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Reduce the behaviour gap with a higher exposure to diversified funds

Avoid trying to time entry and exit from funds; hold for at least one complete cycle

INVESTMENT, PLANS, SAVINGS, mf, mutual funds, investors, equity, pension, funds
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The bulk of an investor’s holdings in debt funds should be in shorter-duration funds

Sanjay Kumar Singh
A recent report by Morningstar says that the returns Indian investors earn are much lower than what the mutual funds (MFs) they have invested in earn. This trend is visible across asset classes and types of funds.

Across the MF universe, the gap was 2.7 percentage points (ppt) over the three-year period, 2.5 ppt over the five-year period, and 5.8 ppt over the 10-year period (data as on June 30).

Poorly timed entry and exit 

The primary reason for this gap (referred to as behaviour gap) is investors’ poorly timed entry and exit from funds.  

“Investors have a persistency bias.

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First Published: Oct 26 2022 | 5:25 PM IST

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