See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/274990926

An Empirical Analysis of Factors Influencing Investment in

Mutual Funds in India

Article  in  Global Business Review · August 2014

DOI: 10.1177/0972150914535136

CITATIONS READS
14 2,831

1 author:

Deepak Chawla
International Management Institute
97 PUBLICATIONS   491 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Developing an instrument to assess the state of Knowledge Management (KM) implementation in Indian manufacturing and service
sector organizations View project

Driving Green marketing in a developing country: Reducing the attitude-behaviour gap View project

All content following this page was uploaded by Deepak Chawla on 25 May 2016.

The user has requested enhancement of the downloaded file.

Military-Madrasa-Mullah
A Global Threat 493
Article Complex 493

An Empirical Analysis Global Business Review

15(3) 493–503
of Factors Influencing Investment © 2014 IMI
SAGE Publications
in Mutual Funds in India Los Angeles, London,
New Delhi, Singapore,
Washington DC
DOI: 10.1177/0972150914535136
http://gbr.sagepub.com

Deepak Chawla

Abstract
The study is based on a sample of 431 respondents chosen using convenience sampling to understand
the mutual fund buying behaviour of the individual investors. The article identifies the various attrib-
utes that investors consider important while investing in mutual fund. There are two underlying
factors of importance that are extracted namely Credibility of the fund and Miscellaneous features
of the fund. The relationship of these factors with demographic variables is ascertained. The article
suggests recommendations for the mutual fund companies and suggestions for future research.

Keywords
Factor analysis, mutual funds, ANOVA, entry and exit load, past performance, tax benefits

Financial markets play a vital role in the economic development of a country. They facilitate the allocation
of scarce resources by transferring them from savers to borrowers, thereby accelerating investment
activities in the economy.
One of the most popular financial investments is mutual funds, which pool the savings of a large
number of investors who share a common financial goal based on trust. The money thus collected is
invested in capital market instruments such as shares, debentures and other securities. Investors get the
number of units based on the amount invested and the net asset value of the units. The income earned is
shared among the investors in proportion to the number of units held by them. A mutual fund is an
investment that suits the needs of the common man. It is an indirect form of investment in the capital
market that has the advantages of diversification, professional management, low-cost investment,
liquidity and tax benefit. The primary objective is to provide better returns to the investor by minimizing
the risk associated with capital markets. The most common features of mutual fund units are low unit
cost. The first mutual fund in India was launched by the Unit Trust of India (UTI) in the mid-1960s, and
since then, mutual funds have come a long way as an investment option.
The history of the mutual fund industry in India can be divided into four phases. The first phase
(1964–1987) began with the establishment of the UTI in 1963. Set up by the Reserve Bank of India
(RBI), the UTI also functioned under its regulatory and administrative control. The first scheme of the
UTI was launched in 1964. At the end of 1988, the UTI had assets worth ` 670,000 million under its

Deepak Chawla is a Distinguished Professor at the International Management Institute, New Delhi, India.
E-mail: dchawla@imi.edu. India Quarterly, 66, 2 (2010): 133–149

Downloaded from gbr.sagepub.com by guest on August 26, 2015

494 Deepak Chawla

management. The second phase (1987–1993) saw the entry of the public sector, mutual funds set up by
public sector banks, Life Insurance Corporation (LIC), as well as the General Insurance Corporation
(GIC). At the end of 1993, the mutual fund industry had assets of ` 470,040 million under its
management. During the third phase (1993–2003), the private sector funds entered the fray in 1993. The
erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual
fund registered in July 1993. At the end of January 2003, there were 33 mutual funds with total
assets of ` 1,218,050 million. The fourth phase (since February 2003) began with the repeal of the UTI
Act 1963 in February 2003. The UTI was bifurcated into two separate entities:

1. The specified undertaking of the UTI, with assets of ` 298,350 million under its management
as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured
return and certain other schemes.
2. The UTI mutual fund, sponsored by the State Bank of India (SBI), Punjab National Bank (PNB),
Bank of Baroda (BOB) and LIC. It is registered with the Securities and Exchange Board
of India (SEBI) and functions under the Mutual Fund Regulations. With the bifurcation of
the erstwhile UTI, which had more than ` 76,000 million of assets under management in
March 2000 and with the setting up of UTI mutual fund and with recent mergers taking
place among different private sector funds, the industry has entered current phase of con-
solidation and growth. At the end of March 2008, there were 33 mutual funds, which managed
assets of ` 505,152 million.

There are now three types of mutual fund schemes:

1. By structure—open-ended schemes, close-ended schemes and interval schemes.

2. By investment objective—growth schemes, income schemes, balanced schemes and money
market schemes.
3. By other features—tax saving schemes and special schemes (index schemes and sector specified
schemes).

Mutual funds are designed to provide maximum benefit to the investors. The fund manager has a research
team to achieve the objectives of the scheme. A mutual fund has the following advantages:

1. The investment is in a well-diversified portfolio of securities, irrespective of whether the amount

invested is big or small.
2. As the investment is in a diversified portfolio of securities, the associated risk is less compared
to merely investing in two or three securities. If some of the securities of the portfolio react
negatively due to some economic or political factors, others will react positively. Thus, the
overall effect of risk is much less in mutual fund compared to portfolios managed by individual
investors.
3. The funds are managed by fund managers who undertake a lot of research and have better
investment management skills than individual investors.
4. Mutual funds are far more liquid than shares, as they can be redeemed easily and quickly.
5. By virtue of having large volume, mutual funds have lower transaction cost, the benefit of which
is passed on to the investors.

Global Business Review, 15, 3 (2014): 493–503

Downloaded from gbr.sagepub.com by guest on August 26, 2015

An Empirical Analysis of Factors Influencing Investment in Mutual Funds in India 495

6. As required by the regulator, mutual funds provide investors with updated information pertaining
to the market and schemes, thereby providing transparency.
7. The interests of mutual fund investors are regulated, as all funds are registered with SEBI, which
enforces complete transparency.
8. Mutual funds offer a lot of flexibility and convenience, as investors can easily switch schemes
and their options.

However, mutual funds also have some disadvantages:

1. Investors do not have a say in the decision-making process of a fund manager, which may come
in the way of achieving the investor’s financial objectives. Moreover, information gathering is
costly, and brokers or the agents often do not disclose all relevant information about the investment
at the time of purchase.
2. Irrespective of the performance of the fund, investors have to pay investment management
fees and fund distribution costs as a proportion of the value of investment as long as they hold
the unit.
3. Mutual funds offer much less in return as compared to direct investment in the capital market.

Literature Review
As per Gupta (1993), investors perceive all types of mutual fund schemes as safe. However, they have a
distinct liking for close-ended, pure equity and growth schemes. The research of Singh and Vanita (2002)
also indicate that the investment in mutual funds is not perceived to be risky, but the preference is for
open-ended schemes. Mutual funds are ranked lower in comparison to investment in Public Provident
Fund (PPF), National Savings Certificate (NSC) and LIC policies. According to them, an important
reason for investment in mutual funds is saving of tax. Sikdar and Surjit (1996) also found tax savings to
be an important reason for investment in mutual funds by salaried and self-employed people. However,
Santhi and Gurunathan (2011) mention that the participation of Indian investors in tax saving mutual
funds is comparatively less than other safer investment areas like insurance, postal deposit schemes and
fixed deposits (FDs).
The relative importance of various factors like past performance of mutual funds, their size and
cost of transaction are used by investors as criteria in investment in mutual funds. Past performance is
given due consideration in the work of Bogle (1992), Ippolito (1992), Ramasamy and Young (2003),
Sikdar and Singh (1996), Singh and Chander (2004) and Wilcox (2003). The size of the fund was
found to be an important consideration in the work of Pollet and Wilson (2008) and Ramasamy and
Young (2003).
Alexander et al. (1997) are of the view that investors are knowledgeable about cost, risk and returns
associated with mutual funds. This is supported by Wilcox (2003), who found that educated investors
demonstrate basic knowledge of finance in their investment decision. However, Mehry (2004) differs,
stating that mutual fund investors are ignorant. Moreover, agents are only concerned about incentives
and commissions they get by selling schemes rather than about the quality of products. They do not
explain the risk factors to the investors associated with the fund. This view is supported by Feverborn

Global Business Review, 15, 3 (2014): 493–503

Downloaded from gbr.sagepub.com by guest on August 26, 2015

496 Deepak Chawla

(2001), who states that individual investors will continue to be misled by companies that sell new funds.
These companies are not completely honest and transparent in their approach.
Barker and Odean (2001) are of the view that women are less confident in their investment decisions
compared to men. Similar views are expressed by Sunden and Surette (1998), who they state that women
are more risk averse than men. Powell and Ansic (1997) are of the view that women are less able
financial decision makers than men. A similar view is advocated by Oakley (2000), who states that
women are less effective and competent than men in the area of financial investment. The result is that
investors prefer to invest in funds managed by males. However, the findings of Stanley et al. (2003) are
different. Comparing the performance and investment behaviour of female- and male-managed fixed
income mutual funds, they found no significant difference in terms of performance, risk and other fund
characteristics. However, they found net asset flow into funds managed by males to be higher, especially
in the initial years of managing funds.
A number of studies have been conducted on the performance of mutual funds under varying
conditions. The work of Badrinath and Gubellini (2012) examines the performance of mutual fund
across the business cycle. This is done by disaggregating funds into different investment objectives to
determine which funds show cyclical performance. The results indicate that both small-cap and mid-cap
growth equity fund are able to contribute to performance, whereas value funds are not able to do so.
Chang et al. (2012) compared the financial performance of green and traditional mutual funds. A total of
131 green mutual funds were compared with the traditional mutual funds in their respective Morning
Star categories on various measures of performance. It was found that green mutual funds gave lower
returns compared to traditional mutual funds in their respective Morning Star categories. The performance
of green mutual funds has also been studied on a risk-adjusted basis. Trainor (2012), who examined the
risk-adjusted performance of individual mutual funds that investors used to invest in this asset class,
found that past performance did influence future performance and investors should invest in top
performing funds with the lowest expense ratio. Arugaslan et al. (2008) evaluated the performance of 50
large US-based international equity funds using risk adjusted returns during 1994–2003. They used risk-
adjusted performance M2 to evaluate equity funds. The results indicate that funds with the highest
average returns may lose their attractiveness to investors once the degree of risk embedded into the funds
is forced into the analysis. Further, some funds in which the average unadjusted returns do not stand out
may look very attractive once their low risk is taken into performance. Research by Drachter et al. (2007)
examines decision processes in general fund companies and their impact on fund performance. The
results show that behaviour of managers depends heavily on the characteristics of the funds and that of
the funds’ company.
Some researchers have examined the behaviour of investors while investing in mutual funds. For
example, Hou (2012) examined the return persistence and investors’ timing ability of 200 domestic
equity mutual funds in Taiwan between 1996 and 2009. It emerged that the funds that had performed
well in the previous year continued to do so in the following year. However, investors’ timing per­
formance was negatively related to fund performance. Watson and Funck (2012) investigated the
trading behaviour of short-term seller and found an increase in short selling with the level of
cloudiness. They found a decrease in short selling three days prior to a cloudy day. Allen and Parwards
(2006) examined mutual fund investors’ response to merger of Australian mutual fund companies. Using
regression analysis to find the impact of mergers on different types of parties in the merger, they found
that mergers did not result in increased money flows. On the contrary, investors withdrew from target
funds prior to and after the merger.

Global Business Review, 15, 3 (2014): 493–503

Downloaded from gbr.sagepub.com by guest on August 26, 2015

An Empirical Analysis of Factors Influencing Investment in Mutual Funds in India 497

Objectives of the Present Study

The literature cited above does not discuss the investment behaviour of investors in mutual funds in the
sense that no attempt is made to extract the important underlying factors of investment, their relative
importance and their relationship with demographic variables. The present work takes care of these
limitations. Specifically, the objectives of this study are the following:

1. To understand the mutual fund buying behaviour of individual investors.

2. To identify the various attributes which investors consider important while investing in mutual
funds.
3. To extract the underlying factors of importance and their relative considerations for investors.
4. To examine whether these extracted factors vary with demographic variables.

Methodology
An exploratory research was conducted by reviewing the literature on the subject, followed by
unstructured interviews with investors and investment consultants dealing with mutual funds. All this
helped in identifying the variables on the subject. A structured questionnaire was prepared using these
variables. Eleven attributes were identified that are considered important by investors while investing in
a mutual fund. These were measured on a 5-point scale, where 1 = very unimportant, 2 = unimportant,
3 = neither important nor unimportant, 4 = important and 5 = very important. Besides the demographic
questions, there were questions on investment behaviour. The survey instrument was pretested with
15 respondents and in the light of the feedback obtained, the questionnaire was revised. An online
survey was conducted to obtain the responses. Some of the respondents were personally contacted to
fill the questionnaire. A sample of 431 useable responses was obtained. It was found that for some of
the questions, a blank was left by the respondents. Such questions were omitted from the analysis and
the sample size was reduced accordingly.
A reliability test using Cronbach’s alpha was conducted on an importance of 11 attributes measured
on interval scale. The value of Cronbach’s alpha was found to be 0.781, which is quite high. A factor
analysis was conducted on these items. The importance of factors was found by computing the average
factor score for each factor. The factor scores are compared for each of the demographic variables using
one-way ANOVA.

Results
A demographic profile of the respondent is given in Table 1.
It is clear from the Table 1 that 64.7 per cent respondents are in the age group of 25–35 years, 87.4
per cent male, 71.9 per cent postgraduate, 80.3 per cent married, 79.8 per cent working in the private
sector, 45.7 per cent with an annual family income of ` 10 lakh and above and 85.5 per cent living in
metropolitan cities. There are on an average 2.15 people working in the family, while an average of
1.42 people are financially dependent on the respondent.

Global Business Review, 15, 3 (2014): 493–503

Downloaded from gbr.sagepub.com by guest on August 26, 2015

498 Deepak Chawla

Table 1. Demographic Profile of the Respondents

Variable Description Percentage

Age (years) < 25 9.1
25–35 64.7
36–50 23.6
More than 50 2.6
Sex Male 87.4
Female 12.6
Educational qualification Graduation 28.1
Postgraduation and above 71.9
Marital status Single 39.7
Married 60.3
Profession Private sector 79.8
Public sector and government 11.7
Business 4.5
Self-employed 1.0
Any other 3.1
Annual family income Up to ` 250,000 3.4
` 250,001–500,000 16.8
` 500,001–750,000 17.3
` 750,001–1,000,000 16.8
Above ` 1,000,000 45.7
Place of current residence Metropolitan city 88.5
Non-metropolitan city 11.5
Source: Authors’ findings.

Table 2. Source of Information for Purchase of Mutual Funds

Investment Instrument Numbers Percentage* (per cent)

Recommendation of friends and family members 175 40.9
Recommendation of the broker 147 34.3
Performance record of the issuing company 242 56.5
Radio   3  0.7
Television  55 12.9
Newspaper 122 28.5
Others  88 20.6
Total 428
Source: Authors’ findings.
Note: *Total exceeds 100 per cent because of multiplicity of answers.

The sources of information for the purchase of mutual funds are given in Table 2.
The most important source of information on purchase of mutual fund is the performance record
of the issuing company (56.5 per cent), followed by recommendation of friends and family members
(40.5 per cent), the recommendation of the broker (34.3 per cent) and the newspaper (28.5 per cent).
In our study, past performance is found to be more important compared to other factors. This goes in

Global Business Review, 15, 3 (2014): 493–503

Downloaded from gbr.sagepub.com by guest on August 26, 2015

An Empirical Analysis of Factors Influencing Investment in Mutual Funds in India 499

accordance with the results of the research conducted by Bogle (1992), Ippolito (1992), Ramasamy and
Young (2003), Sikdar and Singh (1996), Singh and Chander (2004) and Wilcox (2003).
As regards the investment behaviour of consumers, it is seen that 87.4 per cent of the respondents
themselves take investment decisions. Approximately 33 per cent of the respondents save more than
` 200,000 annually, whereas about 30 per cent save ` 50,000–100,000. More than 45 per cent of the
respondents spend less than 25 per cent, whereas about 34 per cent spend 26–40 per cent of their saving
in mutual funds. About 52 per cent of respondents monitor the performance of the mutual funds that they
have invested in less than once a month, whereas 22 per cent do it 1–3 times a month.
The respondents were asked to state the two most important funds for investment in mutual funds (see
Table 3). It is seen that the most preferred fund is growth fund (78.1 per cent), followed by tax saving
funds (68.4 per cent) and balanced funds (20.2 per cent).
When asked to state the motives for investment in mutual funds, the most important reason
was tax savings (68.3 per cent) higher returns (59 per cent) and capital appreciation (54.3 per cent;
see Table 4).
Tax saving was also found to be an important factor in the study of Sikdar and Surjit (1996). Besides
mutual funds, investment in shares, PPF, FDs and the NSC were considered important instruments of
investment by 71, 66.4, 48.7 and 29 per cent of respondents respectively (see Table 5).

Table 3. Two Most Important Funds of the Investors

Investment Instrument Numbers Percentage* (per cent)

Balanced fund  87 20.2
Growth fund 336 78.1
Debt funds  11  2.6
Tax saving funds 294 68.4
Sectoral funds  70 16.3
Income fund  25  5.8
Others   9  2.1
Total 430
Source: Authors’ findings.
Note: *Total exceeds 100 per cent because respondents were asked to choose two responses.

Table 4. Motive for Investment in Mutual Funds

Investment Instrument Numbers Percentage* (per cent)

Tax saving 293 68.3
Regular income  51 11.9
Capital appreciation 233 54.3
Higher returns 253 59.0
Safety  67 15.6
Others  14 3.3
Total 429
Source: Authors’ findings.
Note: *Total exceeds 100 per cent because of multiplicity of answers.

Global Business Review, 15, 3 (2014): 493–503

Downloaded from gbr.sagepub.com by guest on August 26, 2015

500 Deepak Chawla

Table 5. Investment in Various Instruments besides Mutual Fund

Investment Instrument Numbers Percentage* (per cent)

Shares 296 71.0
Bonds  74 17.7
Post office savings 112 26.9
NSC 121 29.0
FDs 203 48.7
PPF 277 66.4
Others  61 14.6
Total 417
Source: Authors’ findings.
Note: *Total exceeds 100 per cent because of multiplicity of answers.

The PPF and NSC are also considered important in the work of Singh and Vanita (2002), where in fact
these instruments are rated higher than mutual funds. The FDs and post office savings are also rated
higher than mutual funds in the research of Santhi and Gurunathan (2011).
Out of the 11 attributes considered, past performance, reputation of the company issuing the fund,
portfolio of the investment, tax benefits and transparency of fund manager were considered important by
93, 84.9, 84.6, 71.9 and 71.5 per cent respectively. Add-ons provided by the funds were important only
to 24 per cent of the respondents.
A factor analysis was conducted on the 11 attributes. The Kaiser-Meyer-Olkin (KMO) statistic was
found to be 0.85 (> 0.5) and Bartlett’s test of sphericity was found to be significant. These showed that
the conditions for applicability of factor analysis were satisfied.
There were two factors that were extracted using principal component method explaining 45.256
per cent total variations. The principal component matrix was rotated and a factor loading above 0.5
was used for naming the two factors. The rotated component matrix is presented in Table 6.
The first factor comprised variables—past performance record, performance of portfolio manager,
reputation of company issuing fund, portfolio of investment, favourable rating by rating agency and

Table 6. Rotated Component Matrix

Attribute Component 1 Component 2

Past performance record  0.773 0.123
Entry and exit load  0.125 0.527
Performance of the portfolio manager  0.678 0.120
Reputation of the company issuing the fund  0.571 0.311
Portfolio of the investment  0.759 0.118
Favourable rating by rating agency  0.611 0.098
Transparency of fund manager  0.698 0.140
Add-ons provided by the funds –0.013 0.671
Declaration of NAV on daily basis  0.359 0.407
Lock in period of the closed-ended funds  0.109 0.735
Tax benefits available on MF  0.313 0.549
Source: Authors’ findings.

Global Business Review, 15, 3 (2014): 493–503

Downloaded from gbr.sagepub.com by guest on August 26, 2015

An Empirical Analysis of Factors Influencing Investment in Mutual Funds in India 501

transparency of the fund manager. This factor was named as ‘credibility of the fund’ and explained
27.942 per cent of the variations. The second contained the variables—entry and exit load, add-on
provided by the mutual fund, lock-in period of closed ended funds and tax benefits available on mutual
funds. This factor was named as ‘miscellaneous features of the fund’ and accounted for 17.314 per cent
of the variations.
The average factor score for the two extracted factors was computed as 4.07 and 3.46 for the factors
credibility of funds and miscellaneous features of fund, respectively. This shows that the credibility of
fund is considered to be the most important factor while investing in a mutual fund.
As mentioned earlier, to determine whether the two factors vary across demographic variables such
as age, sex, educational qualification, marital status, profession and income, a one-way ANOVA is
performed with factor score as dependent variable and each of the demographic variables as factor. It is
found that the credibility of the fund significantly varies with gender and profession (p value less than
0.05). This is significantly higher for male investors compared to female investors. The results are in line
with the work of Barker and Odean (2001) and Powell and Ansic (1997), where they state that women
are less able as decision makers. When it comes to profession, it is seen that businessmen are most
concerned with the credibility of fund, followed by the public sector and the government employees. The
self-employed are least bothered about it. Among the remaining demographic variables, there was no
statistical difference. In case of the second factor, namely, miscellaneous features of the fund, it is found
that significant variations exist in case of age, educational qualification and marital status. As regards the
second factor, that is, miscellaneous features of the fund, single persons attach significantly higher
importance to it than married people. This is not surprising, as married people, because of increased
family responsibilities, would have already invested elsewhere in miscellaneous features provided by the
fund. This could perhaps be the reason for their lack of interest in this factor. Further, it is observed that
graduates show more interest in the miscellaneous features than postgraduates. The interest of younger
investors (aged less than 25) is the highest in this factor and it reduces with age. A plausible reason for
this could be that with age, added responsibilities creep in and accordingly, they already invest in these
features and do not wait for mutual funds to come up with these facilities.

Interpretation of Results and Recommendations

It has been found that past performance of the issuing company, tax-saving funds and growth funds
with capital appreciation are the important considerations for investors in a mutual fund. It is
surprising to know from our study that more than 54 per cent of investors want a capital appreciation
and higher return along with tax savings and low risk. This shows that investors have very high
expectations from the fund managers, whom they expect to generate a high return with minimum
possible risk. This is contradictory to the famous theory in finance that ‘high return is associated with
high risk’. Since the mutual funds face under constant pressure to invest in securities that are likely to
give much higher returns than the risk-free instruments. As the cost of capital to the investor is much less
in risk-free investments, which is just the risk-free rate, the return from mutual fund is risk-free rate
plus risk premium. Mutual fund companies would succeed if they are able to provide premium to the
investors. Otherwise, it will be difficult for them to compete with the risk-free instruments. This is more
the case with equity schemes and growth schemes. Our result is concurrent with many researchers who

Global Business Review, 15, 3 (2014): 493–503

Downloaded from gbr.sagepub.com by guest on August 26, 2015

502 Deepak Chawla

have conducted research in different periods, which shows that past performance is an important factor
for investment by the investors and majority of the investors themselves take investment decisions.
Therefore, fund managers put all their efforts to generate high returns to have a stable record of
performance and have competitive advantage. It may be worth noting that investment in mutual funds if
redeemed after one year of investment is tax free. This aspect may be highlighted while advertising for
mutual funds.
The results indicate that two factors are considered important by investors while investing in mutual
funds. These, in order of importance, are credibility of fund and miscellaneous features of fund. Since
the results have indicated that the general public, business people and employees of public sector and
government attach a lot of importance to the credibility of the fund, the credibility factor should be
emphasized at the time of issuing mutual funds.
The second factor, namely, the miscellaneous features of the fund, is considered important by younger,
unmarried people. This factor comprises of variables like entry and exit load, add-ons provided by the
funds, lock-in period of the closed-ended funds and tax benefits available on mutual funds. All these
variables are considered very important by most of investors with the exception of add-ons provided by
the mutual funds which is considered important by slightly above 50 per cent respondents.

Limitations and Suggestions for Future Research

The main limitations of the study are that the sample is skewed towards respondents residing in
metropolitan cities (Delhi, Mumbai, Kolkatta, Chennai and Banglore), with annual family income of
more than ` 10 lakh, working in the private sector, in the age group 25–35 years, with postgraduate
degree and above. It is seen that 88.5 per cent of respondents reside in metropolitan cities 45.7 per cent
have income above ` 10 lakh, about 80 per cent work for the private sector, 65 per cent are in the age of
25–35 years and 72 per cent with postgraduate degrees. The sample could have been more representative.
Further, it is known that mutual funds are meant for small investors with meagre savings and low income.
This is not the case in this study. Therefore, it may be difficult to generalize these results.
It is suggested that the study may be replicated with the majority of respondents from middle income
and lower category belonging to Tier 1, Tier 2 and Tier 3 cities of India. Further, a considerable proportion
of respondents should be from 50-plus age group, as mutual funds are perceived to be less risky, and
older people tend to be risk averse. Further, the selection of respondents from various professions should
be uniform.

Acknowledgements
The author is grateful to the anonymous referees of the journal for their extremely useful suggestions to improve the
quality of the article. Usual disclaimers apply.

References
Alexander, Gordan J., Jones, Jonathan D., & Nigro, Peter J. (1997). Mutual fund investing through employee
sponsored pension plans—invest knowledge and policy implications. Managerial Finance, 23(8), 5–29.
Allen, David E., & Parwada, Jerry T. (2006). Investor’s response to mutual fund company mergers. International
Journal of Managerial Finance, 2(2), 121–135.

Global Business Review, 15, 3 (2014): 493–503

Downloaded from gbr.sagepub.com by guest on August 26, 2015

 An Empirical Analysis of Factors Influencing Investment in Mutual Funds in India 503

Arugaslan, Omar, Edwards, Ed., & Samant, Ajay (2008). Risk adjusted performance of international mutual funds.
Managerial Finance, 34(1), 5–22.
Badrinath, Swaminathan G., & Gubelline, Stefano (2012). Does conditional mutual fund outperformance exist?
Managerial Finance, 38(12), 1160–1183.
Barker, B.M., & Odean, T. (2001). Boys will be boys: gender overconfidence, and common stock investment.
Quarterly Journal of Economics, 116(1), 261–292.
Bogle, J.C. (1992). Selecting equity mutual funds. The Journal of Portfolio Management, 18(2), 94–110.
Chang, C., Edward, Nelson, Walt A., & Witte, H. Doug (2012). Do green mutual funds perform well? Management
Research View, 35(8), 693–708.
Drachter, Kerstin, Kemf, Alexander, & Wagner, Michael (2007). Decision process in German mutual fund compa-
nies: evidence from a telephone survey. International Journal of Managerial Finance, 3(1), 49–69.
Feverborn, Thomas A. (2001). Misplaced marketing. Journal of Consumer Marketing, 18(1), 7–9.
Gupta, L.C. (1993). MutualFunds and Asset Preferences: Household Investor Survey 2nd Round. New Delhi:
Society for Capital Market Research and Development.
Ippolito, R. (1992). Consumers reaction to measures of poor quality: evidence from mutual funds. Journal of Law
and Economics, 35(1), 45–70.
Mehry, K.D. (2004). Problems of mutual funds in India. Finance India, 18(1), 220–224.
Oakley, J.G. (2000). Gender based barriers to senior management positions: understanding the scarcity of female
CEOs. Journal of Business Ethics, 27(4), 321–334.
Pollet, Joshnu M., & Wilson, Mungo (December 2008). How does size affect mutual fund behavior? The Journal of
Finance, LXIII(6), 2941–2969.
Powell, M., & Anisic, D. (1997). Gender differences in risk behavior in financial decision-making: are women really
more risk averse? American Economic Review, l(89), 381–385.
Ramasamy, B., & Young, M.C.H. (2003). Evaluating mutual funds in an emerging markets: factors that matter to
financial advisors. International Journal of Bank Marketing, 21(3), 122–136.
Santhi, N.S., & Gurunathan, K. Balanaga (2011). An analysis of investors’ attitude towards tax saving mutual funds
in India. European Journal of Economics, Finance and Administrative Sciences, (41), 54–64.
Sikdar, S., & Singh, A.P. (1996). Financial services: investment in equity and mutual funds—a behavioural study.
In B.S. Bhatia & G.S. Batra (Eds), Management of Financial Services (Chapter 10, pp. 136–145). New Delhi:
Deep and Deep Publications.
Singh, J., & Chander, S. (2004). An empirical analysis of perception of investors towards mutual funds. Finance
India, XVIII(4), 1673–1692.
Singh, Y.P., & Vanita. (2002). Mutual fund investors’ perceptions and preferences. A Survey, 55(3), 8–20.
Stanley, A.M., Baird, S.B., & Frye, M.B. (2003). Do female mutual fund managers manage differently? The Journal
for Financial Research, XXVI(1), 1–18.
Sunden, A.E., & Surette, B.J. (1998). Gender differences in the allocation of assets in retirement savings plans.
American Economic Review, 88, 207–211.
Tony, Chieh-Tse, H. (2012). Return persistence and investment timing decisions in Taiwanese domestic equity
mutual funds, Managerial Finance, 38(9), 873–891.
Trainor, W.J. (2012). Performance measurement of high yield bond mutual funds. Management Research Review,
33(6), 609–619.
Watson, E., & Funck, M.C. (2012). A cloudy day in the market: short selling behavioural bias or trading strategy.
International Journal of Managerial Finance, 8(3), 238–255.
Wilcox, R.T. (2003). Bargain hunting or star gazing? Investors’ preferences for stock mutual funds, Journal of
Business, 70(4), 645–663.

Global Business Review, 15, 3 (2014): 493–503

Downloaded from gbr.sagepub.com by guest on August 26, 2015

View publication stats