk-O-Meter and its indication of fund risk claimed to check it before making an investment. However, on a more positive note, 66% of investors expressed interest in understanding more about the Risk-O-Meter and its significance in making informed investment decisions.
The survey of over 1700 Axis Mutual Fund investors across India revealed several interesting trends:
- Investors are increasingly recognizing the importance of investing their savings, buoyed by awareness campaigns by regulators, fund houses, and distributors.
- Nevertheless, 59% of investors still consider past performance as a key criterion for investing in mutual funds.
- Investors often tend to redeem their investments influenced by market noise, even though they understand the significance of long-term investing and compounding.
- Data from AMFI indicates that 22.2% of equity investors remain invested for 12-24 months, with a total of 48.7% of equity investors redeeming their portfolios within two years or less.
- While 89% of investors believe that understanding their “risk appetite” plays a role in choosing the right mutual fund, only 27% of investors said they actually considered their risk appetite before investing.
- The survey revealed that 53% of investors are not very confident in assessing their personal risk, emphasizing the importance of considering individual risk profiles, financial goals, and needs.
The survey findings underscore the need to educate and inform investors about the concepts of risk, risk appetite, and tools like the Risk-O-Meter to make well-informed investment decisions. Ashish Gupta, CIO of Axis AMC, noted the importance of discussing risk and risk appetite, while B. Gopkumar, MD & CEO of Axis AMC, emphasized the industry’s role in enabling investors to make informed investment choices and assess associated risks.
