Journal of Business Management & Social Sciences Research (JBM&SSR) ISSN No: 2319-5614

Volume 4, No.2, February 2015

Investors’ Perception And Attitude Towards Mutual Fund As

An Investment Option
Priyanka Sharma, Assistant Professor, Pacific University, Udaipur, Rajasthan, India
Payal Agrawal, Assistant Professor, Pacific University, Udaipur, Rajasthan, India
Abstract
Mutual funds have opened new vistas to millions of investors by virtually taking investment to their doorstep. In India, a
investor generally goes for such kind of information, which do not provide hedge against inflation and often have negative
real returns. He finds himself to be an odd man out in the investment game. Mutual funds have come, as a much needed
help to these investors. Thus the success of MFs is essentially the result of the combined efforts of competent fund manag-
ers and alert investors. A competent fund manager should analyze investor behavior and understand their needs and ex-
pectations, to gear up the performance to meet investor requirements. Therefore, in this current scenario it is very im-
portant to identify needs of mutual funds investors, their preference for mutual funds schemes and its performance evalua-
tion. In this research paper, researcher has an objective to know preference of mutual funds investors and performance
evaluation of the preferred schemes by the investors. The survey is undertaken of 50 educated investors of Udaipur city
and the major findings reveal the major factors that influence buying behavior mutual funds investors, sources that inves-
tor rely more while making investment and preferable mode to invest in mutual funds market. The study will be immensely
useful to the AMC'; s, Brokers, distributors and to the other potential investors and last but not least to academician as
well.

Indian mutual fund has gained a lot of popularity from the past few years. Earlier only UTI enjoyed the monopoly in this
industry but with the passage of time many new players entered the market, due to which the UTI monopoly breaks down
and the industry faces a severe competition. As the time passes this industry has become a buzz word in the Indian finan-
cial system. So it is very important to know the investors’ perception about this industry. The present study analyses the
mutual fund investments in relation to investor’s behavior. Investors’ opinion and perception has been studied relating to
various issues like type of mutual fund scheme, main objective behind investing in mutual fund scheme, role of financial
advisors and brokers, investors’ opinion relating to factors that attract them to invest in mutual funds, sources of infor-
mation, deficiencies in the services provided by the mutual fund managers, challenges before the Indian mutual fund indus-
try etc. Mutual fund, investors’ perception, investors’ behavior, objectives, challenges, buying behavior, performance
evaluation.

Keywords: Mutual funds, investment, investors perception, brokers, buying behaviour

Introduction
From its inception the growth of mutual funds is very
slow and it took really long years to evolve the modern
day mutual funds. Mutual Funds emerged for the first
time in Netherlands in the18th century and then got in-
troduced to Switzerland, Scotland and then to United
States in the 19th century. The main motive behind mu-
tual fund investments is to deliver a form of diversified
investment solution. Over the years the idea developed
and people received more and more choices of diversi-
fied investment portfolio through the mutual funds. In
India, the mutual fund concept emerged in 1960. The
credit goes to UTI for introducing the first mutual fund
in India. Monetary Fund’s benefited a lot from the mutu-
al funds. Earlier investors used to invest directly in the
stock market and many times suffered from loss due to
wrong speculation. But with the coming up of mutual
funds, which were handled by efficient fund managers,
the investment risks were lowered by a great extent. The
diversified investment structure of mutual funds and
diversified risk contributed tremendously in the growth
of mutual funds. With the passage of time many new
mutual funds emerged. Not only this, the methods and
ways of selling these funds also changed with time. But,
the growth of mutual funds has not stopped. It is con-
tinuing to evolve to a better future, where the investors
will get newer opportunities. In this era of globalization
and competition, the success of an industry is determined
by the market performance of its stock. The investors too
like to invest only in the stock of those companies from
which they can get maximum gains. In early years of
growth of mutual fund industry, investors were available
only with few investment avenues to invest their money.
But with the passage of time a lot of opportunities are
available to the investors for investing their money in
different investment channels. One such channel is to
invest in mutual funds along with effective financial
management. Mutual funds have seen a tremendous
growth in the last few years. This is the result of com-
bined efforts of the brokerage houses and the fund man-
agers who come to one’s rescue by educating the inves-
tors and making them aware of the mutual fund schemes
by different modes of promotion.

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 Journal of Business Management & Social Sciences Research (JBM&SSR) ISSN No: 2319-5614
Volume 4, No.2, February 2015

Consumer behavior from the marketing world and finan-

cial economics have come together to bring to surface an
exciting area for study and research in the form of Be-
havioral Finance and it has been gaining importance over
the recent years. With reforms in financial sector and the
developments in the Indian financial markets, Mutual
Funds (MFs) have emerged to be an important invest-
ment avenue for retail (small) investors. The investment
habit of the small investors particularly has undergone a
sea change. Increasing number of players from public as
well as private sectors has entered in to the market with
innovative schemes to cater to the requirements of the
investors in India and abroad. For all investors, particu-
larly the small Consumer behavior from the marketing
world and financial economics have come together to
bring to surface an exciting area for study and research
in the form of Behavioral Finance and it has been gain-
ing importance over the recent years. With reforms in
financial sector and the developments in the Indian fi-
nancial markets, Mutual Funds (MFs) have emerged to
be an important investment avenue for retail (small) in-
vestors. The investment habit of the small investors par-
ticularly has undergone a sea change. Increasing number
of players from public as well as private sectors has en-
tered in to the market with innovative schemes to cater to
the requirements of the investors in India and abroad.
For all investors, particularly the small investors, mutual
funds have provided a better alternative to obtain bene-
fits of expertise- based equity investments to all types of
investors. So in this scenario where many schemes are
flooded in to market, it is important to analyze needs of
consumers and to find out which factors affects consum-
ers' needs the most.
Review Of Literature
Anjan Chakarabarti and Harsh Rungta (2000)
stressed the importance of brand effect in determining
the competitive position of the AMCs. Their study re-
veals that brand image factor, though cannot be easily
captured by computable performance measures, influ-
ences the investor's perception and hence his fund/
scheme selection.
Shanmugham (2000) conducted a survey of 201 indi-
vidual investors to study the information sourcing by
investors, their perceptions of various investment strate-
gy dimensions and the factors motivating share invest-
ment decisions, and reports that among the various fac-
tors, psychological and sociological factors dominated
the economic factors in share investment decisions.
Hirshleifer (2001) categorized different types of cogni-
tive errors that investors make i.e. self-deception, occur
because people tend to think that they are better than
they really are; heuristic simplification, which occurs
because individuals have limited attention, memory and
processing capabilities; disposition effect, individuals are
prone to sell their winners too quickly and hold on to
their losers too longs.
Research Methodology
Structured questionnaire is used for measuring various
data, Primary data was collected from respondents of
Udaipur city through a questionnaire designed for a
sample of 50 respondents Random sampling method was
adopted by the researcher and selected the samples from
Udaipur representing both the genders, different age
groups, education level, marital status and monthly in-
come. The data collected from the respondents are cod-
ed, tabulated and analyzed into logical statements.
The Questionnaire method was chosen for its versatility,
speed and cost benefits. Descriptive statistical tool- Rank
and Chi –Square is used to arrive at findings and conclu-
sion.
The study has been carried out keeping in mind the fol-
lowing primary objectives:
a) To analysis the impact of demographic factors in
influencing buyers decision.
b) To identify the intensity of various factors that posi-
tively and adversely effect buyer’s decision.

Data Analysis And Interpretation.

TABLE 1:
Opinion Strongly agree neutral disagree strongly disa- Total Mean Rank
agree gree Score
Potential returns 55 44 21 24 9 153 3.06 3
Diversification 50 36 21 20 14 141 2.82 6
Lower Risk 55 32 30 16 13 146 2.92 4
Credit Rating 30 40 36 32 6 144 2.88 5
Past Performance 60 48 21 22 8 159 3.18 2
Brand Image 70 36 33 12 10 161 3.22 1
Liquidity 55 20 27 24 13 139 2.78 7
Tax Benefits 35 36 39 16 13 139 2.78 7

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Volume 4, No.2, February 2015

Interpretation: Brand image of Mutual Fund strongly influence and liquidity and tax benefit are least effective in influ-
encing buying behavior of Mutual.

TABLE 2:
Opinion Strongly Agree Agree Neutral Disagree Strongly Disagree Total Score Mean Rank
Less Liquidity 45 52 39 10 10 156 3.12 4
Lock – In – Period 55 44 42 14 7 162 3.24 2
Difficult To Select 65 40 30 14 10 159 3.18 3
Less Secured 40 40 30 14 15 139 2.78 7
Lack Of Awareness 55 52 33 16 7 163 3.26 1
Low Earning 40 52 36 12 7 147 2.94 6
Slow Growth 50 48 27 18 10 153 3.06 5

Interpretation: Lack of awareness impact adversely in buying behavior, while less secured is least effective in buying
decision of mutual funds.

TABLE 3:
Preferred Investment Avenue By Investors
Kind Of Investments Number Of Respondents Rank
Mutual Funds 50 1
Real Estate 21 2
Commodity 21 2
Share 10 4
Debenture 10 4
Bond 10 4
Bank Deposits 8 7
Nscs 8 7

Interpretation: Mutual funds are most preferred investment avenue followed by real estate, commodity, and share, deben-
tures, bond, bank deposits and NSCs.

Hypothesis:
H1: annual investment do not depends on income level of investors.
H0: annual investment depends on income level of investors.

Annual income of respondent and Total investment

Annual In- Annual Investment Total
come Below 30,000 – 50,000 50,001 – 150,000 above 150,000
30,000
Below 3 Lacs 8 1 0 0 9
3 – 5 Lacs 0 16 0 0 16
5 – 15 Lacs 0 0 17 2 19
above 15 Lacs 0 0 3 3 6
Total 8 17 20 5 50

Interpretation: Tabulated value of chi square at 5% level of significance and 9 degree of freedom is 16.92 and the calcu-
lated value is 100.711.
Result: Calculated value is more than tabulated value therefore null hypothesis is rejected.
Conclusion: Annual investment depends on income level of investors.

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 Journal of Business Management & Social Sciences Research (JBM&SSR) ISSN No: 2319-5614
Volume 4, No.2, February 2015

HYPOTHESIS:
H1: Knowledge of investors does not depend on its Qualification.
H0: Knowledge of investors depends on its Qualification.

Qualification Knowledge about Mutual Fund Total

Not Partial Fully Aware of specific
Aware Knowledge Aware investment schemes
Metric/Intern 1 2 1 4 8
Graduation 0 11 0 0 11
Post Graduation 0 0 20 1 21
Professional 7 2 0 1 10
Total 8 15 21 6 50

Interpretation: Tabulated value of chi square at 5% level of significance and 9 degree of freedom is 16.92
And the calculated Value is 84.61.
Result: Calculated value is more than tabulated value therefore null hypothesis is rejected.
Conclusion: Knowledge of investors depends on its Qualification.

HYPOTHESIS:
H1: Sources of mutual fund Information did not affect knowledge of investors.
H0: Sources of mutual fund Information effect knowledge of investors

Knowledge Source of mutual Fund Knowledge

of Mutual Advertisements Financial Friends/Relatives Others Total
Funds Advisor
Not Aware 3 1 3 1 8
Partial 6 5 4 0 15
Knowledge
Fully Aware 5 11 3 2 21
Aware of spe- 1 3 1 1 6
cific invest-
ment schemes
Total 15 20 11 4 50
Interpretation: Tabulated value of chi square at 5%
level of significance and 9 degree of freedom is 16.92 MFs have emerged as an important segment of financial
and the calculated Value is 7.60. markets and so far have delivered value to the investors.
Result: Calculated value is less than tabulated value The study reveals that the investors’ perception is de-
therefore null hypothesis is accepted. pendent on the demographic profile and assesses that the
Conclusion: Sources of mutual fund Information did not investor’s age, marital status and occupation has direct
affect knowledge of investors. impact on the investors’ choice of investment. The study
further reveals that female segment is not fully tapped
CONCLUSION: and even there is low target on higher income group
It is concluded that the MFs business in Udaipur is still people. Hence, fund managers should take steps to tap
in as embryonic stage. So, concerted Efforts are needed the female segment and higher income group segment to
for its success. The success depend upon high returns, enhance more investment in MF Investment Avenue
professional competence of Fund managers, a MF brings which would really help the industry to flourish. Further,
together a group of people and invests their money in the findings of the research were on the factors influenc-
stocks, bonds and other securities, it have so many ad- ing investor’s perception on public private MF’s. It re-
vantages such as professional Management, economics veals that liquidity, flexibility, tax savings, service quali-
of scale. The MF should be easy to buy and sell through ty and transparency etc. are the factors which have a
broker or higher impact on perception of investors. These factors
directly in the market. It also has some draw backs such give them the required boosting in the investment pro-
as low awareness, too many formalities, difficult to se- cess. Therefore, it becomes imperative on part of the
lect. fund managers to enhance these features for attracting

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Volume 4, No.2, February 2015

more investors and also to retain the trust, the investors have in them.

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