KNOWING BEHAVIOURAL BIASES IN MF INVESTING

EVERY tenth rupee invested in the Indian equity markets belongs to a mutual fund investor. Cumulatively, the collective wealth of all mutual fund investors exceeds $500 billion, or ₹43,00,000 crore. That may sound like some serious wealth for Indians. However, that money is concentrated in only 8% of the people of India. Households in the country cannot be wealthy if they do not save and invest regularly to beat inflation.

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The monthly bulletin of the National Stock Exchange, called the Market Pulse, compiles interesting studies on behavioural biases that influence mutual fund investors. It should help you understand the initial hesitance to use mutual funds as an investment vehicle. There are three fundamental things to learn from the studies published over the past two or three decades. These include core biases and their impact, the impact of marketing and the role of knowledge. They were conducted primarily in developed markets like the US, but the findings are relevant to the Indian context.

Core biases