Facts About Mutual Funds, Investor & Trading (Based On Surveys)

In finance and investing, certain things cannot be considered based solely on an individual's thoughts and opinions because it is a dynamic field influenced by numerous factors affecting any decision.

Therefore, I believe that conducting a survey is a good option because it reveals real facts without being influenced by the perspectives of a single individual.

However, this is a very expensive option, so it is not easy for everyone to collect data in this way. Not for me either.

But after studying many latest surveys, I have collected some facts by investing my time, which is worth it for me. In this blog, I will tell only such facts of the survey that you should know. We will also draw some conclusions from this.

At the end of this blog, I have also attached the links to the sources of all these surveys.

Interesting Facts About Mutual Funds:

• 59% of investors consider the past performance of the mutual fund before choosing it.
• Nearly 70% of users prefer SIPs for investing in mutual funds.
• Approximately 48.7% of investors redeem their investments in equity funds within just 2 years or even less. Among them, 22.2% of investors withdraw their funds within 12-24 months. (Survey conducted by Axis Mutual Fund)
• 15.6% of investors in the survey had investments for less than 6 months.
• 53% of investors are unaware of their risk tolerance and which mutual fund they should choose.
• While 89% of investors acknowledge the importance of assessing their risk tolerance before investing, but only 27% pay attention to this factor.
• Among the respondents, 54% identified mutual funds as their preferred investment option.
• Females prefer investing less in mutual funds according to the survey.
• People aged 26-35 prefer mutual funds more than those in the 21-25 age group.

Conclusion:

The data highlights both the popularity of mutual fund investments and the challenges they face. According to the survey, most of the investors make their decisions by looking at the past returns of mutual funds.

The data highlights both the popularity and challenges associated with mutual fund investments. While a significant majority base their decisions on past performance. Another biggest problem that comes up is premature redemptions which prevent people from experiencing the magic of compounding.

Moreover, significant people know the importance of risk tolerance but conveniently ignore it. Overall, identifying risk and promoting a better understanding of long-term investing can increase the effectiveness of mutual fund investments.

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Facts About Investors & Their Mindset:

• In the survey, when asked about their favorite investment option or where they would prefer to invest, 77% of respondents chose bank savings accounts.
• According to the survey, aggressive investors primarily rely on personal research.
• Only 38% of all respondents invest or save for their retirement.
• There seems to be low awareness about insurance among people. Only 16% have health insurance, and 6% have no insurance at all.
• 61% of survey participants believe that index funds are less risky compared to other investment options, which is a misconception. Additionally, 66% believe that index funds minimize losses.
• 58% of investors see inflation as the biggest risk, impacting their portfolios.
• 44% of investors prefer taking the highest risk for better returns.
• People believe that financial knowledge instills confidence and engagement in them.
• When it comes to learning about investing, people trust books the most, followed by TV shows (54%), newspapers (53%), podcasts/radio (49%), magazines (48%), websites/blogs (37%), and YouTube (27%).
• The primary goal or reason for investing for investors is retirement.
• Women prefer investing in real estate more than other investment options.
• Surprisingly, only 8% of women prioritize gold as an investment option.

Conclusion:

The survey reveals a mix of attitudes and behaviors towards investment, reflecting different preferences and levels of financial literacy.

Despite offering higher returns, a majority favor the safety of bank savings accounts over riskier options such as mutual funds, stocks and F&O trading. Additionally, the findings underscore a lack of focus on long-term financial planning, with only 38% investing or saving for retirement.

Also, a large portion lacks awareness of essential financial protections like insurance. Many people also consider index funds as less risky due to ignorance. This points to the critical need for improved financial education and empowering individuals to make sound decisions aligned with their goals and risk tolerance.

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Facts About F&O Trading:

• More than half of traders buy more to average out their losses in trades.
• The study found that 32% of Newbie Futures & Options traders claim they couldn’t judge the market movement.
• During FY 2022, SEBI’s findings that 9 out of 10 individual traders are losing money in F&O trading with an average loss of Rs. 1.1 lakh.
• 40% of newbie traders claim that their main reason for entering the Futures & Options segment is the chance of making quick and easy money.
• Half of traders imagine that 30% to 50% of people are consistently making 'good returns' from the Futures & Options segment.
• A 35% of traders do not use or apply any specific trading strategy, which can often lead to risky trading decisions.
• Only 5% of traders claim they are using Algo strategies provided by specialized companies/ websites.
• 53% of traders spend their trading capital most often basis inputs from family & friends and mentions on social media/ websites/YouTube videos which can lead to wrong decisions and increased risk.
• Only 42% of traders use Stop-Loss in half of their trades whereas 16% claim they use it very rarely.

Conclusion:

Futures and Options (F&O) trading is complex, and fraught with significant challenges and misconceptions. Data reveals a harsh reality: a vast majority of individual traders, 9 out of 10, suffer losses of an average of Rs. 1.1 lakh according to SEBI findings.

Moreover, behavioral patterns like averaging losses and lack of consistent strategies contribute to increased risk. Dependence on things received or heard from family, friends, and social media for trading decisions further increases this risk.

Furthermore, the low usage of risk management tools like stop-loss orders underscores the need for education and disciplined trading practices to succeed in the volatile F&O market.

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• A Beginner's Guide to Options Trading: Learn the Basics

Final Words

Investment data collected from various surveys reveal some significant trends. Like most investors, about 59%, rely heavily on past performance while choosing mutual funds, while nearly 70% prefer Systematic Investment Plans (SIPs) to discipline their investing journey. However, around 48.7% of investors have redeemed equity fund investments in just two years, indicating impulsive decision-making.

There's a big gap between the acknowledgment and application of risk tolerance, with 89% recognizing its importance but only 27% included it in their investment strategies. Despite aspirations for higher returns, the majority preference for safer options such as bank savings accounts, revealing investors’ paradoxical mindset.

This highlights the need for enhanced financial literacy and education to bridge the gap between understanding and action, enabling investors to make the right decisions aligned with their long-term goals and risk profiles.