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Project Title

Study of demographic factors affecting consumers buying behavior

towards Mutual Funds in India

A Project Submitted to University of Mumbai for partial completion of degree of

Masters of Commerce

Unde4r the Faculty of Commerce

Presented by

Arnold Rose

Roll no- 638

Under the Guidance of

Dr Arun Poojari

Lala Lajpat Rai College of Commerce and Economics

Mahalaxmi Mumbai – 400034

November 2018

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CERTIFICATE

This is to certify that Mr. Arnold Rose has worked and duly completed his project work for the
degree of Masters in Commerce under the Faculty of Commerce and his project is entitled,
“Study of demographic factors affecting consumers buying behavior towards Mutual
Funds in India” under my supervision. I further certify that the entire work has been done by
the learner under my guidance and that no part of it has been submitted previously for any
Degree or Diploma of any University.

It is his own work and facts reported by his personal findings and investigations.

Name and Signature of

Dr Arun Poojari

Date of Submission

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CERTIFICATE EXAMINER

I hereby certify that the work which is being presented in the M.COM Internal Project Report
entitled “Study of demographic factors affecting consumers buying behavior towards
Mutual Funds in India” in partial fulfillment of the requirements for the award of the Master of
Commerce in Management and submitted to the Lala Lajpat Rai College of Commerce and
Economics Mahalaxmi, Mumbai – 400034 is an authentic record of my own work carried out
under the supervision of Dr. Arun Poojari. The matter presented in this Project Report has not
been submitted by me for the award of any other degree elsewhere.

Signature of External Examiner with name and date:

Signature of Internal Examiner with name and date:

Signature of supervisor/Guide teacher with name and date:

Signature of student with name and date:

College Stamp Principal

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DECLARATION BY LEARNER

I the undersigned Mr. Arnold Rose here by, declare that the work embodied in this project work
titled “Study of demographic factors affecting consumers buying behavior towards Mutual
Funds in India” forms my own contribution to the research work carried out under the guidance
of Dr. Arun Poojari is a result of my own research work and has not been previously submitted
to any other University for any other Degree/diploma to this or any other University.
Whenever reference has been made to previous works of others, it has been clearly indicated as
such and included in the bibliography.
I hereby further declare that all information of this document has been obtained and presented in
accordance with academic rules and ethical conduct.

Name and Signature of the learner

(Mr. Arnold Rose)

Certified by
Name and Signature of the Guiding Teacher
(Dr. Arun Poojari)

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ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the depth is so
enormous.
I would like to acknowledge the following as being idealistic channels and fresh dimensions in the
completion of this project.
I take this opportunity to thank the University of Mumbai for giving me chance to do this project.
I would like to thank my Principal, Dr. Arun Poojari for providing the necessary facilities required
for completion of this project.
I take this opportunity to thank our Coordinator, for his moral support and guidance.
I would also like to express my sincere gratitude towards my project guide Dr.Arun Poojari who
guidance and care made the project successful.
Lastly I would like to thank each and every person who directly or indirectly helped me in the
completion of the project especially my Parents and Peers who support me throughout my project.

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Content Page No
Chapter 1:Introduction 7
 Abstract 7
 Introduction 9
 History 11
 Concept of Mutual Funds 15
 Role of Mutual Funds 15
 How do Mutual Funds operate? 16
 Advantages of Mutual Funds 18
 Limitations of a Mutual Funds 21
 Types of Mutual Funds 22
 Legal Structure of Mutual Funds 36
Chapter 2:Research Methodology 39
 Need for research 39
 Objectives 39
 Data Collection 39
 Limitation 40
Chapter 3: Review of Literature 41
 Introduction 41
 Literature Review 41
Chapter 4: Data Analysis & Interpretation 49
 Age 49
 Education 50
 Occupation and Income 51
 Residential Location 52
 Tabular Data 55
 Awareness & Knowledge about Mutual Funds 56
 Investment done in Mutual Funds or Other Financial or Physical Assets 59
 Perceptions towards Mutual Funds 60
 Sources of Investment Advice 65
 Feedback towards Mutual Funds 66
Chapter 5: Conclusion 74
Chapter 6: Appendix 75
 Webliography 75
 Bibliography 75
 Questionnaire 75

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Chapter 1: Introduction to Mutual Funds

Abstract

“Someone's sitting in the shade today because someone planted a tree a long time ago.”
- Warren Buffett

The Indian stock market is the oldest stock market in Asia. The individual investor plays
an important role in the stock market because of the big share of their savings are invested in the
country. The investors’ decision is always based on risk and return relationship. An individual
invests in the stock market at high risk because he/she tends to look at the higher possible return
from the investment. The behavioral finance considers attempt to understand how emotions and
cognitive errors influence individual investors’ behavior. The study attempts to understand the
behavior of individual investors in Indian stock market, specifically their attitude and perception
with respect to the stock market.
The objective is also to identify the preferred source of information influencing
investment decision and to access the psychology of investors in different market situations. The
research is descriptive in nature. The sources of information are both primary & secondary.
There will be the positive relationship between market condition and decision making of
investors with respect to Indian stock market. Investing may offer expressive benefits like status
and feelings of social responsibility besides utilitarian benefits like low risk in combination with
high returns. Investor behavior is characterized by overexcitement and overreaction in a volatile
market.
Investors get carried away by the financial magazine ratings, media impact, tips from
share brokers, friends and others and the sources of information were not adequately tapped. The
goal of financial independence and wealth drive millions of investors to seek out vehicles by
which success may be achieved through any investment avenue. Investors have more socially
oriented needs, which can have important implications for their decision making process.

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In this paper investor behavior is analyzed whether they behave rationally or irrationally
towards various capital market information like bonus issue, rights issue, dividend declaration
etc. The result show that investors behave rationally towards specific capital market information.
Mutual fund is a pool of money of investors who, based on the trust they have in
investment advisors or firms, invest their savings into different market securities such as shares,
debentures, bonds, foreign markets with an aim to achieve a common goal like, capital
appreciation and dividend earning. The objective of these papers is to find the factors that
influence the behavior of mutual fund investors while investing in mutual funds including the
factors that stops the investors to invest in mutual funds and to study the impact of demographics
like age, gender, marital status, occupation, income & educational qualification on the behavior
of mutual fund investors.
This paper examines the behavior of mutual fund investors for which survey has conducted in
Mumbai among 50 respondents through a structured Questionnaire which resulted in the
identification of 4 factors governing investor behavior namely investment through SIP, high
management cost, company’s portfolio, company’s return policies & Company image. Also, the
middle income groups respondents prefer mutual funds as a prior source of investment because
by investing in mutual funds they are enable to earn a better rate of return with lesser risk.
It is more reachable to the investors as the funds do not get invested in one sector but gets
diversified to many sectors. The diversification happens in a professional method. This research
paper focused attention on number of factors that highlights investor’s perception about mutual
fund. The study of the research is on Investor behavior towards mutual funds. From the research
it is found that the majorities of investors are male and are businessmen. The research done was a
primary research from 60 respondents with convenience sampling method. It stated that more
people were aware of mutual fund because of advertisements and social media. This Research
denoted that there was a frequent investment in mutual funds compared to other investment
sectors.

INTRODUCTION

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Indian Mutual Fund industry is growing at a faster rate. People start investing their money in
variety of investment avenues so as to earn profit. They prefer to invest in shares, Bond,
debentures, equity, real estate, stock market, gold, fixed deposits, mutual funds and many more.
Mutual fund is a type of investment in which money is invested by the investors and this money
is used to purchase securities, shares and debentures. Mutual funds are a way to invest in shares
and bonds. The investor will either gain or lose money in mutual funds. These are generally long
term investment options. There are different types of Mutual Funds.
But most common are open ended or close ended. An investor can buy open ended
mutual funds at any time and can sell back to the fund as and when he wants. Whereas, close
ended funds are available for a limited period and the investor cannot sell them back to the fund.
Instead, an investor has to sell them to another investor. The value of the mutual funds is
determined as Net Asset Value (NAV). NAV is calculated at total amount of Mutual Funds, by
dividing it with number of shares issued and outstanding shares on daily basis.
The companies that invest its clients' pooled fund into securities that match its declared financial
objectives are called AMC (Asset Management Company). AMC works on the directions of
SEBI.
Security and Exchange Board of India (SEBI), is a government organization that set the
objectives and regulates the working of different organizations related to bonds, shares, stock
market, mutual funds. Investment in mutual fund can be done through two ways, i.e. LIP and
SIP. LIP is a plan in which user has to invest the whole amount in one go called Lump Sum
Investment Planning and SIP is the plan of investing the same amount of money every month
over an extended period of time regardless of whether the market is up or down is known as
Systematic Investment Plan (SIP).
Mutual Fund gives us four good reasons for investing through SIP.

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As there is no legal definition of mutual fund, the term is frequently applied only to those
collective investments that are regulated, available to the general public and open-ended in
nature. Mutual funds have both advantages and disadvantages compared to direct investing in
individual securities. Today they play an important role in household finances.
The study explains about investors’ awareness towards mutual funds, investor perceptions, their
preferences and the extent of satisfaction towards mutual funds. Some suggestions were also
made to increase the awareness towards mutual funds and measures to select appropriate mutual
funds to maximize the returns.
Unit Trust of India is the first mutual fund set up under a separate act, UTI Act in 1963, and
started its operations in 1964 with the issue of units under the scheme US-64. In India, mutual
funds must be registered with Securities Exchange Board of India (SEBI) is the regulatory body
for all the mutual funds. The only exception is the UTI, since it is a corporation formed under a
separate Act of Parliament. Mutual funds have both advantages and disadvantages compared to
direct investing in individual securities. Today they play an important role in household finances.

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History

A Dutch merchant, Adriaan van Ketwich, had the foresight to pool money from a number of
subscribers to form an investment trust – the world’s first mutual fund – in 1774. The financial
risk to the mainly small investors was spread by diversifying across a number of European
countries and the American colonies, where investments were backed by income from
plantations, an early version of today’s mortgage-backed securities.

Subscription to the closed-end fund, which Van Ketwich called “Eendragt Maakt Magt” (“unity
creates strength”), was available to the public until all 2,000 units were purchased. After that,
participation in the fund was available only by buying shares from existing shareholders in the
open market. The fund’s prospectus required an annual accounting, which investors could view
if they requested. Two subsequent funds set up in the Netherlands increased the emphasis on
diversification to reduce risk, escalating their appeal to even smaller investors with minimal
capital.

Van Ketwich’s fund survived until 1824 but the vehicle he created is still a hallmark of personal
investing more than two centuries later with an estimated $27.86 trillion US in global assets in
July 2013. In Canada alone, mutual funds represent $1.43 trillion.

The early mutual funds spread were of the closed-end variety, issuing a fixed number of shares.
They spread from the Netherlands to England and France before heading to the U.S. in the
1890s.

The first mutual fund outside the Netherlands was the Foreign & Colonial Government Trust,
which was established in London in 1868. Mutual funds were introduced into the United States
in the 1890s. They became popular during the 1920s. These early funds were generally of the
closed-end type with a fixed number of shares which often traded at prices above the value of the
portfolio. The first open-end mutual fund with redeemable shares was established on March 21,
1924

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Mutual Funds in India

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the
initiative of the Government of India and Reserve Bank of India. The history of mutual funds in
India can be broadly divided into four distinct phases

First Phase - 1964-1987

Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. It was set up by the
Reserve Bank of India and functioned under the Regulatory and administrative control of the
Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development
Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The
first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs. 6,700
crores of assets under management.

Second Phase - 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non-UTI, public sector mutual funds set up by public sector banks and
Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC).
SBI Mutual Fund was the first non-UTI Mutual Fund established in June 1987 followed by Can
bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual
Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established
its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.

At the end of 1993, the mutual fund industry had assets under management of Rs. 47,004 crores.

Third Phase - 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being, under which all mutual funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector mutual fund registered in July 1993.

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The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual
Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds setting
up funds in India and also the industry has witnessed several mergers and acquisitions. As at the
end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The
Unit Trust of India with Rs. 44,541 crores of assets under management was way ahead of other
mutual funds.

Fourth Phase - since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated
into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets
under management of Rs. 29,835 crores as at the end of January 2003, representing broadly, the
assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of
Unit Trust of India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with
SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile
UTI which had in March 2000 more than Rs. 76,000 crores of assets under management and with
the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and
with recent mergers taking place among different private sector funds, the mutual fund industry
has entered its current phase of consolidation and growth.

The graph indicates the growth of assets over the years.

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AUM of the industry, as of January 2017 has touched Rs. 17, 37, 087 crores from 2244 schemes offered
by 41 mutual funds. These were distributed as follows:

(In Crores)

Types of Open-Ended Close-Ended Interval Total Percent of

Schemes Total
INCOME 636,538 141,472 5,768 783,778 45
INFRA DEBT - 1,876 - 1,876 @
EQUITY 423,245 19,565 - 442,810 26
BALANCED 71,021 - - 71,021 4
MONEY 321,889 - - 321,889 19
MARKET/LIQU
ID
GILT 16,907 - - 16,907 1
ELSS 50,471 3,415 - 53,886 3
GOLD ETF 5,670 - - 5,670 @
OTHER ETFS 37,412 - - 37,412 2
FUND OF 1,838 - - 1,838 @
FUNDS
INVESTING
OVERSEAS
TOTAL 1,564,991 166,328 5,768 1,737,087 100

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Concept of Mutual Fund

Mutual fund is a vehicle to mobilize money from investors, to invest in different markets and
securities, in line with the investment objectives agreed upon, between the mutual fund and the
investors. In other words, through investment in a mutual fund, an investor can get access to
markets that may otherwise be unavailable to them and avail of the professional fund
management services offered by an asset management company.

Roles of Mutual Funds

Mutual funds perform different roles for the different constituents that participate in it.
Their primary role is to assist investors in earning an income or building their wealth, by
participating in the opportunities available in various securities and markets. It is possible for
mutual funds to structure a scheme for different kinds of investment objectives. Thus, the mutual
fund structure, through its various schemes, makes it possible to tap a large corpus of money
from investors with diverse goals/objectives.
Therefore, mutual funds offer different kinds of schemes to cater to the need of diverse investors.
In the industry, the words ‘fund’ and ‘scheme’ are used inter-changeably. Various categories of
schemes are called “funds”. In order to ensure consistency with what is experienced in the
market, this workbook goes by the industry practice. However, wherever a difference is required
to be drawn, the scheme offering entity is referred to as “mutual fund” or “the fund”.
The money that is raised from investors, ultimately benefits governments, companies and other
entities, directly or indirectly, to raise money for investing in various projects or paying for
various expenses.
The projects that are facilitated through such financing, offer employment to people; the income
they earn helps the employees buy goods and services offered by other companies, thus
supporting projects of these goods and services companies. Thus, overall economic development
is promoted.

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As a large investor, the mutual funds can keep a check on the operations of the investee
company, and their corporate governance and ethical standards.
The mutual fund industry itself, offers livelihood to a large number of employees of mutual
funds, distributors, registrars and various other service providers.
Higher employment, income and output in the economy boost the revenue collection of the
government through taxes and other means. When these are spent prudently, it promotes further
economic development and nation building.
Mutual funds can also act as a market stabilizer, in countering large inflows or outflows from
foreign investors. Mutual funds are therefore viewed as a key participant in the capital market of
any economy.

How Do Mutual Funds Operate?

Mutual fund schemes announce their investment objective and seek investments from the
investor. Depending on how the scheme is structured, it may be open to accept money from
investors, either during a limited period only, or at any time.
The investment that an investor makes in a scheme is translated into a certain number of ‘Units’
in the scheme. Thus, an investor in a scheme is issued units of the scheme.
Typically, every unit has a face value of Rs. 10. (However, older schemes in the market may
have a different face value). The face value is relevant from an accounting perspective. The
number of units issued by a scheme multiplied by its face value (Rs. 10) is the capital of the
scheme – its Unit Capital.
The scheme earns interest income or dividend income on the investments it holds. Further, when
it purchases and sells investments, it earns capital gains or incurs capital losses. These are called
realized capital gains or realized capital losses as the case may be.
Investments owned by the scheme may be quoted in the market at higher than the cost paid. Such
gains in values on securities held are called valuation gains. Similarly, there can be valuation
losses when securities are quoted in the market at a price below the cost at which the scheme
acquired them.
For running the scheme of mutual funds, operating expenses are incurred. Investments can be
said to have been handled profitably, with the following metric:

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(A) +Interest income (B) + Dividend income (C) + Realized capital gains (D) + Valuation gains
(E) – Realized capital losses (F) – Valuation losses (G) – Scheme expenses
When the investment activity is profitable, the true worth of a unit increases; when there are
losses, the true worth of a unit decreases. The true worth of a unit of the scheme is otherwise
called Net Asset Value (NAV) of the scheme. The concept of NAV is elaborated in Chapter6.
When a scheme is first made available for investment, it is called a ‘New Fund Offer’ (NFO).
During the NFO, investors get the chance of buying the units at their face value. Post-NFO,
when they buy into a scheme, they need to pay a price that is linked to its NAV.
The money mobilized from investors is invested by the scheme in a portfolio of securities as per
the stated investment objective. Profits or losses, as the case might be, belong to the investors or
unit holders. No other entity involved in the mutual fund in any capacity participates in the
scheme’s profits or losses. They are all paid a fee or commission for the contributions they make
to launching and operating the schemes. The investor does not however bear a loss higher than
the amount invested by him.
Various investors subscribing to an investment objective might have different expectations on
how the profits are to be handled. Some may like it to be paid off regularly as dividends. Others
might like the money to grow in the scheme. Mutual funds address such differential expectations
between investors within a scheme, by offering various options, such as dividend payout option,
dividend re-investment option and growth option. The implications of each of these options are
discussed in Chapter 7. An investor buying into a scheme gets to select the preferred option also.
The relative size of mutual fund companies is assessed by their assets under management
(AUM). When a scheme is first launched, assets under management is the amount mobilized
from investors. Thereafter, if the scheme has a positive profitability metric, its AUM goes up; a
negative profitability metric will pull it down.
Further, if the scheme is open to receiving money from investors even post-NFO, then such
contributions from investors boost the AUM. Conversely, if the scheme pays any money to the
investors, either as dividend or as consideration for buying back the units of investors, the AUM
falls.
The AUM thus captures the impact of the profitability metric and the flow of unit-holder money
to or from the scheme.

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Advantages to Mutual Fund Investors

Professional Management
Mutual funds offer investors the opportunity to earn an income or build their wealth through
professional management of their investible funds. There are several aspects to such professional
management viz. investing in line with the investment objective, investing based on adequate
research, and ensuring that prudent investment processes are followed.
Investing in the securities markets will require the investor to open and manage multiple
accounts and relationships such as broking account, demat account and others. Mutual fund
investment simplifies the process of investing and holding securities.

Affordable Portfolio Diversification

Investing in the units of a scheme provide investors the exposure to a range of securities held in
the investment portfolio of the scheme in proportion to their holding in the scheme. Thus, even a
small investment of Rs. 500 in a mutual fund scheme can give investors proportionate ownership
in a diversified investment portfolio.
As will be seen in Chapter12, with diversification, an investor ensures that “all the eggs are not
in the same basket”. Consequently, the investor is less likely to lose money on all the
investments at the same time. Thus, diversification helps reduce the risk in investment. In order
to achieve the same level of diversification as a mutual fund scheme, investors will need to set
apart several lakhs of rupees. Instead, they can achieve the diversification through an investment
of less than thousand rupees in a mutual fund scheme.

Economies of Scale
Pooling of large sum of money from many investors makes it possible for the mutual fund to
engage professional managers for managing investments. Individual investors with small
amounts to invest cannot, by themselves, afford to engage such professional management.
Large investment corpus leads to various other economies of scale. For instance, costs related to
investment research and office space gets spread across investors. Further, the higher transaction
volume makes it possible to negotiate better terms with brokers, bankers and other service
providers.

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Mutual funds give the flexibility to an investor to organize their investments according to their
convenience. Direct investments may require a much higher investment amount than what many
investors may be able to invest. For example, investment in gold and real estate require a large
outlay. Similarly, an effectively diversified equity portfolio may require a large outlay. Mutual
funds offer the same benefits at a much lower investment value since it pools small investments
by multiple investors to create a large fund. Similarly, the dividend and growth options of mutual
funds allow investors to structure the returns from the fund in the way that suits their
requirements.
Thus, investing through a mutual fund offers a distinct economic advantage to an investor as
compared to direct investing in terms of cost saving.
Liquidity
At times, investors in financial markets are stuck with a security for which they can’t find a
buyer – worse; at times they can’t find the company they invested in! Such investments, whose
value the investor cannot easily realize in the market, are technically called illiquid investments
and may result in losses for the investor.
Investors in a mutual fund scheme can recover the current value of the money invested, from the
mutual fund itself. Depending on the structure of the mutual fund scheme, this would be
possible, either at any time, or during specific intervals, or only on closure of the scheme.
Schemes, where the money can be recovered from the mutual fund only on closure of the
scheme, are compulsorily listed on a stock exchange. In such schemes, the investor can sell the
units through the stock exchange platform to recover the prevailing value of the investment.
Tax Deferral
As will be discussed in Chapter 6, mutual funds are not liable to pay tax on the income they earn.
If the same income were to be earned by the investor directly, then tax may have to be paid in the
same financial year.
Mutual funds offer options, whereby the investor can let the money grow in the scheme for
several years. By selecting such options, it is possible for the investor to defer the tax liability.
This helps investors to legally build their wealth faster than would have been the case, if they
were to pay tax on the income each year.

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Tax benefits
Specific schemes of mutual funds (Equity Linked Savings Schemes) give investors the benefit of
deduction of the amount subscribed (up to Rs. 150,000 in a financial year), from their income
that is liable to tax. This reduces their taxable income, and therefore the tax liability.
The Rajiv Gandhi Equity Savings Scheme (RGESS) offers a rebate to first time retail investors
(in direct equity) with annual income up to Rs. 12 lakhs. Mutual funds announce specific equity-
oriented schemes that are eligible for the RGESS benefit.
The RGESS benefit is linked to the amount invested (excluding brokerage, securities transaction
tax, service tax, stamp duty and all taxes appearing in the contract note). Rebate of 50 percent of
the amount invested up to Rs. 50,000, can be claimed as a deduction from taxable income. The
investment limit of Rs. 50,000 is applicable for a block of three financial years, starting with the
year of first investment.
Thus, if an investor invests Rs. 30,000 in RGESS schemes in a financial year, then he can reduce
his taxable income for that previous year by 50 percent of Rs. 30,000 i.e. Rs. 15,000. In the
following year, he still has an investment limit of Rs. 20,000 available. The maximum deduction
that can be made from the taxable income over the period of three financial years is 50 percent of
Rs. 50,000 i.e. Rs. 25,000.
Dividends received from mutual fund schemes are tax-free in the hands of the investors.
However, dividends from certain categories of schemes are subject to dividend distribution tax,
which is paid by the scheme before the dividend is distributed to the investor. Long term capital
gains arising out of sale of some categories of schemes are subject to long term capital gains tax,
which may be taxed at a different (and often lower) rate of tax or even entirely tax exempt.
Convenient Options
The options offered under a scheme allow investors to structure their investments in line with
their liquidity preference and tax position.
There is also great transaction conveniences like the ability to withdraw only part of the money
from the investment account, ability to invest additional amount to the account, setting up
systematic transactions, etc.

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Investment Comfort
Once an investment is made with a mutual fund, they make it convenient for the investor to make
further purchases with very little documentation. This simplifies subsequent investment activity.
Regulatory Comfort
The regulator, Securities and Exchange Board of India (SEBI), has mandated strict checks and
balances in the structure of mutual funds and their activities. These are detailed in the subsequent
chapters. Mutual fund investors benefit from such protection.
Systematic Approach to Investments
Mutual funds also offer facilities that help investor invest amounts regularly through a
Systematic Investment Plan (SIP); or withdraw amounts regularly through a Systematic
Withdrawal Plan (SWP); or move money between different kinds of schemes through a
Systematic Transfer Plan (STP). Such systematic approaches promote investment discipline,
which is useful in long-term wealth creation and protection. SWPs allow the investor to structure
a regular cash flow from the investment account.

Limitations of a Mutual Fund

Lack of portfolio customization

Some brokerages offer Portfolio Management Schemes (PMS) to large investors. In a PMS, the
investor has better control over what securities are bought and sold on his behalf. The investor
can get a customized portfolio in case of PMS.
On the other hand, a unit-holder in a mutual fund is just one of several thousand investors in a
scheme. Once a unit-holder has bought into the scheme, investment management is left to the
fund manager (within the broad parameters of the investment objective). Thus, the unit-holder
cannot influence what securities or investments the scheme would invest into.
Choice overload
Over 2000 mutual fund schemes offered by 47 mutual funds – and multiple options within those
schemes – make it difficult for investors to choose between them. Greater dissemination of
scheme information through various media channels and availability of professional advisors in
the market helps investors to handle this overload.

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No control over costs

All the investor's money is pooled together in a scheme. Costs incurred for managing the scheme
are shared by all the Unit-holders in proportion to their holding of Units in the scheme.
Therefore, an individual investor has no control over the costs in a scheme.
SEBI has however imposed certain limits on the expenses that can be charged to any scheme.
These limits vary with the size of assets and the nature of the scheme.

Types of Mutual Funds

Open-ended funds are open for investors to enter or exit at any time, even after the NFO.
When existing investors acquire additional units or new investors acquire units from the open-
ended scheme, it is called a sale transaction. It happens at a sale price, which is linked to the
NAV. When investors choose to return any of their units to the scheme and get back their
equivalent value (in terms of units), it is called a re-purchase transaction. This happens at a re-
purchase price that is linked to the NAV.
Although some unit-holders may exit from the scheme, wholly or partly, the scheme continues
operations with the remaining investors. The scheme does not have any kind of time frame in
which it is to be closed. The on-going entry and exit of investors implies that the unit capital in
an open-ended fund would keep changing on a regular basis.

Close-ended funds have a fixed maturity. Investors can buy units of a close-ended scheme, from
the fund, only during its NFO. The fund makes arrangements for the units to be traded, post-
NFO in a stock exchange. This is done through listing of the scheme in a stock exchange. Such
listing is compulsory for close-ended schemes. Therefore, after the NFO, investors who want to
buy units will have to find a seller for those units in the stock exchange. Similarly, investors who
want to sell units will have to find a buyer for those units in the stock exchange. Since post-NFO,
sale and purchase of units happen to or from counter-party in the stock exchange – and not to or
from the scheme – the unit capital of the scheme remains stable or fixed.
Since the post-NFO sale and purchase transactions happen on the stock exchange between two
different investors, and that the fund is not involved in the transaction, the transaction price is
likely to be different from the NAV. Depending on the demand-supply situation for the units of

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the scheme on the stock exchange, the transaction price could be higher or lower than the
prevailing NAV.
Interval funds combine features of both open-ended and close-ended schemes. They are largely
close-ended, but become open-ended at pre-specified intervals. For instance, an interval scheme
might become open-ended between January 1 to 15, and July 1 to 15, each year. The benefit for
investors is that, unlike in a purely close-ended scheme, they are not completely dependent on
the stock exchange to be able to buy or sell units of the interval fund. However, between these
intervals, the units have to be compulsorily listed on stock exchanges to allow investors an exit
route.
The periods when an interval scheme becomes open-ended, are called ‘transaction periods’; the
period between the close of a transaction period, and the opening of the next transaction period is
called ‘interval period’. Minimum duration of transaction period is 2 days, and minimum
duration of interval period is 15 days. No redemption/repurchase of units is allowed except
during the specified transaction period (during which both subscription and redemption may be
made to and from the scheme).

Actively Managed Funds and Passive Funds

Actively managed funds are funds where the fund manager has the flexibility to choose the
investment portfolio, within the broad parameters of the investment objective of the scheme.
Since this increases the role of the fund manager, the expenses for running the fund turn out to be
higher. Investors expect actively managed funds to perform better than the market.
Passive funds invest on the basis of a specified index, whose performance it seeks to track. Thus,
a passive fund tracking the S&P BSE Sensex would buy only the shares that are part of the
composition of the S&P BSE Sensex. The proportion of each share in the scheme’s portfolio
would also be the same as the weightage assigned to the share in the computation of the S&P
BSE Sensex. Thus, the performance of these funds tends to mirror the concerned index. They are
not designed to perform better than the market. Such schemes are also called index schemes.
Since the portfolio is determined by the index itself, the fund manager has no role in deciding on
investments. Therefore, these schemes have low running costs.
Exchange Traded Funds (ETFs) are also passive funds whose portfolio replicates an index or
benchmark such as an equity market index or a commodity index. The units are issued to the

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investors in a new fund offer (NFO) after which they are available for sale and purchase on a
stock exchange. Units are credited to the investor’s demat account and the transactions post-NFO
is done through the trading and settlement platforms of the stock exchange. The units of the ETF
are traded at real time prices that are linked to the changes in the underlying index .
Debt, Equity and Hybrid Funds
The portfolio of a mutual fund scheme will be driven by the stated investment objective of the
scheme. A scheme might have an investment portfolio invested largely in equity shares and
equity-related investments such as convertible debentures. The investment objective of such
funds is to seek capital appreciation through investment in these growth assets. Such schemes are
called equity schemes.
Schemes with an investment objective that limits them to investments in debt securities such as
Treasury Bills, Government Securities, Bonds and Debentures are called debt funds. These debt
securities are discussed in Chapter8.
Hybrid funds have an investment charter that provides for investment in both debt and equity.
Some of them invest in gold along with either debt or equity or both. This category of funds is
discussed later in this Chapter.
Other funds, such as Gold funds, Real estate funds, Commodity funds and International funds,
create portfolios that reflect their investment objectives.

Concept of Equity & Debt

Equity
Equity represents ownership in the company that has issued the shares to the extent of shares
held. Shareholders participate in the management of the company by exercising the voting rights
associated with the shares held. They also participate in the residual profits of the company i.e.
the profits remaining after all the dues and claims against the company have been met in the
form of dividends. In periods of high revenues and profits, the shareholders benefit from high
dividends that may be paid to them. However, there is no assurance given to equity holders either
that a dividend will be paid or the amount of dividend. A company may not pay a dividend to its
shareholders even if there are distributable profits if the management decides to use the profits
for expansion plans, paying off debt and other financial activities that is expected to increase the

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value of the shares of the company. Apart from dividends, equity investors benefit from the
appreciation in the value of the shares.
Investment in equity is investment in a growth-oriented asset. The primary source of return to the
investor is from the appreciation in the value of the investment. Dividends are declared by the
company when there are adequate profits and provide periodic income to the shareholders.
Debt
Debt represents the borrowings of the issuer. Debt as an asset class represents an income-
oriented asset. The major source of return from a debt instrument is regular income in the form
of interest. The interest is typically known at the time of issue and may be guaranteed either by
an undertaking of the government or by security created on the physical assets of the issuer.
The terms of the issue will determine the conditions such as the coupon or interest payable on the
debt, the tenor of the borrowing after which the borrower/issuer has to return the principal to the
lenders/investors, the security against the assets of the borrower offered as collateral, if any, and
other terms.

Types of Debt Funds

Debt funds can be categorized on the basis of the type of debt securities they invest in. The
distinction can be primarily on the basis of the tenor of the securities—short term or long term,
and the issuer: government, corporate, PSUs and others. The risk and return of the securities will
vary based on the tenor and issuer. The strategy adopted by the fund manager to create and
manage the portfolio can also be a factor for categorizing debt funds.

Gilt funds invest in only treasury bills and government securities, which do not have a credit risk
(i.e. the risk that the issuer of the security defaults). These securities pay a lower coupon or
interest to reflect the low risk of default associated with them. Long-term gilt funds invest in
government securities of medium and long-term maturities. There is no risk of default and
liquidity is considerably higher in case of government securities. However, prices of long-term
government securities are very sensitive to interest rate changes.
Corporate bond funds invest in debt securities issued by companies, including PSUs. There is a
credit risk associated with the issuer that is denoted by the credit rating assigned to the security.
Such bonds pay a higher coupon income to compensate for the credit risk associated with them.

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The prices of corporate bonds are also sensitive to interest rate changes depending upon the tenor
of the securities held.
Liquid schemes or money market schemes are a variant of debt schemes that invest only in short
term debt securities. They can invest in debt securities of up to 91 days maturity. However,
securities in the portfolio having maturity of more than 60-days need to be valued at market
prices [“marked to market” (MTM)]. Since MTM contributes to volatility of NAV, fund
managers of liquid schemes prefer to keep most of their portfolio in debt securities of less than
60-day maturity. As will be seen later in this workbook, this helps in positioning liquid schemes
as the lowest in price risk among all kinds of mutual fund schemes. Therefore, these schemes are
ideal for investors seeking high liquidity with safety of capital.
Short term debt schemes invest in securities with short tenors that have low interest rate risk of
significant changes in the value of the securities. Ultra-short term debt funds, short-term debt
funds, short-term gilt funds are some of the funds in this category. The contribution of interest
income and the gain/loss in the value of the securities and the volatility in the returns from the
fund will vary depending upon the tenor of the securities included in the portfolio.
Ultra short-term plans are also known as treasury management funds, or cash management
funds. They invest in money market and other short term securities of maturity up to 365 days.
The objective is to generate a steady return, mostly coming from accrual of interest income, with
minimal NAV volatility.
Short Term Plans combines short term debt securities with a small allocation to longer term debt
securities. Short term plans earn interest from short term securities and interest and capital gains
from long term securities. Fund managers take a call on the exposure to long term securities
based on their view for interest rate movements. If interest rates are expected to go down, these
funds increase their exposure to long term securities to benefit from the resultant increase in
prices. The volatility in returns will depend upon the extent of long-term debt securities in the
portfolio.
Long-term debt schemes such as Gilt funds and Income funds invest in longer-term securities
issued by the government and other corporate issuers. The returns from these schemes are
significantly impacted by changes in the value of the securities and therefore see greater
volatility in the returns.

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Diversified debt funds or Income fund, invest in a mix of government and non-government debt
securities such as corporate bonds, debentures and commercial paper. The corporate bonds earn
higher coupon income on account of the credit risks associated with them. The government
securities are held to meet liquidity needs and to exploit opportunities to capital gains arising
from interest rate movements.
Junk bond schemes or high yield bond schemes invest in securities that have a lower credit
rating indicating poor credit quality. Such schemes operate on the premise that the attractive
returns offered by the investee companies makes up for the losses arising out of a few companies
defaulting.
Dynamic debt funds are flexible in terms of the type of debt securities held and their tenors.
They do not focus on long or short term securities or any particular category of issuer but look
for opportunities to earn income and capital gains across segments of the debt market. Duration
of these portfolios are not fixed, but are dynamically managed. If the manager believes that
interest rates could move up, the duration of the portfolio is reduced and vice versa. Fixed
maturity plans are a kind of debt fund where the duration of the investment portfolio is closely
aligned to the maturity of the scheme. AMCs tend to structure the scheme around pre-identified
investments. Further, being close-ended schemes, they do not accept money post-NFO, therefore,
the fund manager has little ongoing role in deciding on the investment options.
As will be seen in Chapter8, such a portfolio construction gives more clarity to investors on the
likely returns if they stay invested in the scheme until its maturity (though there can be no
guarantee or assurance of such returns). This helps them compare the returns with alternative
investments like bank deposits.
Floating rate funds invest largely in floating rate debt securities i.e. debt securities where the
interest rate payable by the issuer changes in line with the market. For example, a debt security
where interest payable is described as ‘5-year Government Security yield plus 1 percent’, will
pay interest rate of 7 percent, when the 5-year Government Security yield is 6 percent; if 5-year
Government Security yield goes down to 3 percent, then only 4 percent interest will be payable
on that debt security. The NAVs of such schemes fluctuate lesser than other debt funds that
invest more in debt securities offering a fixed rate of interest.

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Types of Equity Funds

Equity funds invest in equity instruments issued by companies. The funds target long-term
appreciation in the value of the portfolio from the gains in the value of the securities held and the
dividends earned on it. The securities in the portfolio are typically listed on the stock exchange,
and the changes in the price of the securities are reflected in the volatile returns from the
portfolio. These funds can be categorized based on the type of equity shares that are included in
the portfolio and the strategy or style adopted by the fund manager to pick the securities and
manage the portfolio.
Diversified equity fund is a category of funds that invest in a diverse mix of securities that cut
across sectors and market capitalization. The risk of the fund’s performance being significantly
affected by the poor performance of one sector or segment is low.
Market Segment based funds invest in companies of a particular market size. Equity stocks may
be segmented based on market capitalization as large- cap, mid-cap and small-cap stocks.
• Large- cap funds invest in stocks of large, liquid blue-chip companies with stable performance
and returns.
• Mid-cap funds invest in mid-cap companies that have the potential for faster growth and higher
returns. These companies are more susceptible to economic downturns. Therefore, evaluating
and selecting the right companies becomes important. Funds that invest in such companies have
a higher risk, since the selected e companies may not being able to withstand the slowdown in
revenues and profits. Similarly, the price of the stocks also fall more when markets fall.
• Small-cap funds invest in companies with small market capitalization with intent of benefitting
from the higher gains in the price of stocks. The risks are also higher.
Sector funds invest in only a specific sector. For example, a banking sector fund will invest in
only shares of banking companies. Gold sector fund will invest in only shares of gold-related
companies. The performance of such funds can see periods of under-performance and out-
performance as it is linked to the performance of the sector, which tends to be cyclical. Entry and
exit into these funds need to be timed well so that the investor does not invest when the sector
has peaked and exit when the sector performance falls. This makes the scheme more risky than a
diversified equity scheme.
Thematic funds invest in line with an investment theme. For example, an infrastructure thematic
fund might invest in shares of companies that are into infrastructure construction, infrastructure

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toll-collection, cement, steel, telecom, power etc. The investment is thus more broad-based than
a sector fund; but narrower than a diversified equity fund and still has the risk of concentration.

Strategy-based Schemes have portfolios that are created and managed according to a stated style
or strategy. Equity Income/Dividend Yield Schemes invest in securities whose shares fluctuate
less, and the dividend represents a larger proportion of the returns on those shares. They
represent companies with stable earnings but not many opportunities for growth or expansion.
The NAV of such equity schemes are expected to fluctuate lesser than other categories of equity
schemes. Value fund invest in shares of fundamentally strong companies that are currently
under-valued in the market with the expectation of benefiting from an increase in price as the
market recognizes the true value. Such funds have lower risk. They require a longer investment
horizon for the strategy to play out. Growth Funds portfolios feature companies whose earnings
are expected to grow at a rate higher than the average rate. These funds aim at providing capital
appreciation to the investors and provide above average returns in bullish markets. The volatility
in returns is higher in such funds. Focused funds hold portfolios concentrated in a limited
number of stocks. Selection risks are high in such funds. If the fund manager selects the right
stocks then the strategy pays off. If even a few of the stocks do not perform as expected the
impact on the scheme’s returns can be significant as they constitute a large part of the portfolio.
Equity Linked Savings Schemes (ELSS) are diversified equity funds that offer tax benefits to
investors under section 80 C of the Income Tax Act up to an investment limit of Rs. 150,000 a
year. ELSS is required to hold at least 80 percent of its portfolio in equity instruments. The
investment is subject to lock-in for a period of 3 years during which it cannot be redeemed,
transferred or pledged. However, this is subject to change in case there are any amendments in
the ELSS Guidelines with respect to the lock-in period.
Rajiv Gandhi Equity Savings Schemes (RGESS) too, as seen earlier, offer tax benefits to first-
time investors (direct equity). Investments are subject to a fixed lock-in period of 1 year, and
flexible lock-in period of 2 years.

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Types of Hybrid Funds

Hybrid funds invest in a combination of asset classes such as equity, debt and gold. The
combination of asset classes used will depend upon the investment objective of the fund. The
risk and return in the scheme will depend upon the allocation to each asset class and the type of
securities in each asset class that are included in the portfolio. The risk is higher if the equity
component is higher. Similarly, the risk is higher if the debt component is invested in longer-
term debt securities or lower rated instruments.
Debt-oriented Hybrid funds invest primarily in debt with a small allocation to equity. The equity
allocation can range from 5 percent to 30 percent and is stated in the offer document. The debt
component is conservatively managed to earn coupon income, while the equity component
provides the booster to the returns.
Monthly Income Plan is a type of debt-oriented hybrid fund that seeks to declare a dividend
every month. There is no guarantee that a dividend will be paid each month.
As will be discussed in Unit 8, the term ‘Monthly Income’ is a bit of a misnomer and investor
needs to study the scheme properly, before presuming that an income will be received every
month.
Multiple Yield Funds generate returns over the medium term with exposure to multiple asset
classes, such as equity and debt.
Equity-oriented Hybrid funds invest primarily in equity, with a portion of the portfolio invested
in debt to bring stability to the returns. A very popular category among the equity-oriented
hybrid funds is the Balanced Fund. These schemes provide investors simultaneous exposure to
both equity and debt in one portfolio. The objective of these schemes is to provide growth and
stability (or regular income), where investments in equity instruments are made to meet the
objective of growth while debt investments are made to achieve the objective of stability. The
balanced funds can have fixed or flexible allocation between equity and debt. One can get the
information about the allocation and investment style from the Scheme Information Document.
Capital Protected Schemes are close-ended schemes, which are structured to ensure that
investors get their principal back, irrespective of what happens to the market. This is ideally done
by investing in Zero Coupon Government Securities whose maturity is aligned to the scheme’s
maturity. (Zero coupon securities are securities that do not pay a regular interest, but accumulate
the interest, and pay it along with the principal when the security matures).

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As detailed in the following example, the investment is structured, such that the principal amount
invested in the zero-coupon security, together with the interest that accumulates during the
period of the scheme would grow to the amount that the investor invested at the start.
Suppose an investor invested Rs. 10,000 in a capital protected scheme of 5 years. If 5-year
government securities yield 7 percent at that time, then an amount of Rs. 7,129.86 invested in 5-
year zero-coupon government securities would mature to Rs. 10,000 in 5 years. Thus, by
investing Rs. 7,129.86 in the 5-year zero-coupon government security, the scheme ensures that it
will have Rs 10,000 to repay to the investor in 5 years.
After investing in the government security, Rs 2,870.14 is left over (Rs. 10,000 invested by the
investor, less Rs. 7129.86 invested in government securities). This amount is invested in riskier
securities like equities. Even if the risky investment becomes completely worthless (a rare
possibility), the investor is assured of getting back the principal invested, out of the maturity
money received on the government security.
Some of these schemes are structured with a minor difference – the investment is made in good
quality debt securities issued by companies, rather than Central Government Securities. Since
any borrower other than the government can default, it would be appropriate to view these
alternate structures as Capital Protection Oriented Schemes rather than Capital Protected
Schemes.
It may be noted that capital protection can also be offered through a guarantee from a guarantor,
who has the financial strength to offer the guarantee. Such schemes are however not prevalent in
the market.
Some of the hybrid funds are also launched as Asset Allocation Funds. These funds do not
specify a minimum or maximum limit for each of the asset classes. The fund manager allocates
resources based on the expected performance of each asset class.
Arbitrage funds take opposite positions in different markets / securities, such that the risk is
neutralized, but a return is earned. For instance, by buying a share in BSE, and simultaneously
selling the same share in the NSE at a higher price. Most arbitrage funds take contrary positions
between the equity market and the futures and options market. (‘Futures’ and ‘Options’ are
commonly referred to as derivatives. These are designed to help investors to take positions or
protect their risk in some other security, such as an equity share. They are traded in exchanges

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like the NSE and the BSE. Chapter10 provides an example of futures contract that is linked to
gold).
Although these schemes invest in equity markets, the expected returns are in line with liquid
funds.

Real Estate Investment Trusts (Real Estates Mutual Funds)

Real Estate Mutual Funds scheme means a mutual fund scheme that invests directly or
indirectly in real estate assets or other permissible assets in accordance with the SEBI (Mutual
Funds) Regulations, 1996. SEBI’s regulations require that at least 35 percent of the portfolio
should be held in physical assets. Not less than 75 percent of the net assets of the scheme shall be
in real estate assets, mortgage-backed securities (but not directly in mortgages), equity shares or
debentures of companies engaged in dealing in real estate assets or in undertaking real estate
development project. Assets held by the fund will be valued every 90 days by two values
accredited by a credit rating agency. The lower of the two values will be taken to calculate the
NAV. These funds are closed-end funds and have to be listed on a stock exchange.
Real Estate Investment Trusts (REIT) is trusts registered with SEBI that invest in commercial
real estate assets. The REIT will raise funds through an initial offer and subsequently through
follow-on offers, rights issue and institutional placements. The value of the assets owned or
proposed to be owned by a REIT coming out with an initial offer will not be less than Rs. 500
crores and the minimum offer size will not be less than Rs.250 crores. The minimum
subscription amount in an initial offer shall be Rs. 2 lakhs. The units will be listed on the stock
exchange.

Commodity Funds
Commodities, as an asset class, include:
 food crops like wheat and gram
 spices like pepper and turmeric
 fibers like cotton
 industrial metals like copper and aluminum
 energy products like oil and natural gas

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 precious metals (bullion) like gold and silver

The investment objective of commodity funds would specify which of these commodities it
proposes to invest in.
Gold Exchange Traded fund, which is like an index fund that invests in gold, gold receipts or
gold deposit schemes of banks. Each ETF unit typically represents one gram of gold. For every
unit of ETF issued, the fund holds gold in the form of physical gold of 99.5 percent purity or
gold receipts. They are also allowed to invest in the gold deposit schemes of banks to a limit of
20 percent of the net assets of the scheme. The NAV of such funds moves in line with gold
prices in the market.
Gold funds invest in the units of Gold Exchange Traded Funds. They operate just like other
mutual funds as far as the investor is concerned.
Gold Sector fund will invest in shares of companies engaged in gold mining and processing.
Though gold prices influence these shares, the prices of these shares are more closely linked to
the profitability and gold reserves of the companies. Therefore, NAV of these funds do not
closely mirror gold prices.
As with gold, such funds can be structured as Commodity ETF or Commodity Sector Funds. In
India, mutual fund schemes are not permitted to invest in commodities, other than Gold (which
was discussed earlier). Therefore, the commodity funds in the market are in the nature of
Commodity Sector Funds, i.e. funds that invest in shares of companies that are into commodities.
Like Gold Sector Funds, Commodity Sector Funds too are a kind of equity fund.

International Funds
International funds invest in markets outside India, by holding certain foreign securities in their
portfolio. The eligible securities in Indian international funds include equity shares of companies
listed abroad; ADRs and GDRs of Indian companies, debt of companies listed abroad, ETFs of
other countries, units of index funds in other countries, units of actively managed mutual funds
in other countries. International equity funds may also hold some of their portfolios in Indian
equity or debt. They can also hold some portion of the portfolio in money market instruments to
manage liquidity.

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One way for the fund to manage the investment is to hire the requisite people who will manage
the fund. Since their salaries would add to the fixed costs of managing the fund, it can be
justified only if a large corpus of funds is available for such investment.
An alternative route would be to tie up with a foreign fund (called the host fund). If an Indian
mutual fund sees potential in China, it will tie up with a Chinese fund. In India, it will launch
what is called a feeder fund. Investors in India will invest in the feeder fund. The money
collected in the feeder fund would be invested in the Chinese host fund. Thus, when the Chinese
market does well, the Chinese host fund would do well, and the feeder fund in India will follow
suit.
Such feeder funds can be used for any kind of international investment, subject to the scheme
objective. The investment could be specific to a country (like the China fund) or diversified
across countries. A feeder fund can be aligned to any host fund with any investment objective in
any part of the world, subject to legal restrictions of India and the other country.
In such schemes, the local investors invest in rupees for buying the Units. The rupees are
converted into foreign currency for investing abroad. They need to be re-converted into rupees
when the money is to be paid back to the local investors. Since the future foreign currency rates
cannot be predicted today, there is an element of foreign currency risk.
Investor's total return in such schemes will depend on how the international investment performs,
as well as how the foreign currency performs. Weakness in the foreign currency can pull down
the investors' overall return. Similarly, appreciation in the respective currency will boost the
portfolio performance.
Fund of Funds
A Fund of Funds (FoF) is a mutual fund that invests in other mutual funds. It does not hold
securities in its portfolio, but other funds that have been chosen to match its investment
objective. These funds can be either debt or equity, depending on the objective of the FoF. A
Fund of Funds either invests in other mutual funds belonging to the same fund house or
belonging to other fund houses. FoFs belonging to various mutual fund houses are called multi-
manager FoFs, because the AMCs that manage the funds are different. Fund of Funds looks for
funds that fit into its investment objective. It specializes in analyzing funds, their performance
and strategy and adds or removes funds based on such analysis. A FoF imposes additional cost
on the investor, as the expenses of the underlying funds are built into their NAV.

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Exchange Traded funds (ETF) are open-ended funds, whose units are traded in a stock
exchange. Investors buy units directly from the mutual fund only during the NFO of the scheme.
All further purchase and sale transactions in the units are conducted on the stock exchange where
the units are listed. The mutual fund issues further units and redeems units directly only in large
lots defined as creation units.
Transactions in ETF units on the stock exchange happen at market-determined prices. In order to
facilitate such transactions in the stock market, the mutual fund appoints intermediaries called
authorized dealers as market makers, whose job is to offer a price quote for buying and selling
units at all times.
A higher demand for units can push the price of the units higher than the NAV and a lower
demand can push down the prices. The authorized dealers can make more units available in the
market to meet the higher demand by getting units released by the mutual fund in creation units.
They have to submit the underlying assets or cash equivalent with the mutual fund for this.
Similarly, they can reduce the available units available in the market by getting units redeemed
in creation units.
The major advantage of the market makers is to provide liquidity in the units of the ETFs to the
investors.
In a regular open-ended mutual fund, all the purchases of units by investors on a day happen at a
single price. Similarly, all the sales of units by investors on a day happen at a single price. The
securities market however keeps fluctuating during the day. A key benefit of an ETF is that
investors can buy and sell their units in the stock exchange, at real-time prices during the day that
closely track the market at that time. This transaction price may be close to the NAV, but not
necessarily the same as NAV. Further, the unique structure of ETFs, make them more cost-
effective than normal index funds, although the investor would bear a brokerage cost when he
transacts with the market maker and need to have a demat account into which the units of the
ETF will be credited.
Infrastructure Debt Schemes
These are closed-ended schemes with a tenor of at least five years that invest in debt securities
and securitized debt of infrastructure companies. 90 percent of the fund’s portfolio should be
invested in the specified securities. The remaining can be invested in the equity shares of
infrastructure companies and in money market instruments. The NAV of the scheme will be
disclosed at least once each quarter. The minimum investment allowed in these schemes is for

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Rs. one crores and the minimum face value of each unit shall be Rs. ten lakhs. As a closed-ended
scheme the units of the scheme will be listed on a stock exchange. An Infrastructure Debt
Scheme can be set up by an existing mutual fund or a new fund set up for this purpose. The
sponsor and key personnel must have adequate experience in the infrastructure sector to be able
to launch the scheme.
Infrastructure Investment Trusts (InvIT) are trusts registered with SEBI that invest in the
infrastructure sector. The InvIT will raise funds from the public through an initial offer of units.
The offer shall be for not less than Rs. 250 crores and the value of the proposed assets of the
InvIT shall not be less than Rs. 500 crores. The minimum subscription size will be Rs. 10 lakhs.
The units will be listed on a stock exchange.

Legal Structure of Mutual Funds in India

SEBI (Mutual Fund) Regulations, 1996 as amended till date define “mutual fund” as “a fund
established in the form of a trust to raise monies through the sale of units to the public or a
section of the public under one or more schemes for investing in securities including money
market instruments or gold or gold-related instruments or real estate assets.”
Key features of a mutual fund that flows from the definition above are:
 It is established as a trust
 It raises money through sale of units to the public or a section of the public
 The units are sold under one or more schemes
 The schemes invest in securities (including money market instruments) or gold or gold-
related instruments or real estate assets.
SEBI has stipulated the legal structure under which mutual funds in India need to be constituted.
The structure, which has inherent checks and balances to protect the interests of the investors,
can be briefly described as follows:

 Mutual funds are constituted as Trusts. Therefore, they are governed by the Indian Trusts

Act, 1882

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 The mutual fund trust is created by one or more Sponsors, who are the main persons

behind the mutual fund business.

 Every trust has beneficiaries. The beneficiaries, in the case of a mutual fund trust, are the

investors who invest in various schemes of the mutual fund.

 The operations of the mutual fund trust are governed by a Trust Deed, which is executed

between the sponsors and the trustees. SEBI has laid down various clauses that need to be

part of the Trust Deed.

 The Trust acts through its trustees. Therefore, the role of protecting the interests of the

beneficiaries (investors) is that of the Trustees. The first trustees are named in the Trust

Deed, which also prescribes the procedure for change in Trustees.

 In order to perform the trusteeship role, either individuals may be appointed as trustees or

a Trustee company may be appointed. When individuals are appointed trustees, they are

jointly referred to as ‘Board of Trustees’. A trustee company functions through its Board

of Directors.

 Day to day management of the schemes is handled by an Asset Management Company

(AMC). The AMC is appointed by the sponsor or the Trustees.

 The trustees execute an investment management agreement with the AMC, setting out its

responsibilities.

 Although the AMC manages the schemes, custody of the assets of the scheme (securities,

gold, gold-related instruments & real estate assets) is with a Custodian, who is appointed

by the Trustees.

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 Investors invest in various schemes of the mutual fund. The record of investors and their

unit-holding may be maintained by the AMC itself, or it can appoint a Registrar &

Transfer Agent (RTA).

Let us understand the various agencies, by taking the example of the constitution of SBI Mutual
Fund.

Sponsor State Bank of India

Trustee SBI Mutual Fund Trustee Company
Private Limited
AMC SBI Funds Management Private
Limited
Custodian HDFC Bank Limited
SBI-SG Global Securities Services
Private Limited
Bank of Nova Scotia (custodian for
Gold)
RTA Computer Age Management Services
Pvt. Ltd

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Chapter 2: Research Methodology

Need for Research

For retail investor who does not have the time and expertise to analyze and invest in stocks and
bonds, mutual funds offer a viable investment alternative. This is because mutual funds provide
the benefit of cheap access to expensive stocks. Mutual funds diversify the risk of the investor by
investing in a basket of assets. A team of professional fund managers manages them with in-
depth research inputs from investment analysts. Being institutions with good bargaining power in
markets, mutual funds have access to crucial corporate information which individual investors
cannot access. So the present study has taken up to know the extent of awareness about mutual
funds and to analyze the investors’ perception towards mutual funds

Objectives

1. To understand “What is Mutual Funds”.

2. To know about the extent of awareness about mutual funds in India.
3. To study the impact of demographics like age, gender, marital status, occupation, income
& educational qualification on the behavior of mutual fund investors.

Data and Data Sources

The study mainly deals with the financial behavior of Individual Investors towards Mutual funds
in Mumbai city. The required data was collected through a simple questionnaire administered on
a combination of simple random and judgment sample of 50 educated individual investors.
Judgment sample selection is due to the time and financial constraints. Respondents were
screened and inclusion was purely on the basis of their knowledge about Financial Markets, MFs
in particular. This was necessary, because the questionnaire presumed awareness of some basic
terminology about Mutual Funds. The purpose of the survey was to understand the behavioral
aspects of individual investors, mainly their fund selection behavior, various factors influencing
this behavior and also the conceptual awareness level among individual investors. The survey
was conducted during September-October 2018, among 50 educated, geographically dispersed
individual investors of Mumbai city. The unit of observation and analysis of survey is only
among Individual

39
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Investors whose definition is “An Individual who has currently invested (i.e. as on September or
October 2018) in any Mutual Funds and this does not include high net worth individuals (i.e.,
those who earn above Rs. 10,00,000/- per annum) and institutions. Since it is an exploratory
study no specific hypothesis is formulated.

Questionnaire is used to collect the Primary data. Secondary data is collected through Internet,
magazines and mutual fund companies’ online reports. Sample size is 100 respondents and
sampling units include businessmen, Government servants, professional and Student.

Limitations to the study

1) Sample size is limited to 50 educated individual investors in the city of Mumbai. The
sample size may not adequately represent the national market.
2) Simple Random and judgment sampling techniques is due to time and financial
constraints.
3) This study has not been conducted over an extended period of time having both ups and
downs of stock market conditions which a significant influence on investor’ s buying
pattern and preferences.
4) The research was limited to Mumbai city only and if the same research would have been
carried in another city, the results may vary.
5) Sometimes the respondents because of their business didn’t able to concentrate while
filling up the questions. However the researcher tried her level best to overcome the
limitation by explaining the importance of research.

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Chapter 3: Review of Literature

Introduction

Mutual funds attracted the interests of academicians, researchers and financial analysts mostly
since 1986. A number of articles have been published in financial dailies like economic times,
business line and financial express, periodicals like capital market, Business India etc., and in
professional and research journals. Literature Review on consumer buying behavior towards
mutual fund is enormous. Various studies have been carried out in India and abroad to evaluate
the consumer buying behavior towards mutual funds Mutual funds schemes from time to time. A
few research studies that have influenced substantially in preparing the project are discussed
below in this chapter.

Literature Review
Zhen, L. (1999) found the evidence of funds that receive more money subsequently perform
significantly better than those that lose money. This effect is short-lived and is largely but not
completely explained by a strategy of betting on winners. In the aggregate, there was no
significant evidence that funds receive more money subsequently beat the market. However, it
states possible to earn positive abnormal returns by using the cash flow information for small
funds and Fant, L. F. (1999) studied the relationship of stock market returns with components of
aggregate equity mutual fund flows (new sales, redemptions, exchanges-in, and exchanges-out)
was examined. The objective of the study was to find the investor’s behavior of mutual fund. The
evidence suggests that the various components reflect different investor objectives and
information.
Grinblatt, M., & Keloharju, M. (2000) - analyses the extent to which past returns determine the
propensity to buy and sell. It also analyses whether these differences in past-return-based
behavior and differences in investor sophistication drive the performance of various investor
types. The main objective of the study was to find out the investment behavior and performance
of various investors.
Kamesaka, A., Nofsinger, J. R., & Kawakita, H. (2003) noted the investment patterns and
performance of foreign investors, individual investors, and five types of institutional investors.
This was a particularly new and interesting finding that evidence of both information-based
trading and behavioral-based trading occurs in the same market. And Wang, C. (2003) analyzed

41
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a unique data set and uncover a remarkable result that casts a new light on the home bias
phenomenon. This Study suggests that information asymmetries play an important role in equity
home bias and that the benefits of international risk sharing are limited to select firms. And Lin,
A. Y., & Swanson, P. E. (2003) investigates trading behavior and investment performance of
foreign investors in 60 large-size firms listed on the Taiwan Stock Exchange Findings show that
foreign investors are short-term superior performers but long-term inferior performers. The
short-term superior performance appears to be driven partially by price momentum of winner’s
portfolios rather than by risk taking. After controlling for firm size, share turnover, and industry,
foreigners' short-term performance in large-size, high-turnover, and high-tech stocks is better
than it is in small-size, low turnover, and non-high-tech stocks.
Indro, D. C. (2004) examines the relationship between net aggregate equity fund flow and
investor sentiment using weekly flow data. The study resulted net aggregate equity fund flow in
the current week is higher when individual investors became more bullish in the previous and
current weeks. The relationship between net aggregate equity fund flow and investor sentiment
remains strong even after accounting for the effects of risk premium and inflation. Overall, the
evidence suggests that the behavior of equity fund investors is influenced not only by economic
fundamentals, but also by investor sentiment.
Massa, M., & Simonov, A. (2005) examined the way investors react to prior gains/losses. Inspect
the investor reactions to different definitions of gains and losses and consider how gains and
losses in one category of wealth affect holdings in other categories. We show that investors
change their holdings of risky assets as a function of both financial and real estate gains. Prior
gains increase risk-taking, while prior losses reduce it. To interpret our results, we consider and
compare three alternative hypotheses of investor behavior: prospect theory, house money effect
and standard utility theory with diminishing risk dislike. Our evidence fails to support loss
aversion, pointing in the direction of the house money effect or standard utility theory. Investors
consider wealth in its entirety, and risk-taking in financial markets is affected by gains/losses in
overall wealth, financial wealth, and real estate wealth.
Ranganathan, K. (2006) examined the related aspects of the fund selection behavior of individual
investors towards Mutual funds, in the city of Mumbai. This study will help developing and
expanding knowledge in the field of Consumer behavior from the marketing world and also the
financial economics has brought together. And Griffin, J. M., Nardari, F., & Stulz, R. M. (2006)

42
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investigates the lively relation between market-wide trading activity and returns in markets.
Many stock markets display a strong positive relation between turnover and past returns. These
findings stand up in the face of various controls for unpredictability, alternative definitions of
turnover, differing sample periods, and are present at both the weekly and daily frequency. The
relation is more statistically and economically significant in countries with high levels of
corruption, with short-sale restrictions, and in which market volatility is high.
Kim, K. A., & Nofsinger, J. R. (2007) identified Japanese individual investors by contrasting
their behavior during a long bull market (1984-1989) to a long bear market (1990-1999).the
objective of the study is to test the individuals' attitudes and preferences toward stock risk, book
to-market valuation, and past returns, are different between market conditions. The study
identified some striking differences in investing behavior between the bull and the bear market.
These behaviors are associated with poor investment performance. The findings are consistent
with existing behavioral theories, but some of our findings are not. B. M., & Odean, T. (2011)
describes impression of research on the stock trading behavior of every single investors. This
research documents that individual investors (1) disappoint standard benchmarks (2) sell winning
investments while holding losing investments (3) are heavily influenced by limited attention and
past return performance in their purchase decisions, (4) engage in naïve reinforcement learning
by repeating past behaviors that matched with pleasure while avoiding past behaviors that
generated pain, and (5) tend to hold undiversified stock portfolios. These behaviors deleteriously
affect the financial worthy of individual investors.
MFs have attracted a lot of attention and kindled the interest of both academic and practitioner
communities. Compared to the developed markets, very few studies on MFs are done in India.
This literature review reveals Investor behavior studies which can be grouped under two themes.

1) Studies relating to General Financial Behavior of Investors.

2) Fund Selection Behavior Studies.

A. General Financial Behavior Studies:

Daniel Kahneman and Amos Tversky (1979) originally described “Prospect Theory” and found
that individuals were much more distressed by prospective losses than they were happy by

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equivalent gains. Some economists have concluded that investors typically consider the loss of
$1 twice as painful as the pleasure received from a $ gain. Individuals will respond differently to
equivalent situations depending on whether it is presented in the context of losses or gains. Here
is an example from Tversky and Kahneman 1979 article. Tversky and Kahneman presented
groups of subjects with a number of problems. One group of subjects was presented with this
problem.

1. In addition to what you own, you have been given $1000. You are now asked to choose
between
 A sure gain of $500.
 A 50% chance to gain $1,000 and a 50% chance to gain nothing.

Another group of subjects were presented with another problem.

2. In addition to whatever you own, you have been given $2000. You are now asked to choose
between:
 A sure loss of $500.
 A 50% chance to lose $1,000 and 50% chance to lose nothing.

In the first group 84% chose A. In the second group 69% chose B. The two problems are
identical in terms of net cash to the subject; however the phrasing of the question causes the
problem to be interpreted differently.
Langer (1983) suggests that when these preferences are based on choices, there is more ego
involvement and attachment to the preferences, suggesting heightened level of preference bias.
This phenomenon is consistent with the prediction from Cognitive Dissonance theory of
Festinger (1957).
Robert J. Shiller (1993) reported that many investors do not have data analysis and
interpretation skills. This is because, data from the market supports the merits of index investing,
passive investors are more likely to base their investment choices on information received from
objective or scientific sources.

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Phillip (1995) reported that there is a change in financial decision-making and investor behavior
as a result of participating in investor education programes sponsored by employees.
Berhein and Garnette (1996) affirmed Philip’s findings and further stated that a serious national
campaign to promote savings through education and information could have a measurable impact
on financial behavior.
Alexander et al., (1996) reported that only 18.9% of respondents could provide an estimate of
expenses for their largest MF holding. 57% stated that they did not know what the expenses were
even at the time they made the MF purchase. This suggests insensitivity to costs and many
investors do not use fund costs as an evaluative criterion in making investment decisions.
Hirshleifer (2001) categorized different types of cognitive 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 long.

B. Fund Selection Behavior Studies:

Investor fund selection Behavior influences marketing decisions of fund management and has
captured the attention of researchers. The findings are reported below:

Foreign Studies:
Ippolito (1992) and Bogle (1992) reported that fund selection by investors is based on past
performance of the funds and money flows into winning funds more rapidly than they flow out
of losing funds.
Goetzman (1993) and Grubber (1996) studied the ability of investors to select funds and found
evidence to support selection ability among active fund investors.
Malhotra and Robert (1997) reported that the preoccupation of MF investors with using
performance evaluation as selection criteria is misguided because of volatility of returns, which
may be due to superior management or just good luck is difficult to determine. The findings of
Ferris and Chance (1987), Trzeinka and Zwing (1990), and Chance and Ferris (1991) are
consistent with the findings of Malhotra and Robert (1997).

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Lu Zheng (1998) examined the fund selection ability of MF investors and found that the
investor’s decisions are based on short-term future performance and investors use fund specific
information in their selection decision.

Indian Studies:
Vidyashankar (1990), Agarwal G.D. (1992), Gupta L.C. (1993) Atmaramani (1996), Madhusudan
(1996) and Ajay Srinivasan (1999) and others have conducted extensive research regarding
investor expectations, protection, awareness and fund selection behavior. Few striking ones
among the other studies are given below.
Gupta L.C. (1993) conducted a household investor survey with the objective to provide data on
investor preferences on MFs and other financial assets.
Madhusudhan V. Jambodekar (1996) conducted a study to assess the awareness of MFs among
investors, to identify the information sources influencing the buyer decision and the factors
influencing the choice of a particular fund. The study revealed that income schemes and open-
ended schemes are preferred over growth schemes and close-ended schemes during the prevalent
market conditions.
Investors look for Safety of Principal, Liquidity and Capital Appreciation in order of importance;
Newspapers and Magazines are the first source of information through which investors get to
know about MFs / Schemes and the investor service are the major differentiating factor in the
selection of MFs.
Sujit Sikidar and Amrit Pal Singh (1996) carried out a survey with an objective to understand
the behavioral aspects of the investors of the North Eastern region towards equity and MFs
investment portfolio. The survey revealed that the salaried and self-employed formed the major
investors in MFs primarily due to tax concessions. UTI and SBI schemes were popular in that
part of the country then and other funds had not proved to be a big hit during the time when the
survey was done.
Raja Rajan (1997, 1998) high lightened segmentation of investors on the basis of their
characteristics, investment size, and the relationship between stage in life cycle of the investors
and their investment pattern.
Syama Sunder (1998) conducted a survey to get an insight into the MF operations of private
institutions with special reference to Kothari Pioneer. The survey revealed that the awareness

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about MF concept was poor during that time in small cities like Vishakapatnam. Agents play a
vital role in spreading the MF culture; open-end schemes were much preferred then; age and
income are the two important determinants in the selection of fund / scheme; brand image and
return are their prime considerations.
An attempt was made by the NCAER in 1964 to understand the attitude and motivation for the
savings of individuals, for which a survey of households was undertaken. Another NCAER study
in 1996 analyzed the structure of the capital market and presented the views and attitudes of
individual shareholders. SEBI-NCAER survey (2000) was carried out to estimate the number of
households and the population of individual investors, their economic and demographic profile,
portfolio size, and investment preference for equity as well as other savings instruments.
This is a unique and comprehensive study of individual investors, for, data was collected from 3,
00,000 geographically dispersed rural and urban households. Some of the relevant findings of the
study are: Households preference for instruments match their risk perception; Bank Deposit has
an appeal across all income class; 43% of the non-investor households (estimated around 60
million households) apparently lack awareness about stock markets; and, compared with low
income groups, the higher income groups have a higher share of investments in MFs signifying
that MFs have not truly become the investment vehicle for small investors; the number of
households owning units of mutual funds is more (9%) than the investor households owning
investments in shares and debentures (8%). Nevertheless, the study predicts that in the next two
years (i.e., 2000 hence) the investment of households in MFs is likely to increase.
Shanmugham (2001) conducted a survey of 201 individual investors to study the information
sourcing by investors, their perception of various investment strategy dimensions and the factors
motivating share investment decisions, and reported that, psychological and sociological factors
dominated economic factors in share investment decisions.
Rajeshwari T.R and Rama Moorthy V.E (2002) studied the financial behavior and factors
influencing fund/scheme selection of retail investors by conducting Factor Analysis using
Principal Component Analysis, to identify the investor’s underlying fund/scheme selection
criteria, so as to group them into specific market segment for designing of the appropriate
marketing strategy.

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Kiran D. and Rao U.S. (2004) identified investor group segments using the demographic and
psychographic characteristics of investors using two statistical techniques, namely – Multinomial
Logistic Regression (MLR) and Factor Analysis.
An article by Personal FN (http://www.personalfn.com) for Business India August 2, 2004 with
the title,
“The Golden Nest Egg”, reported that, investor’s age could be used as a benchmark to
determine the nature of the portfolio.

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Chapter 4: Data Analysis and Interpretation

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 financial
system. So it is very important to know the investors' perception & Awareness 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 information, deficiencies in the services provided by the mutual fund managers,
challenges before the Indian mutual fund industry etc.
In this chapter we shall study the following objectives
 Age, gender, marital status, occupation, Residential Location, income & educational
qualification on the behavior of mutual fund investors.
 Awareness & Knowledge about Mutual Funds
 Investment done in Mutual Funds or Other Financial or Physical Assets
 Perceptions towards Mutual Funds
 Sources of Investment Advice
 Feedback towards Mutual Funds

 Demographic Factor – Age

1. From Dough Nut Chart A, we can see that over 48% of the total respondents fall within
the age group of below 25 years. 27% of the total respondents fall within the age group of
25 years to 35 years. 18.8% of the total respondents fall within the age group of 35 years
to 45 years. 6.3% of the total respondents fall within the age group 45 years and above.

49
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Age Group of the respondents

6%

19%
Below 25 Years 25 to 35 Years

48%

35 to 45 Years 45 Years and above

27%

Dough Nut Chart A

2. From Pie Chart A, we will learn at what age the respondents who were already investing
in Mutual funds started investing. Over 34% of the total respondents started investing in
Mutual Funds or related instruments before the age of 25 years. 36% of the respondents
who were already investing in Mutual Funds started their first investments in Mutual
Funds when they were in the age group of 25 years to 35 years. 18.8% of the respondents
who were already investing in Mutual Funds started their first investments in Mutual
Funds when they were in the age group of 35 years to 45 years. 6.3% of the respondents
who were already investing in Mutual Funds started their first investments in Mutual
Funds when they were above 45 years.

At what age did you start investing in Mutual

Funds?

7%

Below 25 Years
20% 25 to 35 Years
36% 35 to 45 Years
45 Years and above

38%

Pie Chart A

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 Demographic Factor - Education Qualification

3. From Pie Chart B, we will study the educational qualifications of the respondents. We
can see that over 6.3% of the total respondents have only finished their schooling or have
studied up to their 10th standard. 6.3% of the total respondents haven’t finished their
college or have studied up to their 12th standard or yet pursuing intermediate. A Majority
of 56.3% of the total respondents are graduates. 25% of the total respondents are post-
graduates. A remaining 6.3% of the total respondents are certified professional.

Educational Qualifications of the respondents

6% 6%
6%

Upto school
Intermediate
25%
Graduate
Post Graduate
Certified Professional

56%

Pie Chart B

4. The respondents then gave their view of the question as to whether does Educational
Qualification affects the Investing Buying Behaviour with regards to Mutual Funds in
India. 92% of the total respondents feel that Education plays a major role which affects
the Investor buying behavior. As education increases the horizon of learning about new
and effective investment tools where Mutual Funds being one of it. The remaining 8%
don’t feel education is important while taking important investment decisions with
regards to Mutual Funds.

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Does Educational Qualification affect the investor buying

behavior with regards to Mutual Funds?

No
8%

Yes
92%

Dough Nut Chart B

 Demographic Factor - Occupation and Income slab

5. From Pie Chart C, we will study the occupation of the respondents. We can see that over
6.3% of the total respondents are business professionals. 12.5% of the total respondents
haven’t finished their college or are yet studying. A Majority of 62.5% of the total
respondents are working in under private sector for salary. 12.5% of the total respondents
are self- employed. The remaining 6.3% of the total respondents are retired personnel.

occupation of the respondents

Retired
Business 6%
6%
Student
12%
Self Employed
12%

Private Sector Service

62%

Pie Chart C

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6. From Pie Chart D, we will study the income of the respondents. We can see that over
32% of the total respondents have their income below 1.5 Lakhs. 36% of the total
respondents earn an income within the slab of 1.5 Lakhs to 3.5Lakhs. 20% of the total
respondents earn an income within the slab of 3.5 Lakhs to 5Lakhs. The remaining 12%
of the respondents earn an income more than 5Lakhs.

Annual Income of the Respondents

5 Lakhs and above
12%

Below 1.5 Lakhs

3.5 Lakhs to 5 32%
Lakhs
20%

1.5 Lakhs to 3.5 Lakhs

36%

Pie Chart D

7. Further the groups of respondents were asked whether what percent of their income they
invest or they would invest in Mutual Funds. From Dough Nut Chart C we can study that
out of the total respondents 56.6% would invest only 15% or less proportion of their
income in Mutual Funds. 31.3% of the total respondents would invest 15% to 30% of
their income in Mutual Funds. The remaining 12.5% of the respondents would invest
more than 50% of their income in Mutual Funds.

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What % of your income have you or would you

invest in Mutual Funds?

12%
15% and below
16% to 30%
31% to 50%
51% and above

31% 56%

Dough Nut Chart D

8. Further the groups of respondents were asked about their savings objective from their
income they invest or they would invest in Mutual Funds to accomplish their goals. From
Pie Chart E we can study that out of the total respondents 31.3% would invest for house
purchase from their income in Mutual Funds. 25% of the total respondents would invest
for the goal of retirement from their income in Mutual Funds. 25% of the respondents
would invest for the goal of children or self education from their income in Mutual
Funds. 6.3% of the respondents would invest for the goal of children’s marriage or for
their own marriage in Mutual Funds. 6.3% of the respondents would invest for the goal of
international vacation from their income in Mutual Funds. The remaining 6.3% of the
respondents would invest for healthcare from their income in Mutual Funds.

Savings objective from their income in Mutual

Funds

6% Childrens Education or Self Educa-

6% tion
25% Retirement
6% Home Purchase
Childrens Marriage
Healthcare
International or Domestic Hol-
idays

31%
25%

Pie Chart E

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1. Demographic Factor – Residential Location

9. The respondents then gave their view on the question such as whether does Residential
location affect the Investing Buying Behaviour with regards to Mutual Funds in India.
43% of the total respondents feel that Residential location plays a major role which
affects the Investor buying behavior. Where various investors living all over India find it
difficult to invest in Mutual Funds firstly because of the traditional thinking that they
don’t want to adopt to the growing technology and payment systems and methods for
investments. They believe in a traditional way of investing that is attaining a physical
copy of any investment they have and going to the Fund houses personally and doing the
investment. The horizon decreases where they don’t have much amount of options where
they can invest where they reside not wanting to adapt to the technology and growing
way of investments. The remaining 57% don’t feel residential location is a barrier while
investing in Mutual Funds where there are various other measures to invest online Mutual
Funds. Online Modes such as, ACH Mandate system and Paytm have made it much
easier to invest in any instruments not only Mutual Funds. Investor living in Assam and
other outskirts of India Can now invest easily just by a click of a button.

Does Residential Location affect the buying

behaviour towards Mutual Funds India?

Yes
43%

No
57%

Dough Nut Chart E

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 Awareness & Knowledge about Mutual Funds

A. From Dough Nut Chart F, it is observed that out of the total respondents, 76% respondents
are aware of mutual funds and 24% respondents are not aware of mutual funds.

Awareness about Mutual Funds

24%

Yes No

76%

Dough Nut Chart F

B. Out of all the respondents 57.7% have average or above average knowledge about Mutual
Funds in India up to some extent. 15.4% has no idea about Mutual Funds. Whereas 26.9%
of the respondents have some basic knowledge about Mutual Funds. This can be observed in
Dough nut graph G.

Has knowledge about Mutual Funds

27%

Yes
No
Maybe

58%

15%

Dough Nut Graph G

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C. 19.2% of the total respondents think that they should invest in Mutual Funds to gain Income
Tax benefit. Whereas 30.8% of all the respondents consider investing in MF for good
returns and earnings considering the risk- returns tradeoffs. Only 7.7% of the total
respondents would link their investments i.e. Mutual Funds to their goals staying committed
by investing regularly and holding the investment until and unless they have accomplished
their goals. 42.3% of the respondents believe that all of the above factors can be taken into
consideration while investing in Mutual Funds. Whereas one can earn good returns as well
as gain tax benefits by investing in various ELSS Schemes also should link their goals.
Which can be further explained with the help of the Pie Chart No F.

Why should one invest in Mutual Funds?

19%

For Tax Benefit

42% To get good returns
To accomplish all your goals
All of the above

31%

8%

Pie Chart F

D. From Pie Chart No G we can see that how an individual reacts when the market falls by
1000 points. 8% of the total respondents will sell some or all units in order to stop the loss
which has been incurred. 16% of them would redeem some or all amount from equity and
reinvest in debt funds or FD. Whereas 16% of the total respondents would sell an amount or
portion from the debt and reinvest the same in equity in order to gain or capture more
market share. And 60% of the total respondents would do nothing with their money and
hold the same.

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What would one do if the Sensex fell by 1000

points?
8%
Sell some or all units invested in
Equity
16% Sell some units invested in Equity
and invest in Debt funds or FDs
Sell some units invested in Debt
portion and invest in Equity por-
tion
Nothing
60%
16%

Pie Chart G

E. From Pie Chart H we can see that how an individual reacts when the Market rises by 1000
points. 16% of the total respondents will but some units in order to reap fast money in the
market. 28% of them would redeem some or all amount from Equity and Reinvest in Debt
Funds or FD. Whereas 20% of the total respondents would sell an amount or portion from
the debt and reinvest the same in equity in order to gain or capture more market share. And
36% of the total respondents would do nothing with their money and hold the same.

What would one do if the Sensex rises by 1000

points?

16%
Buy more units

36%
Sell some units invested in Equity and invest
in Debt funds or FDs

Sell some units invested in Debt portion and

invest in Equity portion
28%

Nothing

20%

Pie Chart H

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 Investment done in Mutual Funds or Other Financial or Physical Assets

F. From Dough Nut Chart H, it is observed that 56% of the respondents invest in financial
instruments and 36% of total respondents have not invested in any financial instruments.
Whereas 8% might have invest in financial instruments and later might have redeemed the
same.

Have have invested in Financial Instruments

8%

Yes
No
Maybe
36%
56%

Dough Nut Chart H

G. From Pie Chart I, it is observed that about 37% of the respondents invest in financial
instruments like Equity Shares, Mutual Funds, Debentures & Bonds etc and 29% of total
respondents have invested in banking instruments like Bank Fixed deposits & Current
Account deposits. 4.2% have invested in Physical Gold. 12.5% have invested in Real
Estates & 16.7% have invested in LIC & ULIP Policies.

Investments done in the following assets

Bank Fixed Deposits/ Current A/c

Deposits
29%
37% Gold

Real Estates

4% LIC/ ULIP Policies

12%
17% Mutual Funds/ Shares/ Debentures/
Bonds

Pie Chart I

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 Perceptions towards Mutual Funds

H. Only 53.8% would rather invest into Mutual Funds out of all the respondents. Whereas
38.5% are yet not sure whether to invest or not in Mutual Funds. 7.7% are still not
comfortable enough to invest in Mutual funds and would rather not look forward to Mutual
Funds as an investment option. This is further explained in Dough Nut Chart – I.

would you choose Mutual Funds as an in-

vestment option

39%
Yes No Maybe

54%

8%

Dough Nut Chart – I

I. Further the group of respondents was asked whether in which category of Mutual Fund they
will like to invest for a time horizon of 5 years. As the every individual have a different risk
appetite hence they had different variety of choices. Mostly the category would revolve
around 5 types of Mutual Funds. We will learn about it in detail with the help of Pie Chart J.

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Mutual Funds majorly invested in for the time

horizon of 5 years

20% 20%
Low Duration Funds (Debt)
Hybrid Equity Fund
Large Cap Funds
Mid & Small Cap Funds
Balanced Advantage Funds

24%
28%

8%

Pie Chart J
20% of the total respondents would rather invest into liquid funds or low duration funds
where their entire corpus is invested in Bonds and debenture along with good quality paper.
24% of the total respondents would invest their money in Hybrid equity funds. Hybrid funds
have a ratio between equity and debt instruments. Whereas 60% of the amount will be
invested in Equity shares and the rest 40% will be invested in Bonds, debentures,
Government Securities etc. 28% of the total respondents will invest their money in Mid and
Small Cap funds where majority of the stocks are invested Mid and Small Cap stocks which
have the market turnover of below 2000 crores. 20% will invest their money in Balanced
Advantage sector. Balanced Advantage is slightly opposite of Hybrid Equity Funds where
the Debt component is on the higher side in these types of funds. Where 30% of these funds
are invested Equity, 30% in Debt and the rest in Arbitrage sector. The remaining 8% of the
respondents will invest their money in Large Cap funds. These funds contain huge amount
of large cap stocks where the company which has a turnover of more than 10000 Crores is
taken under consideration.
A. From Pie Chart K, it is observed that about 65.4% of the respondents consider returns as the
most important parameter while investing whereas 23.1% of total respondents consider Low
risk factor as a major component of their investments. 7.7% consider inflation majorly while
investing. 3.8% of all the respondents consider the lock-in period while investing.

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Considering the most important factor while

investing in Mutual Funds

4%
8%

Returns Low Risk Factor

23%
Inflation Lock In Period

65%

Pie Chart K

B. The group of respondents was then asked questions based on which company Mutual Funds
would they prefer and what the exact reason was. Majorly these 4 Companies was the first
choice of investors from the sample space which is further explained in the Pie Chart L.

Companies in which the respondents would

like to or have already invested

12%
ICICI Prudential

44% DSP Mutual Funds

40% HDFC

Edelweiss

4%

Pie Chart L

44% of the total respondents will invest in ICICI Prudential MF. 40% of all the respondents
consider investing in HDFC MF. Only 4% of the total respondents would invest in DSP MF.

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The remaining 12% of the respondents would consider investing in Edelweiss MF as stated
in Pie Chart L.

C. Further the group of respondents was asked whether why they would choose XYZ company
funds. As the every individual have different perceptions hence they had different variety of
choices. Mostly the category would revolve around 5 Parameters which every individual
look in while picking up the desired Mutual Fund. We will learn about it in detail with the
help of Pie Chart M.

Reason for Preferring XYZ Mutual Funds

8%
4%

Returns
Lower Risk
42% Corporate Image
23% Fund Managers
Credit Rating

23%

Pie Chart M

42% of the total respondents would rather invest because their respective companies are able
to generate sufficient and satisfying returns. 24% of the total respondents would invest their
money based on the Corporate Image of the company. Whereas 25% of the respondents
consider the strategies of the Fund manager who is able to generate sufficient returns as well
as is able to maintain low risk profile of the fund. And the rest 8% depend on the credit
ratings of the funds which are rated by various companies like Value Research, Bloomberg,
and Morning Star Etc.

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D. Further the group of respondents was asked whether for how long they would stay invested.
From Pie Chart N we can observe that 40% of the total respondents would withdraw their
money within 6 months of Investment. 28% of the Total sample space would stay invested
for 3 years and below. And 24% would stay invested for 5 years and below based on any
particular goals. Only 8% of the total respondents would stay invested for long term i.e.
15years and above.

For how long would one stay invested?

8%

Less then 6 Months

24% 40% 3 Years
5 Years
15 Years

28%

Pie Chart N
E. From Doughnut Chart J, we get to learn that 76% of the total respondents are more
comfortable to invest in Debt or Debt related Mutual Funds rather than investing in Equity
or Equity related Mutual Funds. The remaining 24% would rather invest aggressively in
Equity or Equity related Mutual Funds.

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Which sector is one more comfortable staying

invested?

24%
Direct Equity or Equity Mutual
Funds
Debt Mutual Funds

76%

Doughnut Chart J

 Sources of Investment Advice

F. From Pie Chart O, we will learn the source of investment advice people consider while
investing. We get to learn that 6.3% of the total respondents consider newspaper articles and
magazines while making investment decisions. 18.8% of the total respondents consider
advice or suggestions from family and friends who have invested in similar investment
while making investment decisions. 62.5% of total respondents consider the advice from
IFAs (Independent Financial Advisors) or Certified Financial Planners or Wealth Managers.
As these people feel that a good Financial Advisors will have much better knowledge and
precision to suggest which investment tool would be better for them based on their financial
need or requirements. As it is the day in day out work of the financial advisors to study and
plan the wealth of their clients hence they feel they would know what is best for their
wealth. 12.5% of the total respondents consider Internet articles and news on various social
media applications or news letter like LinkedIn Twitter etc. Nobody out of all the
respondents feel it is important to consider investment advice from News Channels.

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Sources of Investment advice one considers

while investing their own money

6%
Newspapers
Family and Friends
19%
Internet
IFAs or CFPs
News Channels

62% 12%

Pie Chart O

 Feedback towards Mutual Funds

Since the reply based on the returns of Mutual funds received was extraordinary the group of
respondent were asked whether how they would rate Mutual Funds in India based on the returns
received. We shall study about the same in below Pie Chart P.

How much would you rate Mutual Funds in

India on the basis of returns?

4%
12%
Highly Satisfactory
Satisfactory
Average
Dissatisfactory
Highly Dis-satisfactory

32%
52%

Pie
Chart P

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G. From Pie Chart P, we get to learn that 12% of the total respondents rated Returns through
Mutual Funds in India Highly Satisfactory. 32% are satisfied with the returns earned in
Mutual Funds in India. 52% of total respondents rated Returns through Mutual Funds in
India as Average. As these people might or might not know the potential of Mutual Fund
investments also the power of compounding hence believes that Mutual Funds in India
should give a better a return. 4% of the total respondents believe that the returns in Mutual
Investments are very low and they are not satisfied by the returns earned. They believe they
can earn much better return via Direct Equity Shares which can give multifold higher
returns more than Mutual Funds. As there are many charges which one has to pay to the
Fund Manager and Fund houses and constant churning of Portfolio makes its returns low.
Whereas nobody is very dissatisfied by the returns earned Mutual Funds in India.

The final concept I wanted to learn as to how many from the total respondents would consider
consulting a Financial Advisor. From Dough Nut Chart K we can learn the same.

Would you consider consulting a Financial

Advisor?

Yes
36% No
Maybe
52%

12%

Dough Nut Chart K

H. From Doughnut Chart K, we get to learn that 52% of the total respondents are more
comfortable to invest based on the consultation of an Advisor. 36% of the total respondents
may or may not consider consulting a Financial Advisor for Investments as there might yet a

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hesitation to consult an unknown person. The remaining 12% of the total respondents are
not comfortable to invest based on the consultation of an Advisor.

Tabular data

 Age Group of the respondents

Age Number of Students %
Below 25 Years 24 48.0%
25 to 35 Years 13 27.0%
35 to 45 Years 9 18.8%
45 Years and above 3 6.3%
Total 50 100%

 At what age did you do your first Mutual Fund Investment?

Age Number of Students %
Below 25 Years 24 48.0%
25 to 35 Years 13 27.0%
35 to 45 Years 9 18.8%
45 Years and above 3 6.3%
Total 50 100%

 Educational Qualifications of the respondents

Qualification Number of Students %
Up to school 3 6.3%
Intermediate 3 6.3%
Graduate 28 56.3%
Post Graduate 12 25.0%
Certified Professional 3 6%
Total 50 100%

 Does Educational Qualification affect the investor buying behavior with

regards to Mutual Funds?
View Number of Students %
Yes 46 92%
No 4 8%
Total 50 100%

 occupation of the respondents

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occupation Number of Students %

Student 6 12.5%
Private Sector Service 31 62.5%
Self Employed 6 12.5%
Business 3 6.3%
Retired 3 6%
Total 50 100%

 Annual Income of the Respondents

Income Slab Number of Students %
Below 1.5 Lakhs 16 32.0%
1.5 Lakhs to 3.5 Lakhs 18 36.0%
3.5 Lakhs to 5 Lakhs 10 20.0%
5 Lakhs and above 6 12.0%
Total 50 100%

 What % of your income one has or would they invest in Mutual Funds?
% invested Number of Students %
15% and below 28 56.3%
16% to 30% 16 31.3%
31% to 50% 0 0.0%
51% and above 6 12.5%
Total 50 100%

 Savings objective from their income in Mutual Funds

Goals Number of Students %
Children’s Education or Self Education 12 25.0%
Retirement 12 25.0%
Home Purchase 16 31.3%
Children’s Marriage 3 6.3%
Healthcare 3 6.3%
International or Domestic Holidays 3 6%
Total 50 100%

 Does Residential Location affect the buying behavior towards

Mutual Funds India?
View No of Respondents %
Yes 22 43%

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No 29 57%
Total 50 100.00%

10. Awareness about Mutual Funds

Perceptions No of Respondents %
Yes 38 76%
No 12 24%
Total 50 100%

11. Has knowledge about Mutual Funds

Knowledge No of Respondents %
Yes 29 57.7%
No 8 15.4%
Maybe 13 26.9%
Total 50 100%

12. Why should one invest in Mutual Funds?

Measures considered No of Respondents %
For Tax Benefit 10 19.2%
To get good returns 15 30.8%
To accomplish all your goals 4 7.7%
All of the above 21 42.3%
Total 50 100%

13. What would one do if the Sensex fell by 1000 points?

Actions No of Respondents %
Sell some or all units invested in Equity 4 8%
Sell some units invested in Equity and 8 16%
invest in Debt funds or FDs
Sell some units invested in Debt portion 8 16%
and invest in Equity portion
Nothing 30 60%
Total 50 100%

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1. What would one do if the Sensex rises by 1000 points?

Actions Taken No of Respondents %
Buy more units 8 16%
Sell some units invested in Equity and 14 28%
invest in Debt funds or FDs
Sell some units invested in Debt portion 10 20%
and invest in Equity portion
Nothing 18 36%
Total 50 100%

2. Have invested in Financial Instruments

Perceptions No of Respondents %
Yes 28 56%
No 18 36%
Maybe 4 8%
Total 50 100%

14. Investments done in the following assets

Investment Instruments No of Respondents %
Bank Fixed Deposits/ Current A/c 15 29.2%
Deposits
Gold 2 4.2%
Real Estates 6 12.5%
LIC/ ULIP Policies 8 16.7%
Mutual Funds/ Shares/ Debentures/ 19 37.5%
Bonds
Total 50 100%

15. Would you choose Mutual Funds as an investment option?

Perceptions No of Respondents %
Yes 27 53.8%
No 4 7.7%
Maybe 19 38.5%
Total 50 100%

3. Mutual Funds majorly invested in for the time horizon of 5 Years

Category No of Respondents %
Low Duration Funds (Debt) 10 20%
Hybrid Equity Fund 12 24%
Large Cap Funds 714 8%
Mid & Small Cap Funds 14 28%
Balanced Advantage Funds 10 20%
Total 50 100%
`

4. Considering the most important factor while investing

Factors No of Respondents %
Returns 33 65.40%
Low Risk Factor 12 23.10%
Inflation 4 7.70%
Lock In Period 2 3.80%
Total 50 100%
16. Companies in which respondents would like to or have already invested
AMCs No of Respondents %
ICICI Prudential Mutual Funds 22 44%
DSP Mutual Funds 2 4%
HDFC 20 40%
Edelweiss Mutual Funds 6 12%
Total 50 100%

5. Reason for Preferring XYZ Mutual Funds

Factors No of Respondents No of Respondents
Returns 21 42.3%
Lower Risk 12 23.1%
Corporate Image 12 23.1%
Fund Managers 2 3.8%
Credit Rating 4 7.7%
6.
Total For how long would one stay invested? 50 100%
Period No of Respondents %
Less than 6 Months 20 40%
3 Years 14 28%
5 Years 12 24%
15 Years 4 8%
Total 50 100%

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8. Sources of Investment advice one considers while investing their own money
7. Which sector is one more comfortable staying invested?
Mediums No of Respondents %
Category No of Respondents %
Newspapers 3 6.3%
Direct Equity or Equity Mutual Funds 12 24%
Family and Friends 9 18.8%
Debt Mutual Funds 38 76%
Internet 6 12.5%
Total 50 100%
IFAs or CFPs 31 62.5%
News Channels 0 0.0%
Total 50 100%

9. How much would you rate Mutual Funds in India on the basis of returns?
Ratings % No of Respondents
Highly Satisfactory 12% 6
Satisfactory 32% 16
Average 52% 26
Dissatisfactory 4% 2
Highly Dissatisfactory 0% 0
Total 100% 50

10. Would you consider consulting a Financial Advisor?

Views % No of Respondents Chapter
Yes 52% 26 5:
No 12% 6
Maybe 36% 18
Total 100% 50
CONCLUSION

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Mutual funds are good source of returns for majority of households and it is particularly useful
for the people who are at the age of retirement, who want to achieve various other goals such as
house purchase, Education and Marriage or wealth creation. However, average investors are still
restricting their choices to conventional options like gold and fixed deposits when the market is
flooded with countless investment opportunities, with mutual funds. This is because of lack of
information about how mutual funds work, which makes many investors hesitant towards mutual
fund investments. In fact, many a times, people investing in mutual funds too are unclear about
how they function and how one can manage them. So the organizations which are offering
mutual funds have to provide complete information to the prospective investors relating to
mutual funds. The government also has to take some measures to encourage people to invest in
mutual funds even though it is offering schemes like Rajiv Gandhi Equity Savings Scheme to the
investors. It is believed that some of these measures could lift the morale of the mutual fund
industry which has been crippled for the last three years, Thanks to campaigns like Mutual
Funds Sahi Hai led by AMFI (Association of Mutual Funds of India) there is a growing
eagerness and awareness towards Mutual Funds.

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Chapter 6: Appendix

Bibliography

 Coffee Can Approach – Saurabh Mukharjea

 NISM VA – Distributor Model
 Economic Times

Webliography
 www.valueresearchonline.com
 www.morningstar.in
 www.moneycontrol.com
 www.livemint.com
 www.investopedia.com

Questionnaire

1. Under which age group do you fall?

 Below 25 Years
 25 to 35 Years
 35 to 45 Years
 45 Years and above

2. At what age did you do your first Mutual Fund Investment?

 Below 25 Years
 25 to 35 Years
 35 to 45 Years
 45 Years and above

3. What is you Educational Qualifications ?

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 Up to school
 Intermediate
 Graduate
 Post Graduate
 Certified Professional

4. Does Educational Qualification affect the investor buying behavior with regards to Mutual
Funds?
 Yes
 No

5. What is your Occupation?

 Student
 Private Sector Service
 Self Employed
 Business
 Retired

6. What is your Annual Income?

 Below 1.5 Lakhs
 1.5 Lakhs to 3.5 Lakhs
 Lakhs to 5 Lakhs
 5 Lakhs and above

7. What % of your income one has or would they invest in Mutual Funds?
 15% and below
 16% to 30%
 31% to 50%
 51% and above

8. What is your Savings objective from their income in Mutual Funds?

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 Children’s Education or Self Education

 Retirement
 Home Purchase
 Children’s Marriage
 Healthcare
 International or Domestic Holidays

9. Does Residential Location affect the buying behavior towards Mutual Funds India?
 Yes
 No

10. Are you Aware about Mutual Funds?

 Yes
 No

11. Do you have any knowledge about Mutual Funds?

 Yes
 No
 Maybe

12. Why should one invest in Mutual Funds?

 For Tax Benefit
 To get good returns
 To accomplish all your goals
 All of the above

13. What would you do if the Sensex fell by 1000 points?

 Sell some or all units invested in Equity
 Sell some units invested in Equity and invest in Debt funds or FDs
 Sell some units invested in Debt portion and invest in Equity portion
 Nothing
14. What would you do if the Sensex rises by 1000 points?

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 Sell some or all units invested in Equity

 Sell some units invested in Equity and invest in Debt funds or FDs
 Sell some units invested in Debt portion and invest in Equity portion
 Nothing

15. Have invested in any Financial Instruments earlier?

 Yes
 No
 Maybe

16. In which of the following Assets have you invested or would invest?
 Bank Fixed Deposits/ Current A/c Deposits
 Gold
 Real Estates
 LIC/ ULIP Policies
 Mutual Funds/ Shares/ Debentures/ Bonds

17. Would you choose Mutual Funds as an investment option?

 Yes
 No
 Maybe

18. Which Category of Mutual Funds you would invest in for the time horizon of 5 Years?
 Low Duration Funds (Debt)
 Hybrid Equity Fund
 Large Cap Funds
 Mid & Small Cap Funds
 Balanced Advantage Funds

19. Which is the most important factor you consider while investing?
 Returns
 Low Risk Factor
 Inflation
 Lock in Period

20. Which of the following Mutual Fund companies would you like to invest?
 ICICI Prudential Mutual Funds

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 DSP Mutual Funds

 HDFC
 Edelweiss Mutual Funds

21. Which sector are you more comfortable staying invested?

 Direct Equity or Equity Mutual Funds
 Debt Mutual Funds

22. What are the sources of Investment advice you consider while investing your own money?
 Newspapers
 Family and Friends
 Internet
 IFAs & CFPs
 News Channel

23. Reason for Preferring XYZ Mutual Funds?

 Returns
 Low Risk Factor
 Corporate Image
 Fund Managers
 Credit Ratings
24. How long would you stay invested?
 Less than 6 Months
 3 Years
 5 Years
 15 Years

25. How much would you rate Mutual Funds in India on the basis of returns?
 Highly Satisfactory
 Satisfactory
 Average
 Dissatisfactory
 Highly Dissatisfactory

26. Would you consider consulting a Financial Advisor?

 Yes
 No
 Maybe

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80