GURU JAMBESHWAR UNIVERSITY
PROJECT SYNOPSIS OF EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR
THIRD PARTY PRODUCTS – MUTUAL FUND
SUBMITTED BY MAHESH RAHEJA
He was a software engineer and had recently joined a big MNC. I’ll be focusing on three external influencers affecting consumer choice and decision making process. i. In the morning news daily he had read an article describing mutual funds. and now he started his in depth search about mutual funds. their returns and benefits. you
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.. Finally. he knew about inflation and importance of investment to secure a bright future for his kids. He had struggled all his life and this was his transition from middle-class to upper middle-class. culture. If you are like most people. CONCEPT OF MUTUAL FUND These days you are hearing more and more about mutual funds as a means of investment.e. His salary was good but thanks to media and his general knowledge.EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR
TITLE External influence on consumer behavior BRIEF OF THE PROJECT When someone asks me “tell me some risk free investments which can generate good returns” – I get confused. I will also be focusing on whether the sellers are aware of these external influencers and how do they fine-tune their sales strategy accordingly. Why? Because according to me there are a number of risks in investing and I’m not sure which risk is he talking about? Warren Buffett Said “Risk comes from not knowing what you are doing”. He wanted to secure a future for his kids which he was deprived of. Raj a middle-class Indian man with strong family beliefs and cultural values had just moved to the financial capital of IndiaMumbai. i will try to identify suggestions to which factors a customer as well as a seller should consider while investing and selling mutual funds. group and social class. In our project. let’s try and identify various issues and risks associated with mutual funds. So.
What is a Mutual Fund? Like most developed and developing countries the mutual fund fashion or you can say craze has been catching on in India. income and/or income preservation. You are not the only one.its assets are invested in many different securities.
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.its shareholders -. Beyond that. by its very nature.to invest in a variety of different securities. This is why investing through mutual funds has become such a popular way of investing. but subject to any losses in value as well. is diversified -. A mutual fund.EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR
probably have most of your money in a bank savings account and your biggest investment may be your home. Understanding Mutual funds is easy as it's such a simple concept: a mutual fund is a company that pools the money of many investors -. minimum investment requirements on many funds are low enough that even the smallest investor can get started in mutual funds. And in addition to this a mutual fund brings the benefits of diversification and money management to the individual investor. Those securities are professionally managed on behalf of the shareholders. Investments may be in stocks. investing is probably something you simply do not have the time or knowledge to get involved in. mutual funds provide the benefit of having someone else manage your investments and diversify your money over many different securities that may not be available or affordable to you otherwise. furthering your chances to diversify. Today. providing an opportunity for financial success that was once available only to a select few. money market securities or some combination of these. There are various reasons for this.entitled to any profits when the securities are sold. there are many different types of mutual funds with different objectives and levels of growth potential. and each investor holds a pro rata share of the portfolio . Mutual funds make it easy and less costly for investors to satisfy their need for capital growth. For the individual investor. bonds. Apart from that.
Mutual fund flow chart
Why invest in Mutual Funds. an equity fund would invest in equity and equity related instruments and a debt fund would invest in bonds. Mutual funds hire full-time.EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR
A mutual fund is a common pool of money in to which investors with common investment objective place their contributions that are to be invested in accordance with the stated investment objective of the scheme. high-level investment professionals. 1.
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. A good investment manager is certainly worth the fees you will pay. gilts etc. The investment manager would invest the money collected from the investor in to assets that are defined/ permitted by the stated objective of the scheme. debentures. Professional investment management One of the primary benefits of mutual funds is that an investor has access to professional management. Good mutual fund managers with an excellent research team can do a better job of monitoring the companies they have chosen to invest in. Following are some of the primary benefits. Investing in mutual has various benefits which makes it an ideal investment avenue. For example.
4. bonds. 3. When you buy a mutual fund. Mutual fund unit-holders can benefit from diversification techniques usually available only to investors wealthy enough to buy significant positions in a wide variety of securities. While you own just one security rather than many. small investors do not have enough money to properly allocate their assets. An investor can buy in to a portfolio of equities. the primary asset you are buying is the manager. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs. you still enjoy the benefits of a diversified portfolio and a wide range of services. Diversification The cliche. 2. By pooling your funds with others. who will be controlling which assets are chosen to meet the funds' stated investment objectives. shares.Thus it would be affordable for an investor to build a portfolio of investments through a mutual fund rather than investing directly in the stock market. Mutual funds invest in a broad range of securities. depending upon the investment objective of the scheme.EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR
The managers have real-time access to crucial market information and are able to execute trades on the largest and most cost-effective scale. etc.e. It also uses
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. A crucial element in investing is asset allocation. It plays a very big part in the success of any portfolio. Convenience and Flexibility Investing in mutual funds has its own convenience. However. Affordability A mutual fund invests in a portfolio of assets. you can quickly benefit from greater diversification. "don't put all your eggs in one basket" really applies to the concept of intelligent investing. i. 500/-. Fund managers decide what securities to trade collect the interest payments and see that your dividends on portfolio securities are received and your rights exercised. which would otherwise be extremely expensive. This limits investment risk by reducing the effect of a possible decline in the value of anyone security.
as well as information on the fund's holdings and the fund manager's strategy. Funds are more liquid than most investments in shares. Liquidity With open-end funds. you are provided with regular updates. This allows you to easily rebalance your portfolio to respond to significant fund management or economic changes. for example daily NAVs. 7. Regulations. technology stocks. All mutual funds are required to register with SEBI (Securities Exchange Board of India). you get regular information on the value of your investment. You can track the investments that have been made on youR behalf and the specific investments made by the mutual fund scheme to see where your money is going. making it quick and efficient so that you can get your cash in hand as soon as possible. As a unit holder. They are obliged to follow strict regulations designed to protect investors. 5. In addition to this. All operations are also regularly monitored by the SEBI. There are funds that focus on blue-chip stocks. the process is standardized.EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR
the services of a high quality custodian and registrar. you can redeem all or part of your investment any time you wish and receive the current value of the shares. Transparency Regulations for mutual funds have made the industry very transparent. 8. 6. deposits and bonds. Variety There is no shortage of variety when investing in mutual funds. bonds or a mix of stocks and bonds. You can find a mutual fund that matches just about any investing strategy you select. Another big advantage is that you can move your funds easily from one fund to another within a mutual fund family. Moreover.
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To do this one must know the different types of funds that cater to investor needs. financial position. Open-ended schemes
Open-ended schemes do not have a fixed maturity period. Tax Benefits In case of Individuals and Hindu Undivided Families a deduction up to Rs. tax saving) as well as the number of units (if these are unlimited then the fund is an open-ended one while if there are limited units then the fund is close-ended). risk tolerance and return expectations. including income from units of the mutual fund. Investors can buy or sell units at NAV-related prices from and
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. TYPES OF MUTUAL FUND SCHEMES
Getting a handle on what's under the hood helps you become a better investor and put together a more successful portfolio. growth.000 from the Total lncome will be admissible in respect of income from investments Specified in section 80L. 9.EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR
9. The mutual fund schemes can be classified according to both their investment objective (like income. By Consitution 1. whatever the age.
investors' expectations and other market factors. The market price of the units could vary from the NAV of the scheme due to demand and supply factors. These funds are not generally listed on any exchange. In the interim. Unlike open-ended schemes. Close ended schemes Close-ended schemes have fixed maturity periods (generally ranging from 3 to 15 years). 3). Open-ended schemes are preferred for their liquidity. Interval Schemes These funds combine the features of both open-ended and close-ended schemes where in the scheme is close-ended for the first couple of years and open-ended thereafter. unit capital of open ended funds can fluctuate on a daily basis. investors can buy or sell units on the stock exchanges where they are listed. open-ended schemes do not have a fixed maturity. EG: Franklin India Tax shield 97 & 98. Some schemes allow fresh subscriptions and redemption at fixed
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. Reliance Vision Fund. EG: SBI Bluechip Fund-Growth. Investors can buy into these funds during the period when these funds are open in the initial issue. These schemes have unlimited capitalization. Hence. These schemes are launched with an initial public offer (IPO) with a stated maturity period after which the units are fully redeemed at NAV linked prices. the unit capital in closedended schemes usually remains unchanged. Such funds can issue and redeem units any time during the life of a scheme. there is no cap on the amount you can buy from the fund and the unit capital can keep growing.EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR
to the mutual fund on any business day. After an initial closed period. the scheme may offer direct repurchase facility to the investors. Benchmark Split Capital Fund Class A. 2).
the NAV of these schemes may not
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. Income schemes are ideal for capital stability and regular income. 2). safety of principal. have outperformed most other kind of investments held over the long term. 3). Growth schemes are ideal for investors having a long-term outlook seeking growth over a period of time. In a rising stock market. Debt Schemes based
The aim of income scheme is to provide regular and steady income to investors. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. Such schemes generally invest in fixed income securities such as bonds. 1). It has been proven that returns from stocks. Equity Schemes oriented
The aim of growth scheme is to provide capital appreciation over the medium to long.term. Balanced/Hybrid Schemes The aim of balanced schemes is to provide both growth and regular income. By Investment objectives Mutual fund schemes can be further classified based on their specific investment objective such as growth of capital. current income or tax exempt income. Such schemes normally invest a majority of amount in equities. corporate debentures and Government securities.EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR
times every year (say every six months) in order to reduce the administrative aspects of daily entry or exit. yet providing reasonable liquidity.
For eg: DSP ML Balanced Fund. These are ideal for investors looking for a combination of income and moderate growth . or fall equally when the market falls. Kotak Balanced Fund.EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR
normally keep pace.
CURRENT STATUS OF THE PROJECT
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EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR
Research Problem The study is based on the problem to identify external influencers which affect ‘consumer choice’ & ‘decision making’ and also to identify whether sellers are aware of the impact of these influencers & whether they fine-tune their sales strategy/pitch accordingly. Sellers Convenient Questionnaire Primary Sources
. Questionnaires are enclosed in Annexure II and III Tools of Analysis Following tools are used to analyze the data
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50 Investors. Research Objectives To identify external influencers affecting consumer’s choice & decision making process b) To identify whether sellers are aware of the impact of these influencers c) To identify sales strategy adopted by the sellers and find gaps
Research Design The research study is Empirical and descriptive in nature Sample Size: Sample Type: Sample Criteria: Sampling Data Collection Technique: (Annexure 1 & II) Research based on: Data Collection mode Structured questionnaire is used to collect the information from both the investor and sellers.
which is difficult to obtain Some Questions like Income and Age may not have been responded authentically People generally hesitate to give true information regarding questions on investments.
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.EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR
Tabulation Comparative charts Limitations of the study It is based on primary data.
For what purpose do you want to invest or already invested (Give ranks)? a) Dividend b) Liquidity c) Tax benefit d) Higher returns e) Safety f) Others 4. Which source would you refer to get the knowledge of the mutual funds? a) Newspaper b) Magazines c) TV d) Brokers
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ANNEXURE I Questionnaire for Customers 1. In which schemes you like to invest? a) Open ended Scheme b) Close ended Scheme 5. Do you want to invest for good returns? a) Yes b) No 2. What is your present income? a) 60k to 2 lakh b) 2 Lakh to 5 lakh c) 5 to 10 lakh d) > 10 Lakh 3. Where you have invested or want to invest? a) Stock Market b) Bonds c) Debentures d) Others 6.
Which factors do you consider before investing in a company’s share? (Give ranks) a) Dividend b) Volume of trading c) Market capitalization d) Company mgt e) Return on equity f) Earnings per share g) P/ E ratio h) Others Name: Age: Marital Status: Occupation:
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. How much risk you are willing to take? a) Low b) Moderate c) High d) Very high 8.EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR
e) Friends f) Family g) Others 7.20 % c) 20% -30% d) Above 30% 9. How much return do you expect from stock market? a) 5% – 10 % b) 10% . In which industry do you want to invest? (give ranks) a) Pharma b) IT c) FMCG d) Insurance e) Banking f) Manufacturing g) Telecommunication h) Others 10.
as long as his investments have a greater potential for growth over time d) High – He is willing to take substantial risk in pursuit of higher total returns
2. Why does a chunk of your customer base resist investing in mutual funds? a) Bitter past experience b) Lack of knowledge c) Lack of confidence in service levels
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. even if it means that his total returns are relatively small b) Low – He is willing to accept occasional losses in value as long as his investments have some potential for growth over time c) Moderate – The investor is willing to take moderate risk.The customer focusses on current income and stability in value. while considering Mutual fund investments? a) Lowest Possible . What are the primary incentives investing in mutual funds? a) High returns b) Dividends c) Tax benefits d) Liquidity e) Safety
4. What degree of volatility is acceptable to Muslim customers.EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR
ANNEXURE II Questionnaire for Sellers 1. How often do your clients consult their friends
and/or relatives choice? a) Every time b) Often c) Rarely d) Never
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d) Difficulty in selection of scheme e) Inefficient investment advisors 5. Do you consider the income level of your customers before suggesting them mutual funds? a) Yes b) No
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. What are the primary goals of investors while investing in mutual funds? a) Preserving the value of investments b) Generate regular cash inflows c) Moderate growth in the value of investments over time d) Substantial growth in the value of Investments 6.