Most investors, who had burnt their fingers investing in mutual funds, had chosen the wrong products, they said. For investing in mutual funds, it is essential that investors understand their risk appetite and be clear about the kind of risk-returns they could expect from the mutual fund.

Tata Mutual Fund managing director, KN Atmaramani said that high expectations built up by players like assured high returns during 1990-93 but failed to deliver on their promises in the wake of market dynamics changing the risk-return profile of the industry in the subsequent years, particularly during 1994-98 when the industry faced a setback.

The awareness building issue among investors and distributors should also have been done earlier. The result is that intermediaries are a suspected community today. There is a desperate need to train them, said SBI Mutual Fund managing director, Niamatullah.

Mutual funds have also been sold incorrectly by intermediaries, opined most of the speakers present at the seminar. Mr Niamatullah said that registrars and distributors have a very important and responsible role to play. He also stated Sebi regulations to that effect are also the need of the hour.

Investors should understand that past performance cannot always be repeated. Investors should avoid short-term returns being annualised as also not panic on negative returns, Mr Atamaramani said. Daily dividends on debt funds raises too much expectations said Mr Naimatullah. Investors should consider costs while investing, as high cost could be a drag on returns felt some mutual fund chiefs. IDBI-Principal Asset Management managing director and CEO, Sanjay Sachdev said, "Investors should look for loads and weigh the impact that these will have on their returns."

On the other hand, they should also look out for funds that waive or absorb expenses as a marketing ploy to boost yields temporarily, he said. Awareness building of the industry should have been done.

He also said that investors should understand that as markets become efficient, fund managers would find it increasingly difficult to consistently outform the Sensex. At present, since markets have not matured, outperforming the index is no big deal, anybody can today outperform the market, he added.

Mr Atmaramanin said the composite performance ranking by Value Research for the mutual funds industry is the most scientific and effective way of rating.