“To study investment behaviour of investors towards mutual funds.

Anjali Acharya

Student

Prof. Apeksha Chanpaneri

GLS University

Ahmedabad

Abstract

A mutual fund in India has not been as favourable investment comparison to developed
countries. According to PWC report, 2016 mutual fund gross domestic product contribution
has been 7% only which is very less in comparison to another country’s mutual fund industry
growth rate. It remains imperative to understand the investor's behaviour with context to
investor’s awareness and perception. Descriptive research design has been used for the
research. For descriptive research design, cross-sectional studies comprising sample surveys
of Ahmedabad city. The research provides the perception of investors about half of the
respondents were investing in a mutual fund of around less than 25% of their total income.
Majority of the youngsters were invested in the mutual fund for less than 3 years while the
adults were invested for a longer period of time, however, age, gender and occupation had an
impact on awareness and perception about the mutual fund. The study has implications for
mutual funds and regulators. Research highlights mutual fund and regulators need to focus
more on the awareness about mutual funds with context to more savings from total income.
This would increase the investor base and flow of funds in a mutual fund.

Keyword: Mutual fund, awareness, perception, investor’s behaviour

INTRODUCTION
The economy of India directly related to the financial sector development and as it facilitates
the efficient mobilization and allocation of resources. They mobilize the saving of the
household sector through various financial instruments one of them is a mutual fund. A
mutual fund is a type of financial intermediary that pools the funds of investors who seek the
same general investment objective and invests them in a number of different types of
financial claims viz. equity shares, bonds, money market instrument. These pooled funds
provide thousands of investors with proportional investment managers. The term ‘mutual’ is
used in the sense that all its returns, minus its expenses, are shared by the fund's unitholders.

According to Chandra Prasanna, “Mutual Fund is called unit trust or open-ended trust – a
company that invests the fund of its subscribers in diversified securities and in turn issues
units representing shares in those holdings. They make a continuous offering of new shares at
net asset value and redeem the shares on demand of net asset value determined daily by the
market value of the securities they hold.”

LITERATURE REVIEW

(Kaur & K., 2015) The Research aimed to broaden the investor base for mutual funds in
India; it remained imperative to understand the determinants of investment behaviour of
investors towards mutual funds. It was found that the investment behaviour could be
explained with awareness, perception and socioeconomic characteristics of individual
investors. Better awareness related to various aspects of mutual funds would have a positive
effect on investment in mutual funds. Contrary to belief, risk perception for mutual funds had
no effect on the investment decision. It was also found that, the socioeconomic characteristics
such as age, gender, occupation, income and education of investors had an impact on the
awareness of mutual funds.

(B, Nair, Sai, & N, 2015) The Research aimed at finding out the factors affecting investment
decision on mutual funds and its preference over retail investors. It also aimed at finding
about the factors that prevent the people from investing in mutual funds. It was found that the
mutual funds emerged as one of the important class of financial intermediaries which cater to
the needs of the retail investors. The major factors influencing the investment decision of
retail investors were tax benefits, high return, price and capital appreciation. Equity-based
schemes were the most preferred. Further, it was found that the bitter past experience was the
major preventing factor while considering investment decisions. Investors satisfaction with
regard to mutual fund was rated as average.

(Jyothi, 2015) From the Research it was found that the investors considered the variables,
viz., Fund/Scheme’s performance record, favorable rating by a rating agency, scheme’s
portfolio of investments, reputation of the fund manager/scheme, minimum initial investment
and product with tax benefits, the first six factors which were more important in their
selection of fund/scheme followed by others. It was also found that the factors thus extracted
have enabled to identify the types of investors who had given importance to these factors in
their fund selection techniques, viz., professional investors and image-conscious investors.
The first category of investors identified reputation of sponsoring firm, sponsor’s ability to
offer a wide range of schemes and recognized the brand name as essential in fund sponsor
qualities. On the other hand, the second category of investors preferred expertise of the fund
manager in managing money, well-developed research wing and other infrastructure and a
well-developed agency and network of the sponsoring firm were the major factors
influencing fund selection behaviour of investors.

(Kotishwar & Khan, 2014) The Research aimed to analyze the behaviour of individual
investors toward Mutual Funds in Telangana Region in Andhra Pradesh and performance of
selected Growth schemes. It was found that the Income constituted the most important factor
influencing the investors preference and behaviour. Every investor had a definite objective
behind his investment decision. The motive of every investor investing in funds varied as per
circumstances. The objectives reflected the investor's investment strategy, selection of
schemes, holding period etc., It was also found that the objectives of the savings were
confined to retirement, to meet contingency, to save tax, to purchase an asset, and to meet the
educational needs of children. The nature and intensity of financial needs differed from
investor to investor based on their requirements, objectives and economic status.

(Chawla, 2014) The Research conducted to understand the mutual fund buying behaviour of
the individual investors. It was found that the past performance of the issuing company, tax-
saving funds and growth funds with capital appreciation had important considerations for
investors in a mutual fund. The results indicated that two factors considered important by
investors while investing in mutual funds, those in order of importance, were credibility of
fund and miscellaneous features of fund.

(Vyas, 2012) From the Research it was found that mutual funds were not that much known to
investors, still investor rely upon bank and post office deposits, most of the investor used to
invest in mutual fund for not more than 3 years and they used to quit from the fund which
were not giving desired results. Equity option and SIP mode of investment were on top
priority in investors’ list. It was also found that maximum number of investors had not
analyzed risk in their investment and they were depended upon their broker and agent for that
work.

(MEHTA & SHAH, 2012) The Research conducted to know the preference of mutual funds
investors and performance evaluation of preferred schemes by the investors. It was found that
the investors who were of the age of less than 30 were more attracted by the high returns
followed by low risk involved and then liquidity or company reputation. Investors in the age
group of 31-40 years of age also had gave high preference to high return. On the other hand,
the investors between the age group of 41-50 were evenly distributed for factors like
liquidity, high return and low risk. Investors above 50 years of age had preferred low risk
more than any other factor. Mode preferred to receive returns yearly and the type of Return
expected by the investors were dependent on each other. It was also found that the Investors
mostly preferred equity schemes while making investment into mutual funds. Amongst equity
schemes also Equity tax savings (ELSS), Equity diversified scheme and Equity sectoral
schemes were mostly preferred by the investors.

(Saha & Dey, 2011) It was found that the MF scheme preference for the majority of investors
were ‘growth scheme’ followed by ‘income schemes’. The investors were interested in
earning higher return rather than regular safe returns. Analysis of scheme preference by
nature of operation revealed the popularity of ‘open-ended’ schemes. Findings of the study
divulged that investors attached high priority to reference groups, closely followed by
published information, thereby preferring newspapers (general and business), and financial
magazines. It was also found that 44% of the respondents of Kolkata city preferred to
telephone the office to know more about MF. 72% of the respondents had the good awareness
level of MFs.

(Prabhu & Vechalekar) The Research conducted to make investors aware of the benefits of
investment in mutual funds and to identify various factors affecting the perception of
 investors regarding investment in mutual funds. It was found that the most of the investors
were aware of various schemes of mutual funds. The Mutual Fund investors were mainly
belonging to the age group from 19 years to 55 years and fallen in the income group of Rs
30,000 to Rs 70,000 and above. Diversification of portfolio and tax benefit were the main
factors of mutual fund that allure the investors. It was also found that the most of the
investors were aware of MIP Funds and the preferred reason for investing in MIP fund was
consistent returns given by these funds.

Research Methodology

The need for the study

As the financial sector have a direct impact on economic growth of India, and as per PWC
report 2016, mutual fund gross domestic product contribution was only 7% which is very low
compared to another developing country. Therefore, to study the behaviour of investors with
context to investor’s awareness and perception about the mutual fund.

Research design and sampling: Descriptive research design has been used, and 100 investors
of Ahmedabad city has been selected for the survey. Data collected through convenience
sampling method and analysed with the help of SPSS latest version.

The study has proposed that investors behaviour towards mutual fund determined within the
context of awareness and perception of a mutual fund. For research purpose developed a
Likert scales related to risk perception and awareness about a mutual fund.

Cross sectional analysis

The relationship between Age and Preference of Mutual Funds Scheme to Use/Invest in a
mutual fund
Age Total
18-25 26-33 34-41 41 &
above
Open
Which mutual funds scheme 39 17 11 3 70
Ended
do you prefer to use/invest
Close
in a mutual fund? 26 2 0 2 30
Ended
Total 65 19 11 5 100
 Majority of the respondents, i.e., 39 from the Age Bracket of 18-25 Preferred to invest in
Open-Ended Mutual Funds Scheme, followed by 26 from the Age Bracket of 18-25
Preferred to invest in Close Ended Mutual Funds Scheme, there was none response from the
Age Bracket of 34-41 for Close Ended Mutual Funds Scheme. 70 were the highest response
from the entire four Age Brackets for Open-Ended Mutual Funds Scheme to invest.

There is no association between Income and Reasons for Investing in SIP Funds.

ONE WAY ANOVA

Sum of df Mean F Sig.
Squares Square
Between
3.920 3 1.307 2.708 .049
Preferred Reason you agree for SIP Funds – Groups
‘You want to start early with your investing, Within
46.320 96 .482
and you want to start small.’ Groups
Total 50.240 99
Between
1.009 3 .336 .631 .597
Preferred Reason you agree for SIP Funds - Groups
‘You want to build the saving and investing Within
51.151 96 .533
habit.’ Groups
Total 52.160 99
Between
Preferred Reason you agree for SIP Funds– 2.951 3 .984 .790 .502
Groups
‘You do not have lump sum amounts to
Groups 119.489 96 1.245
invest.’
Total 122.440 99
Between
.768 3 .256 .316 .814
Groups
Preferred Reason you agree for SIP Funds–
Within
‘You want to have convenience and less risk.’ 77.742 96 .810
Groups
Total 78.510 99
Preferred Reason you agree for SIP Funds – Between
1.441 3 .480 .521 .669
‘They average the cost of your investments Groups
 and deliver superior returns with fewer shocks Within
88.559 96 .922
over the long term.’ Groups
Total 90.000 99

From above table it showed that significant value for Reason ‘You want to start early with
your investing and you want to start small’ is 0.049 which is less than 0.05, i.e., 0.049 < 0.05.
So, Null Hypothesis that there is no association between Income and Investors want to start
early and small with their investing is Rejected. Whereas other four reasons which are ‘You
want to build the saving and investing habit’, ‘You do not have lump sum amounts to invest’,
‘You want to have convenience and less risk’, ‘They average the cost of your investments
and deliver superior returns with fewer shocks over the long term’ showed the significant
values greater than 0.05 which are 0.597 > 0.05, 0.502 > 0.05, 0.814 > 0.05, 0.669 > 0.05 So,
Null Hypothesis that there is no association between Income and above Reason for Investing
in SIP Funds are Accepted.

There is no association between Age and Factors Investors noticed during Promotional
Activities of Mutual Funds Investment.

ONE WAY ANOVA

Sum of Df Mean Square F Sig.
Squares
You agree on the Between
3.398 3 1.133 2.494 .065
factor you noticed Groups
during promotional Within Groups 43.602 96 .454
activities of Mutual
Funds investment - Total 47.000 99
‘Goodwill/Name.’
You agree on the Between
7.165 3 2.388 4.793 .004
factor you noticed Groups
during promotional Within Groups 47.835 96 .498
activities of Mutual
Funds investment -
Total 55.000 99
‘Size/Volume of
Business.’
You agree on the Between
10.618 3 3.539 4.861 .003
factor you noticed Groups
while promotional Within Groups 69.892 96 .728
activities of Mutual
Funds investment - Total 80.510 99
‘Its Aim.’
You agree on the Between
8.013 3 2.671 3.129 .029
factor you noticed Groups
during promotional Within Groups 81.947 96 .854
activities of Mutual
Funds investment – Total 89.960 99
‘Active Client.’
You agree on the Between
2.133 3 .711 .832 .480
factor you noticed Groups
during promotional Within Groups 82.057 96 .855
activities of Mutual
Funds investment - Total 84.190 99
‘Direct Portal.’

From the above table it showed that significant value for Factors ‘Goodwill/Name’ and
‘Direct Portal’ are greater than 0.05, i.e., 0.065 > 0.05, 0.480 > 0.05 So, Null Hypothesis
that, there is no association between Age and above mentioned two Factors Investors Noticed
while Promotional Activities of Mutual Funds Investment are Accepted. Whereas other three
Factors which are ‘Size/Volume of Business’, ‘Its Aim’ and ‘Active Client’ showed the
significant values less than 0.05 which are 0.004 < 0.05, 0.003 < 0.05, 0.029 < 0.05 So, Null
Hypothesis that, there is no association between Age and above mentioned three Factors
Investors Noticed while Promotional Activities of Mutual Funds Investment are Rejected.
Age and Preference investing in mutual fund from total income

Cross tabulation

Age

18-25 26-33 34-41 41 & above Total

Percentage of savings <=25 % 55 12 8 2 77

do you prefer investing
<= 50 % 8 6 2 1 17
in mutual funds from
your total income <= 75 % 2 1 1 2 6

Total 65 19 11 5 100

Respondent’s behaviour with context to preference for investing in mutual funds from total
income and from above table it showed that Majority of the respondents i.e., 55 from the Age
Bracket of 18-25 Preferred to invest <=25 % of savings from their total income in mutual
funds. Followed by 12 respondents from age bracket of 26-33 preferred to invest <=25 % of
savings from their total income in mutual funds.

Education qualification and Preference investing in mutual fund from total income

Cross tabulation

Educational Qualification

Post-
Schooling Graduate Graduate Doctorate Total

Percentage of savings <=25 % 2 26 48 1 77

do you prefer investing
<= 50 % 0 7 10 0 17
in mutual funds from
your total income <= 75 % 0 2 4 0 6

Total 2 35 62 1 100
From above table it showed that Majority of the respondents i.e., 48 Post Graduate Preferred
to invest <=25 % of savings from their total income in mutual funds. Followed by 26
Graduate respondents preferred to invest <=25 % of savings from their total income in mutual
funds.

Occupation and Preference investing in mutual fund from total income

Cross tabulation

Occupation

Governm Business/
Stude Home Professi ent Private Entrepre
nt maker onal Service Service neurship Total

Percentage of <=25 % 14 1 9 4 38 11 77
savings do you
prefer investing <= 50 % 4 1 1 1 8 2 17

in mutual funds <= 75 %

from your total 1 0 0 1 4 0 6
income

Total 19 2 10 6 50 13 100

From above table it showed that Majority of the respondents i.e., 38 from Private Service
Sector Preferred to invest <=25 % of savings from their total income in mutual funds.
Followed by 14 Students preferred to invest <=25 % of savings from their total income in
mutual funds.

Conclusion

Majority of the investors from private service sector and post graduate preferred to invest less
than 25% of savings from their total income in mutual funds. Majority of the youngsters were
invested in the mutual fund for less than 3 years while the adults were invested for a longer
period of time with open ended mutual funds scheme. Research highlighted mutual fund and
regulators need to focus more on female to improve the awareness about mutual funds. This
would increase the investor base and flow of funds in a mutual fund.

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