Understanding Retail Investor Behaviour and Hesitation: A Study of First-Time Mutual Fund Investors

Abstract

Despite the rapid growth of mutual fund penetration in India, a persistent gap remains between prospect interest and actual investment conversion, particularly among first-time retail investors. This paper examines the behavioural patterns, demographic profile and stated reasons for hesitation among first-time mutual fund prospects, using primary field data gathered over a thirteen-week, field-based study conducted at the Pune branch of NJ India Invest Pvt. Ltd. (NJ Wealth), one of India's largest mutual fund distribution networks. Data were collected through approximately 4,700 structured cold-calling interactions and 95 in-person client meetings, and analysed using descriptive statistics interpreted through the lens of financial intermediation theory and behavioural finance. Findings show a strong preference for Systematic Investment Plans (58%) over lump-sum investing (27%) among interested prospects, a concentration of genuine engagement among working-age individuals aged 31–50 (60% combined), and hesitation driven primarily by a stated need for further research (31%), risk discomfort (24%) and limited surplus funds (21%) rather than outright disinterest (9%). These patterns are consistent with established behavioural-finance constructs — present bias and commitment-device preference, loss aversion, and status-quo bias — and suggest that most 'lost' prospects in a distribution funnel are not permanently disengaged but simply not yet ready to commit. The paper concludes with practical, reason-specific recommendations for mutual fund distributors seeking to convert a larger share of hesitant, information-seeking prospects, and identifies avenues for future multi-branch and longitudinal research. Keywords: retail investor behaviour; mutual funds; Systematic Investment Plan (SIP); investment hesitation; behavioural finance; financial intermediation; mutual fund distribution