The latest study by Navi Mutual Fund among mutual fund investors and non-investors, millennials and Gen Z revealed interesting insights into their decision-making and potential knowledge gaps. The study highlighted the significance of greater financial literacy and dispelling misconceptions in empowering young adults to make informed investment decisions.
Key findings from the study highlighted over-reliance on social networks and ‘fin-fluencers’. Despite the risk, 80 per cent of investors rely on their social networks and ‘fin-fluencers’ for investment information.
Low understanding of index funds was observed with one out of three index fund investors having difficulty in understanding concepts of index funds. Further, index funds are preferred due to lower fees and positive experiences from friends and family.
As per the report, returns are the top priority for one out of two investors in selecting a fund. This is applicable for both active and index funds.
Some key misconceptions such as mutual fund Investing requires extensive financial knowledge were highlighted from the study, as over 60 per cent of respondents were found to believe that mutual fund investment requires extensive financial knowledge detering potential investors.
Another myth that a large lump sum is required to start investing was uncovered. It discouraged one out of every three potential investors even though many mutual funds allow investments with limited initial capital.
Nearly 50 per cent of non-users fear their investments are not secure if the investment app shuts down.
Findings from Navi’s study highlight the increasing need for financial literacy initiatives to empower investors. Mutual fund houses can develop and provide user-friendly educational resources and tools that simplify the concept of mutual funds and the investment process while dispelling common misconceptions.
Access to such credible and trusted resources can exponentially reduce obstacles for young investors, allowing them to make more informed investment decisions.
