India has seen unparalleled growth in the number of investors entering mutual funds in the last decade. According to AMFI data, the AUM of the Indian Mutual Fund Industry has grown sixfold from Rs 7.66 trillion as of August 31, 2013, to Rs 46.63 trillion as of August 31, 2023. The total folios as of 31st August 2023 stood at 15.42 crores.

Moreover, from June 2018 to June 2023, the average number of new folios added was 12.42 lakh accounts per month. While these data points indicate that there is tremendous growth potential especially for the mutual fund industry in India, not many investors are aware of a major tool that can help them in avoiding losses.

This tool, Risk-O-Meter, helps in understanding a fund’s risk, enabling investors to make informed decisions based on their risk appetites.

However, a survey by Axis Mutual Fund found that 61% of the respondents were not aware of what the risk-o-meter indicates. Further, Only 16% of the total respondents who were aware of a ‘Riskometer’ and that it indicated ‘Fund’ risk, claimed to check the ‘Riskometer’ before making an investment. However, on a slightly brighter side, 66% of investors mentioned that they would like to understand more about the risk-o-meter and its importance in making informed decisions.

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The survey of over 1700 Axis Mutual fund investors across the country has revealed several interesting patterns:

  • Buoyed by the awareness drives by regulators, fund houses, and distributors, investors have recognized the importance of investing their hard-earned money to potentially appreciate it and one of the increasingly preferred investment avenues is Mutual Funds.
  • However, 59% of 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% of equity investors stay invested for 12-24 months and in total 48.7% of equity investors redeem their portfolio within two years or less.
  • Even though 89% of investors believe that understanding ‘risk appetite’ plays a role in choosing the right mutual fund, only 27% of investors said that they actually took their risk appetite into consideration before investing.
  • In fact, the survey reveals that 53% of investors are not very confident in personal risk assessment while choosing a mutual fund. The survey report said it is imperative to understand that each investor has a different risk appetite based on his/her investment profile, financial goal, and needs.
  • Furthermore, investments are still largely ‘behaviourally’ influenced, making it even more important to shape this attitude into an aware, educated, and well-informed skill set.

Commenting on the survey findings, 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’.”

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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 on investor’s understanding of risk, and awareness of the tools available to investors to assess risks associated with mutual fund investments.”

Disclaimer: The above content is for informational purposes only, based on a press release of the survey conducted by Axis Mutual Fund. Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing.