Impact of Risk Perception and Return Expectations on Mutual Fund Investment Preferences of Investors in Delhi NCR

Abstract

Background: Mutual funds have become a primary choice for retail investors who wish to diversify their investments and have professional management of their funds. The decision of mutual funds investment is conventionally elucidated by risk–return trade-off; although, emerging evidence indicates that behavioral and contextual variables might moderate the role of the risk perception and return anticipations, especially in new markets like India. Aim: The purpose of the study is to check the influence of risk perception and expectation of returns on the investment preference in mutual funds by individual investors in Delhi NCR. Method: The descriptive and analytical research design was taken. The sample size was 100 primary datasets gathered in the form of a structured questionnaire filled in on a five–point Likert scale using a structured questionnaire on each of the 100 individual mutual fund investors in Delhi NCR. Simple linear regression, Pearson correlation analysis and descriptive statistics were the tools used to analyze the data with the assistance of the SPSS. Results: The results show that the mutual fund awareness, knowledge, and preferences of investments have weak and negative relationships with risk perception and return expectations. Nevertheless, the two variables were established as having no statistically significant effect on mutual fund investment preferences. Also, there was no significant correlation between investment experience and preference of investors. Conclusion: The research concludes that the preferences of investors in terms of mutual fund investment in the city of Delhi NCR is not significantly supported by the risk perception or return expectations alone. The findings indicate the significance of behavioral, informational, and contextualities in determining investment behavior, which implies the necessity of increased investor education and advice.