Risk Appetite and Return Expectations: A Study of Investors Shifting from Fixed Deposits to Mutual Funds

Recently, a notable change has been seen in the investment habits of Indian investors. Traditional and low-risk investment choices such as Bank Fixed Deposits (FDs) are slowly losing their appeal, while market-linked assets like Mutual Funds are gaining more acceptance. This change is largely motivated by the changing risk appetite and rising return expectations of investors. This research examines the influence of risk tolerance and return expectations on investors’ decisions to transition from Fixed Deposits to Mutual Funds. The study highlights aspects such as decreasing FD interest rates, increasing inflation, financial knowledge, and online investment platforms. Utilizing a descriptive research approach, this study depends on secondary data sourced from reports of the Reserve Bank of India (RBI), the Association of Mutual Funds in India (AMFI), scholarly journals, and financial publications. The results indicate that increased financial awareness and poor real returns on Fixed Deposits are the main factors driving this change in investment strategy. The study shows that Mutual Funds are progressively viewed as effective tools for long-term wealth generation in the changing economic environment.