Investor Apprehension and Behavioural Factors Influencing Mutual Fund Investment in Kerala

Abstract

The growing prominence of mutual funds as a preferred investment avenue among retail investors in India has intensified the need to understand the behavioural and psychological factors influencing investment decisions. Despite significant expansion in the mutual fund industry, investor participation continues to be shaped by apprehension, varying levels of financial literacy, perceptions of value and trust, and individual risk attitudes. This study examines the behavioural determinants influencing mutual fund investment decisions with specific reference to retail investors in Kerala. The research develops and empirically tests an integrated conceptual framework that incorporates investor apprehension, financial literacy, perceived value, perceived trust, risk tolerance, and investor involvement as key antecedents influencing investment performance, reinvestment decisions, and recommendation intentions. The study adopts a descriptive and analytical research design, using primary data collected from 502 mutual fund investors across selected districts of Kerala through a structured questionnaire. Probability-based multistage sampling was employed to ensure representativeness of the sample. The collected data were analysed using appropriate descriptive statistics and advanced multivariate techniques to examine direct, mediating, and moderating relationships among the constructs. The findings reveal that investor apprehension significantly influences mutual fund investment behaviour by affecting risk perception and performance outcomes. Financial literacy emerges as a critical enabler, positively shaping perceived value, trust, and informed decision-making. Perceived value and perceived trust are found to play a pivotal role in enhancing investment performance, while risk tolerance acts as a significant mediating mechanism between behavioural perceptions and performance outcomes. Further, investor involvement moderates the relationship between apprehension and investment outcomes, highlighting the role of active engagement in mitigating behavioural biases. The study also establishes that favourable investment performance positively influences reinvestment decisions and recommendation intentions among mutual fund investors. The study contributes to behavioural finance literature by offering a context-specific behavioural model for mutual fund investors and provides practical insights for policymakers, asset management companies, and regulators to design targeted investor education initiatives, enhance transparency, and promote sustained investor participation in mutual fund markets.