List of Factors Influencing Investor’s Decisions in Mutual Fund

7 September 2022
4 mins read
by Angel One
Mutual funds are considered one of the lucrative investments for people looking for tax-efficient returns. Let’s find out what are the factors that may affect your investing decisions.
List of Factors Influencing  Investor’s Decisions in Mutual Fund

Nowadays, one can choose from a wide variety of investment opportunities. Among these are Mutual funds, equities, bonds, and fixed deposits. Mutual funds are widely used because they allow investors to gain access to a wide range of securities with relatively modest sums of money. 

However, investors consider a number of aspects before making a decision about mutual fund investments. We have created a list of the factors that investors consider when making investment decisions in a mutual fund

Top 5 Factors To Be Considered Before Investment Decisions

1. Risk Factor 

The risk associated with investing is always present. Mutual funds, for instance, offer investors advantages like cost-effectiveness and flexibility, but they also expose those investors to certain dangers. Learning about and employing ways to mitigate the risks associated with Mutual Funds is the best course of action for investors.

2. Liquidity Factor 

This is a major consideration in choosing an investment. “Liquidity” refers to how easily a given asset may be sold for cash on the stock exchange. Because several factors, such as a company’s valuation, the bid-ask margins for its securities on the exchange, etc., affect whether or not stock may be successfully converted into cash, the risks associated with such trades are referred to as liquidity risk.

If there is a high level of liquidity risk associated with a certain investment, it usually indicates that it is challenging to buy or exchange that instrument on the share market. This is because declining cash flow could make it harder for the issuing corporation to meet its present liabilities.

3. Uniformity Factor 

The long-term success of a mutual fund is measured by its ability to surpass its target, a fact known to any prudent investor. The “alpha” of a fund is its excess return over its benchmark. It’s vital to remember that the money you put into a mutual fund is your own. The expected outcome is that the fund will outperform its benchmark and provide more alpha.

Moreover, the success of the fund is crucial. It needs to be factored in for an appropriate amount of time. This practice ensures that the investments have weathered multiple market cycles. In the long run, this would provide for a constant profit. When it comes to deciding how to allocate their capital, all investors should keep this consideration at the forefront of their minds.

4. Returns Factor 

A high and stable return is a priority for the average investor when choosing a mutual fund. Therefore, you should stay away from a mutual fund that has posted abnormally high returns recently but has a poor track record overall. You may learn a lot about a fund’s potential for growth and stability by looking at its past performance.

5. Research Factor

Even though it seems obvious, many people make the mistake of putting their money into a fund only to find out later that it isn’t suitable for them. As a result, don’t make that mistake. A smart investor will always prioritise learning as much as possible.

Before you put any money into a mutual fund, make sure it’s something you’re interested in. Despite being a great choice for most individuals, you shouldn’t fall for the hype just because your peers are doing it.

Also Read More About What is Mutual Fund?


Mutual fund investment is a great way to put your money to work for you. When deciding whether or not to invest in a mutual fund, there are many crucial parameters to weigh. Therefore, it is essential to think carefully about everything beforehand. As long as you avoid the pitfalls, there’s no reason you can’t turn a healthy profit. So start your journey today by opening a demat account with Angel One!