Are Exchange-Traded Funds (ETFs) Replacing Mutual Funds as the

Preferred Investment Choice Among Young Investors in India?

Vignesh Balaji R

Faculty of Management Studies,

CMS Business School,

JAIN (Deemed-to-be University)

2026

Abstract

The present study examines whether Exchange-Traded Funds (ETFs) are replacing mutual funds as the preferred investment choice among young investors in India. With the rapid growth of financial markets, increasing digitalization, and rising financial awareness, young investors are increasingly exploring diverse investment options beyond traditional instruments. This study aims to analyze the changing investment preferences of young investors and identify the key factors influencing their choice between ETFs and mutual funds.

The research adopts a quantitative approach using primary data collected through a structured questionnaire administered to young investors within the age group of 20–35 years. Secondary data from academic literature, industry reports, and regulatory publications are also used to support the analysis. The study focuses on factors such as cost efficiency, risk perception, expected returns, liquidity, digital accessibility, and behavioural aspects influencing investment decisions.

The findings reveal that mutual funds continue to remain the dominant investment option among young investors due to their perceived safety, professional management, and popularity of systematic investment plans (SIPs). However, ETFs are gaining increasing attention, particularly among financially literate and technologically inclined investors who value low costs, transparency, and flexibility in trading. The study further indicates that cost considerations and digital platform usage significantly influence the growing adoption of ETFs.

The research concludes that ETFs are not completely replacing mutual funds but are emerging as a complementary investment option. The investment behaviour of young investors reflects a gradual shift rather than a complete transition, influenced by both rational financial considerations and behavioural factors. The study contributes to understanding evolving investment trends in India and provides insights for financial institutions, policymakers, and investors.

Keywords: Exchange-Traded Funds, mutual funds, young investors, investment preference, India, behavioural finance, cost efficiency, digital investment platforms