Determinants of Investment Behavior in Mutual Funds: Evidence From Pakistan.

Sharaz Saleem,Rizwan Shabbir,Muhammad Usman,Faiq Mahmood,Mohsin Bashir

doi:10.3389/fpsyg.2021.666007

Sharaz Saleem, Rizwan Shabbir + Show 3 more

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https://doi.org/10.3389/fpsyg.2021.666007

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Abstract

This paper aimed to provide empirical evidence on the behavior of the investor toward mutual funds by considering its relationship with risk perception (RP), return perception (Return P), investment criteria (IC), mutual fund awareness (MFA), and financial literacy (FL). Data were collected using a questionnaire from 500 mutual fund investors, from which 460 questionnaires were used for the analysis. In addition, the snowball sampling technique was used to collect data from different cities in Pakistan. The result showed that RP, Return P, and MFA are insignificant and negatively affect the behavior of mutual fund investors. Investment criteria have a negative and significant effect on the behavior of mutual fund investors. Financial literacy has a positive and insignificant effect on the behavior of mutual fund investors. The results provide better information and guidance to investors and policymakers on the factors that affect the behavior of mutual fund investors.

Highlights

A mutual fund is one of the professionally well-managed portfolios that typically pool funds for purchasing different shares from a variety of investors
This paper empirically investigated the determinants of the behavior of investors toward mutual funds in Pakistan
We established an important association between a mutual fund, the behavior of the investor, demographic characteristics of the respondents, and other variables used in the research

Summary

Introduction

A mutual fund is one of the professionally well-managed portfolios that typically pool funds for purchasing different shares from a variety of investors. Mutual funds utilize the wealth of small investors and families and make them available in the form of shares in business avenues, such as securities, bonds, and other financial instruments, to the economy. The mutual fund makes it easier for small investors who do not have adequate knowledge, expertise, and low-risk tolerance to invest their savings in profitable portfolios by more skilled fund managers. To achieve a return for clients, these skillful technical managers target profitable and outperforming financial instruments. Mutual fund investing is a risky investment operation This could be due to poor production of the asset class, change in design, and increases in high return costs.

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