Perception of Investors Towards Mutual Funds

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Table of Contents

  • Content of Questionnaire
  • Population of the study
  • Limitation of study
  • Review of related literature
  • Investment Pattern
  • Mutual funds and its changing picture
  • Mutual Funds are complicated to understand
    Mutual Funds requires lot of capital to invest
    Mutual Funds invest only in equities
  • Investor needs to hold money in Mutual Funds for a longer period
  • Mutual Fund need a De-mat Account
    Mutual Fund requires keeping watch on market always
  • Companies performing well form last 10 years are best to invest
  • All types of Mutual Funds are providing tax exempted returns

Every individual saves part of its money, some people keep it in bank or locker or some people invest it to get its multiplied return with some form of risk in investment. So investment is indulging funds in blend of risk and return. The person who plays with this risk factor is the winner of the game. There are various forms of investments options available and in this paper we are going to focus on one such investment option i.e. Mutual Funds. Mutual Fund is not a recent set up industry in India. But still the term is new to many people. However the picture is changing with the change in economic situations of India, but still a long way to cover up. In this paper an attempt has been made to analyze the perception of investors and misconceptions regarding mutual funds in the mind of non-investors. All this study is based on a survey conducted on people of Chandigarh.

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Mutual fund is a non-depository, non-banking institution, an intermediary who operates both in Capital Market and Money Market. The investment made in Mutual Funds is having twin objectives of attractive yield and capital appreciation.

It is a financial service organization that receives money from investors (that investor can be any individual or institution), invests it in various financial securities like shares , bonds, debentures and other securities , earns returns on it and share part of return with the investors. The joint ownership of fund is thus “Mutual” , i.e. the fund belongs to all investors.

Mutual fund is gaining attention now days because with the help of Mutual Fund Companies a common lay man who is having no knowledge of share market and its related risk can easily investment in these markets using knowledge and experience of such companies.

Mutual Fund industry is not grown over a fore night. Its concept came in July 1963, when introduced first time by UTI an initiative taken by RBI and Government of India. Later on it get delinked with RBI. After that Government of India has amended Banking Regulation Act in 1987 to enable commercial banks to launch mutual funds in India. Mutual Fund is having four tiers Management System.

Content of Questionnaire

A questionnaire was framed and filled from various people from Chandigarh which includes both investors as well as non-investors of mutual fund. Respondents were contacted through both online and in person mode. The questionnaire consists of 15 questions, out of which 5 were general questions and 10 were specific related to topic.

Population of the study

The sample is mainly collected form sector 17 Chandigarh which is considered as hub of the stock trading activity in Chandigarh. The researcher particularly visited Stock broker offices and customers who visit these offices were requested to fill in the questionnaire.

Limitation of study

  • The result may vary with increase in sample size.
  • Measurement cannot be assured of cent percent accurate because risk is factor cannot be measured accurately in quantitative numbers.
  • Respondent’s bias may be another limiting factor.

Review of related literature

The available literature to the present study has been reviewed to understand the work done so far by different researchers:

Dr. Ravi Vyas (2012) conducted a survey in Indore to find out Mutual Fund investor’s behaviour and perception in Indore city with sample size of 120 people. The research work concluded that mutual fund industry is grown a lot, but still there were investors who rely more on banks. The investors who invests in mutual fund they do not keep their money invested in one scheme for more than 3 years and most preferred plan among mutual fund is equity and SIP.

Dhimen Jaddishbhai Jani, Bhautik Alpeshkumar patel and Rajeev jain (2012) conducted a survey on people of Valsad city located in Gujarat to find out the consumer’s perception towards mutual funds as an investment option. A sample size of 150 respondents was taken. It was concluded through research work that because of low return on Fixed Deposits, Public Provident Fund, National saving certificate etc. Mutual Fund becomes more attractive among investors. The main factor attracting investors towards mutual fund is high return and affordability.

Gaurav Agrawal and Dr. Mini Jain (2013) conducted a research in city of Mathura regarding the investor’s preference towards mutual fund in comparison to other investment avenues. A sample of 300 respondents was taken. The research work concluded that investors generally invest for the sake of return followed by safety and tax planning. According to the research most preferred investment avenue is Banks and LIC followed by Real estate and Mutual Fund. According to the survey 80% people were having knowledge of Mutual Fund.

Priti Mane (2016) conducted a survey on people of Aurangabad to study the investors view towards Mutual Fund. A sample of 30 respondents was taken. The research work concluded that people still hesitate to invest in mutual fund because of the false image in the mind of investors, they still find mutual fund is risky as share market, because they believe mutual fund only invests in equity.

MS.M.Kalaiselvi (2016) conducted a survey on people of Pollachi, Coimbatore, District Tamilnadu to find out perception of investors towards mutual fund investment. A sample of 250 respondents was taken. The research work concluded that majority of investors were male and mostly prefer to invest in F.Ds. Those who invest in mutual fund were young mostly of age group 18-40 and prefer open ended schemes of equity to invest.

AH Khan and SK Agarwal (2017) conducted a survey on people of Delhi and Meerut to study investor’s perception towards Mutual Funds. A sample of 100 people was taken. The research work concluded that non investors were of opinion that mutual fund is risky as compared with other investment options. People were having partial knowledge regarding mutual funds. And mostly the working class people prefer to invest in mutual funds.

DATA ANALYSIS (I) Factors influencing Investment in any Investment Avenue

HIGH RETURN: – According to the collected data 28 respondents out of 50 i.e. more than 50% considers high return as the first and foremost factor in determining investment in any avenue, followed by 12 who have considered it at second rank and 10 respondents have given it rank 3 or less than 3.

RISK FACTOR: – Through the data collected it can be analyzed that 20 respondents have given “Risk Factor” rank second which means that risk is also one of the important factor which is considered while taking investment decision.

LIQUIDITY OF FUNDS: – Most of the respondents have given rank 4 to the liquidity of funds.

CAPITAL APPRECIATION:- Capital appreciation vary between rank 3 to rank 5, as 10 respondents have given it rank 3, 8 respondents have ranked it as 4 and 18 respondents i.e. almost 36% ranked capital appreciation as rank 5.

DIVERSIFICATION: – Mostly respondents at given rank 6 or 7 to this factor.

TAX SAVING: – This factor floates between ranks 2 – 5.

EASY PAYMENTS: – This is last considered factor by most of the respondents as given rank 6 or 7 in considering Investment Avenue.

Investment Pattern

FIXED DEPOSITS: -Most of the investors keep their money in fixed deposits. Almost all the respondents have given rank between 1to 3 as they find F.Ds risk free.

RECURRING DEPOSITS: – It is also the preferred investment avenue of respondents, almost 64% of respondents considered it in rank 2 or 3.

MUTUAL FUNDS: – It can easily seen from the data that Mutual Funds are also giving as tough competition to F.Ds or R.Ds as 96% of respondents have given rank between 1 to 3. Out of all the respondents, 60% of them invest in mutual funds while other considers it as good investment avenue but don’t invest because of lack of knowledge how to invest or to choose which scheme.

The data collected above shows that maximum people come to know about mutual funds through internet & television, followed by relatives & friends, advertisements, newspaper and magazines, agents etc.

Mutual funds and its changing picture

According to latest data collected from the Association of Mutual Funds, the mutual funds in India has grown a lot, providing huge rate of return. By March 2017, 47.7 million mutual fund folios which means 4.77 crore people have mutual fund investment. The industry has close to 2 crore SIP accounts as on Jan 2018. The industry has added about 9.26 lakhs SIP accounts each month on average during financial year 2018.


F.Ds and R.Ds are safest mode to invest

It’s true that Mutual Fund is a volatile investment whose return fluctuates according to market economy. But when it is compared with Fixed Deposits we find that in Fixed Deposits one has to pay huge tax on returns and also the returns are when compared with Mutual Funds.

Also you have to keep your money for longer period in case of Fixed Deposits and if you withdraw your money before that period you have pay penalty. But Mutual Funds are more liquid except in case of lock in period. But in lock in period condition also you have to pay only exist load which is much less than return you sacrifice in case of Fixed Deposits.

Mutual Funds are complicated to understand

Yes, it is true that Fixed Deposits or Recurring Deposits are easy to understand as compared with Mutual Funds because they are working in front of you on proper books in which you get your predetermined return in particular period. Mutual Fund is volatile which gives you return according to the market. It may happen that it does not give you return as much as you have estimated while investing in Mutual Fund. But Mutual Funds are not complicated, it’s just requires a little bit of time to understand them and this is one time learning process.

Mutual Funds requires lot of capital to invest

Some of the respondents replied that they don’t have the money to invest in Mutual Fund. Now a person can invest in mutual fund with only ₹500. It’s not compulsory that you need to invest huge funds for longer period.

Mutual Funds invest only in equities

Investing in equity is most preferred scheme now a day from investor’s point of view. But it’s not true that mutual fund means investing only in equities. It has investment options in Equity, Debt, Balanced Funds, Money Market Instruments, Gilt Edged Securities etc.

Investor needs to hold money in Mutual Funds for a longer period

This statement is not true there is no compulsion to invest for longer period however long period helps an investor to get benefit of compounding factor. But there are many small period Mutual Fund plans which give you good return. Just holding funds in Mutual Fund for longer period not necessarily gives you high returns. It’s up to the need of investor that for how much time period he/she wants to invest.

Mutual Fund need a De-mat Account

De-mat account is not mandatory, however if an investor is having de-mat account he/she can use it to invest in Mutual Funds. An investor who do not have de-mat account can invest through a simple filling process which requires a bank account, PAN card and KYC formalities.

Mutual Fund requires keeping watch on market always

It is true that evaluating the market and than investing is a wise decision and you need to look at the market and have to take buy or sell decision. But there are some blue chip companies where you need to monitor your holdings at regular intervals instead of responding to constant market fluctuations.

Companies performing well form last 10 years are best to invest

Investing in a company performing well form last 10 years may not always be fruitful. At all stages proper analysis and prediction required based upon its current performance and scope for future performance. Sometimes a newly set up company may not be performing well, but investor should look at its future prospects and then should take a decision.

All types of Mutual Funds are providing tax exempted returns

All Mutual Fund investments are not tax exempted uniformly, it is only few investment plan that got exemption like ELSS (Equity Linked Saving Scheme) exempted under 80C up to ₹1.5 Lacs, dividend received from Equity Mutual funds, Arbitrage Fund and Hybrid Equity Oriented Mutual Fund, dividends from Debt Funds are tax free plans. However Mutual Fund allows investor to save tax as compared to other investment avenues like Fixed Deposits.

  • It is found from the above study that mutual fund industry movement is changing from last few years towards the growth direction. But still it have to cover a long path, there are still people who are not aware about Mutual Funds.
  • The growth we have seen in mutual fund is because of many reasons and one such reason is advertisement “MUTUAL FUND SHAI HAI”. And awareness campaign by AMFI during the last financial year AMCs had conducted 8,203 awareness programs in 211 cities covering 4,02,584 participants. These kinds of awareness programs were started by Asset Management Companies in different cities of India since May2017.
  • It was also found that maximum numbers of the investors don’t have proper knowledge of Mutual Funds and they simply rely on agents for investment.
  • The data collected above shows that individual investor is attracting towards equity mutual fund more as compared with institutions which prefer debt mutual fund.
  • It was also found that it not just large income group investing in mutual funds. Now the middle and low income group also started to invest in mutual funds because the minimum amount of investment is ₹500.
  • The first and the foremost factor which investor consider while investing is high return and safety and security.
  • Earlier the first preference of investors was Fixed Deposits or Recurring Deposits and this trend is now little bit shifted towards Mutual Funds.
  • The study shows that usually people of 18-50 age group prefer to invest in mutual fund. They find Mutual Fund as a investment source rather than a speculation. Old age people hesitate to take risk they find Fixed Deposits as preferred source.

After analyzing and interpreting the above data it can be concluded that awareness of Mutual Fund is increasing among people. Now Mutual Fund is found as an investment avenue rather than a speculation. Investors are trusting Mutual Funds more as compared with shares and other investment avenues. The share of assets under Mutual Funds have increased manifold and still moving on path of growth. But still a large portion of non-investors to cover up.

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