FACTORS INFLUENCING INVESTMENT DECISION IN MUTUAL FUNDS

Abstract

This study examines the mutual fund industry in India, focusing on its historical development, current structure, and the factors influencing investment decisions. The Indian mutual fund industry began in 1963 with the launch of the Unit Trust of India (UTI). Over time, the sector matured, with significant growth in both assets under management (AUM) and the number of investor folios. As of 2024, the mutual fund industry's AUM reached ₹57.26 trillion. Despite this growth, mutual funds still represent a small fraction of total household investments, with fewer than 10% of Indian households investing in them. Challenges such as low awareness, financial literacy, and limited distribution channels continue to hinder growth. This research focuses on understanding the factors influencing mutual fund investment decisions. The study explores investor behavior across various demographic segments, such as businessmen, salaried employees, and retirees, to identify the key factors that guide their investment choices. Primary data is collected through surveys targeting a diverse range of investors, with questions addressing risk tolerance, expected returns, and financial goals. The study also examines the regulatory framework and the role of distributors in expanding market reach. Different types of mutual funds, including equity, income, and tax-saving funds, are discussed, along with the increasing popularity of Systematic Investment Plans (SIPs) for long-term wealth creation. In conclusion, the mutual fund industry has significant growth potential, but addressing challenges like low financial literacy and limited awareness is crucial for broader adoption. The study provides insights that can help policymakers and financial institutions enhance strategies for increasing mutual fund penetration in India.