Navigating Volatility: How Mutual Fund Performance Shapes Investor Confidence in Emerging Markets

Abstract

In emerging markets, mutual funds have become a pivotal investment vehicle for retail and institutional investors seeking diversification and long-term growth. However, investor confidence in these funds remains sensitive to performance volatility, macroeconomic fluctuations, and informational asymmetries. This study investigates the relationship between mutual fund performance indicators—such as returns, expense ratios, and portfolio diversification—and investor confidence across selected emerging market contexts. Using a structured questionnaire administered to 100 respondents, the research employs descriptive statistics, exploratory factor analysis, and regression modelling to identify key drivers of investor sentiment. Findings reveal that fund performance is the most significant predictor of confidence, moderated by financial literacy, economic stability, and media influence. The study offers actionable insights for fund managers, policymakers, and financial educators aiming to strengthen investor trust and participation in mutual fund ecosystems.