Theoretical framework

Mutual funds investors have different perception towards the mutual funds according to their
demographic factors as well as purpose of investment and responsible factors of investment
decision on mutual funds. Moreover in recent years, mutual funds have taken initiative to
improve investor's services. While seeing the mobilization of resources by the mutual fund
industry in the recent years, it appears that the investors have gained confidence in the industry.
Hence an attempt was made to evaluate the growth and performance of mutual fund industry in
Nepal along with the behavior of their returns and the risk associated with the funds. In fact,
mutual funds have designed an extensive range of mutual fund schemes to meet the diverse
needs of a multitude of investors.

During the past two decades, the Nepalese mutual fund industry has witnessed major
transformation. It has grown several folds in terms of resource mobilization, number of mutual
fund schemes, assets under management, number of investors and the range of products and
services offered to the investors. With the entry of different private sector mutual funds the
industry has become far more competitive. The range of financial assets available to the house
hold sector competes with each other for the attraction of small investors. They entice them to
invest their funds by providing incentives and facilities in terms of flexible investment options
and withdrawal plan. Each instrument has its own return, risk, liquidity and safety profile.
Mutual Funds come into this category. Small investors cannot afford to own scripts of top
companies to maximize their returns. It is a vague situation that develops a question in the minds
of investors upon whom an average investor should rely or else, what should be the criteria to
distinguish better mutual funds from the others from the investment point of view. Hence, this
study is needed to identify the impact of demographic factors on the investment objectives of
small active investors.

Joseph and Joseph (2015) identified 22 variables were classified under four heads as knowledge
awareness, regulation & transparency, convenience & flexibility and return & affordability based
on the facto loading. Kaur (2014) extracted overall 11 factors into the 3 significantly loaded on
factors which are first Mutual funds are transparent, second Mutual funds are transparent,
beneficial and provide entry into blue chip companies and last one is Utilization of Idle resources
to beat the uncertain future monetary benefits. Likewise Jambodekar (1996), Jalandhar,
Gobindgarh, & Mohali (2011), Kandavel (2011), Simran, Bimal and Ramandeep (2011), Vyas
and Moonat (2012), Rekha (2012), Das (2012), Vyas (2012), Shraddha (2013), Kumar &Goel
(2014), Sundar and Prakash (2014), Joseph and joseph (2015), Hassan &Fazili (2019), Arathy et.
al. (2015) and Mane (2016) conducted the study on investor's perception of mutual funds with
the respect to the demographic factors. The studies reveal that the buying intent of a mutual fund
product by a small investor can be due to multiple reasons depending upon customer’s
knowledge and awareness, regulation and transparency, convenience and flexibility and return
and affordability and investors’ perception is dependent on the demographic profile. So, the
present study derive theoretical framework as follows.

Demographic Factors

Age
Gender
Education background
Education level
Income level
Annual saving
Occupation

Investor's Perception toward

Mutual Funds
Perceptual Factors

Transparency & Efficiency

Knowledge & Awareness
Suitability & Regulation
Service & Return
Flexibility & Convenience
Diversification & Safety
Questionsto collect Demographic information(Name, Age, Gender, Income Level,
Education Level, Education background, Annual Saving, and Occupation)
Name: Date:
Education Background: Age:
Education Level: Occupation:
Gender: Income Level:
Annual Saving:

Perceptual Factors of Mutual Fund investors for the study.

Scale of 1 to 5, where 1 Strongly Disagree, 2 Disagree, 3 Neutral, 4 Agree and 5 Strongly Agree
Perceptual factors of mutual fund investors

Statement 1 2 3 4 5
MF involves less transaction cost.
MFs provide a shield against risk loss than to direct investment in
shares.

Past performance of the scheme does not guarantee future performance

of scheme.

Public sector mutual fund players are more secure than private sector
players

MF units involve investment risk including the possible loss of principal

amount.
MFs are suitable for small investors.
MFs have failed to provide adequate return in investments to me.
The private sector mutual funds have benefitted the investors by
providing them more options and better services.

Mutual fund investment helps diversification and reduction of risk.

Mutual funds provide the service of experienced and skilled
professionals in fund management.

Good structural requirements of mutual fund ensure the investors

protection.

Fund managers keep track of investments and changes in market conditions.

Day to day disclosure of NAV by the funds is really beneficial for me.

Flexibility in investment pattern attracts me.

Disclosure norms prescribed by SEBON is significant factors in investor

services.
Loads and taxes reduce the investor’s return that is earned by the scheme.

Investment in mutual funds by MC’s are based on adequate research and

after ensuring prudent process.
SEBON and other controlling bodies are effective in regulating the mutual
fund market.
The mutual funds are quite wrongly promoted as an alternative to equity
investing and create very high expectations in the minds of the investors.
One can invest or withdraw funds according to its necessity and
convenience.
Reputation of MC, is the important quality I look forward before investing in
a fund.
Mutual fund is an ideal option for individual investors who do not have the
time, knowledge & expertise in the stock market.