Behaviour Of Individual Investors Towards Mutual

Published Date: 02 Nov 2017

First Research Draft

Mridul Minz

T Y B.sC ECONOMICS

sYMBIOSIS SCHOOL OF ECONOMICS

Table of Contents

A STUDY OF FUND SELECTION BEHAVIOUR OF INDIVIDUAL INVESTORS TOWARDS MUTUAL FUNDS - With reference to Pune city

Chapter 1: Abstract

MF is a retail product designed to target little traders, salaried people and others who are discouraged by the secrets of stock market but, nevertheless, like to make use of stock market investing. With the changes of commercial policy, public industry, economical industry and the many improvements in the Indian money market and capital market, financial behaviour of small investors reflects in the selection of Mutual Funds and other investment avenues. Mutual Funds have become a critical arena for these small investors. The group of people investing in Mutual Funds are highly heterogeneous and their choices and fund selection pattern differs widely. Investors demand inter-temporal prosperity moving as he or she moves along through the life-cycle. Expectations of investors play a vital role in the financial markets. They influence the price of the securities, the volume traded and various other financial operations. Consumer behaviour from the marketing world and economical business economics has brought together to the surface an interesting area for academic work and research: behavioural finance. Experts seem to treat marketplaces as a combination of mathematical findings, technical and fundamental research. A rich view of research stays this innovative understanding of how marketplaces are also affected by the ‘financial behaviour’ of traders. Hence, this research has made an attempt to analyse the related aspects of the finance choice behaviour of individual traders towards Mutual funds, in the city of Pune.

Chapter 2: Introduction

2.1 Background and Statement of purpose

The Native Indian financial market has been growing extremely with the changes of the commercial policy, reforms of public market and economical market and new economic guidelines of liberalization, deregulation and reorientation. The Indian economic system has started out up and many improvements have been developing in the Indian financial market and cash market with the help of economic climate and banking organizations or intermediaries which nurture benefits and programs them to their most efficient use. One such financial intermediary who has performed a significant role in the development and growth of financial commitment markets is Mutual Funds (MF).The idea of MFs has been on the economical scenery for long in a basic form.

The tale of mutual fund market in Indian started in 1963 with the development of Unit Trust of India, at the effort of the Government of India and Reserve Bank. The releasing of impressive techniques in India has been rather slow due to existing financial commitment mind-set and infrastructural insufficiencies. Risk negative investors are interested in techniques with bearable financial commitment risk and come back over bank first deposit, which has restricted the launching of more risky products in the Indian Capital market. But this purpose of the MF market has changed over the years. For many years resources were more of assistance than an item, the assistance being professional management. In the last 15 years MFs have progressed to be an item. The term ‘product’ is used because MF is not merely to recreation area investor’s benefits but techniques are ‘customize made’ to cater to investor’s needs, whatever their age, budget, risk patience and come back objectives. This issue of mixing assistance and item will be an important one for the next several years. Mutual Funds have started out new views to an incredible number of little traders by virtually getting financial commitment to their front door.

UTI had a fantastic previous and had always been recognized as a secure, great generate financial commitment automobile with the added tax advantage. Many UTI customers had validated their values by staying spent in UTI even after the 1999 help out and many have still not missing trust in UTI, even after the September 2001 show. "Endowment Effect" is explained by Thaler Kahneman and Knetsch (1992) as "People are more likely to believe that something they own is better than something they do not own". We have proof for the impact of this impact also among Indian MF traders, for, how else can we describe the purpose for the lifestyle of many inadequate performing funds without traders remaining spent with them? However, in the economical literary works, there are no designs which describe the influence of these "perceptions" and "beliefs" on "Expectations" and "Decision Making". Because of our own lack of ability to comprehend the resources of motivations and the reasons for these objectives we usually neglect it. No question, truth is so complex that trying to fit a personal investor’s values into a design is impossible. But, to a certain level, we can lend principles from social psychology where behavioural styles, logical or unreasonable, are designed and empirically examined. On the same collections, we can create certain designs to check the financial behaviour, to the level of the option the informative factors.

In India, a little trader generally goes for bank remains, which do not provide hedge against prise rise and often have negative real profits. He has restricted access to price delicate information and if available, may not be able to understand openly available details couched in specialized and legal jargons. He discovers himself to be an odd man out in this financial set-up. Mutual Funds have come, as a much needed help to these traders. MFs are looked upon by individual traders as financial intermediaries/ profile professionals who process details, recognize financial commitment possibilities, formulate investment strategies, spend resources and observe improvement at a very low cost. Thus the success of MFs is essentially the result of the mixed initiatives of qualified fund professionals and aware traders. A competent fund administrator should evaluate trader behaviour and understand their needs and objectives, to equipment up the overall performance to meet trader requirements.

2.2 Methodology

This is an exploratory type of research whose purpose is to analyse what factors individuals prefer while investing in mutual funds and what type of behaviour they exhibit. The study will be based on survey method. The primary data will be collected by interviews through structured questionnaire. For the purpose of study, people of various grades and profession will be selected and interviewed. Exploratory type of research will be undertaken to fulfil the objectives of the study

Data Collection

The research mainly deals with the economical behaviour of Personal Traders towards Mutual Funds in Pune city. The required data will be gathered through a pretested set of questions applied on a mixture of simple random and judgement sample of 100 knowledgeable individual investors. Judgement example choice is due to the time and financial constraints. Participants will be tested and inclusion will simply be on the basis of their knowledge about Financial Markets, MFs in particular. This is necessary, because the set of questions assumed attention of some basic language about Common Funds. The purpose of the research is to understand the behavioural aspects of person investors, mainly their finance choice behaviour, various factors impacting this behaviour and also the conceptual attention level among individual investors. The research will be performed during Dec & Jan, among 100 knowledgeable, geographically spread individual investors of Pune town.

2.3 Objectives of the study

The study has the following broad objectives:

To assess the level of awareness about mutual funds among the individual investors.

To identify the preferred savings avenue among individual investors.

To assess the savings objectives among individual investors.

To understand the preferential feature in the savings instrument among individual investors.

The study also seeks to access following other specific objectives like:

To assess the mutual fund scheme preference of investors.

To evaluate fund qualities that would affect the selection of Mutual funds.

To perceive the preferred communication mode of investors.

To understand the fund sponsor qualities influencing the selection of MFs/Schemes.

To identify the information sources influencing the scheme selection decision of investors.

To identify the most popular Mutual Funds among individual investors.

To assess the influence of personal variables on the MF conceptual awareness level of individual investors.

To evaluate investor related services that would affect the selection of Mutual funds.

To establish a relationship between types of investors and MF qualities that influence MF/Scheme selection.

And ultimately to see the dynamics of the above factors/objectives in the recent years.

2.4 Limitations of the study

Sample dimension is limited to 100 knowledgeable individual investors in the town of Pune. The example dimension may not effectively signify the national industry. Simple Random and reasoning choosing techniques is due to some time to economical restrictions. This research will not be performed over an extended time period having both highs and lows of currency markets conditions which a significant impact on investor’ s buying routine and choices

Chapter 3: Review of Literature

Daniel Kahneman and Amos Tversky (1979) initially described "Prospect Theory" and discovered that people were much more troubled by prospective failures than they were happy by comparative profits. Some economic experts have determined that traders typically consider the decrease in $1 twice as painful as the pleasure obtained from a $ obtain. Men and women react in a different way to comparative situations based on whether it is provided in the perspective of failures or profits. Here is an example from Tversky and Kahneman 1979 article. Tversky and Kahneman provided categories of topics with a variety of issues. One list of topics was provided with this issue.

1. Moreover to what you own, you have been given $1000. You are now requested to select between

A. A sure obtain of $500.

B. A 50% opportunity to obtain $1,000 and a 50% opportunity to obtain nothing.

Another list of topics was provided with another issue.

2. Moreover to whatever you own, you have been given $2000. You are now requested to select between:

A. A sure decrease in $500.

B. A 50% opportunity to reduce $1,000 and 50% opportunity to reduce nothing.

3. in the first team 84% select A. In the second team 69% select B. The two issues are identical in terms of net cash to the subject; however the terminology and wording of the question causes the issue to be considered in a different way.

Goetzman (1997) states that there is evidence that trader mind-set impacts fund/scheme choice and changing.

Robert J. Shiller (1993) exposed that many traders do not have information research and presentation skills. This is because, information from the industry facilitates the benefits of index investing, inactive traders are more likely to base their economical commitment choices on details obtained from purpose or scientific resources.

Phillip (1995) exposed that there is a change in economic decision-making and trader behaviour as a result of doing trader knowledge programs provided by employees.

Berhein and Garnette (1996) confirmed Philip’s conclusions and further mentioned that a serious national strategy to promote benefits through knowledge and details could have a considerable impact on economical behaviour.

Ippolito (1992) says that fund/scheme choice by traders is based on past performance of the resources and money moves into winning resources more rapidly than they flow out of losing resources.

Alexander et al., (1996) exposed that only 18.9% of participants could offer an calculate of expenses for their biggest MF holding. 57% mentioned that they did not know what the expenses were even at enough time they created the MF purchase. This indicates insensitivity to expenses and many traders do not use finance expenses as an evaluative requirements to make economical commitment choices.

Hirshleifer (2001) classified different types of intellectual mistakes that traders make i.e. self-deception, occur because people tend to think that they are better than they really are; heuristic generality, which occurs because people have limited attention, memory and handling capabilities; temperament effect, people are vulnerable to sell their winners too quickly and hold on to their losers too long

Lu Zheng (1998) examined the finance choice ability of MF traders and discovered that the investor’s choices are based on short-term future performance and traders use finance particular details in their choice.

An attempt was created by the NCAER in 1964 to comprehend the mind-set and inspiration for the benefits of people, for which a research of houses was performed. Another NCAER research in 1996 examined the structure of the investment industry and provided the opinions and behaviour of personal investors. SEBI-NCAER research (2000) was performed to calculate the variety of houses and the population of personal traders, their financial and group information, information size, and economical commitment choice for value as well as other benefits equipment. This was a unique comprehensive research of personal traders, for information was gathered from 3, 00,000 geographically spread non-urban and urban houses. Some of the relevant conclusions of the research are: Households choice for equipment match their risk perception; Bank First deposit has an appeal across all earnings class; 43% of the non-investor houses (estimated around 60 million households) obviously lack attention about stock markets; and, compared with low earnings categories, the greater earnings categories have an improved discuss of investment strategies in MFs representing that MFs have not truly become the economical commitment vehicle for small investors; the variety of houses having units of common resources is more (9%) than the trader houses having investment strategies in stocks and debentures (8%). Nevertheless, the research forecasts that in the next two years (i.e., 2000 hence) the economical commitment of houses in MFs is likely to increase. Shanmugham (2001) performed a research of 201 personal traders to research the details seeking by traders, their understanding of various economical commitment technique dimensions and the aspects encouraging discuss economical commitment choices, and exposed that, emotional and sociological aspects taken over financial aspects in discuss economical commitment choices.

Gupta L.C. (1993) performed a household trader research with the purpose to offer information on trader choices on MFs and other economic resources.

Sujit Sikidar and Amrit Pal Singh (1996) performed a research with an purpose to comprehend the behavioural aspects of the traders of the North Southern region towards value and MFs economical commitment information. The research exposed that the paid and self-employed established the significant traders in MFs primarily due to tax discounts. UTI and SBI techniques were popular in that part of the country then and other resources had not been shown to be a big hit during enough time when the research was done.

Madhusudhan V. Jambodekar (1996) performed a research to evaluate the attention of MFs among traders, to recognize the details resources impacting the buyer choice and the aspects impacting the choice of a particular finance. The research exposed that earnings techniques and open-ended techniques are preferred over growth techniques and close-ended techniques during the frequent industry conditions. Investors look for Safety of Major, Assets and Capital Admiration in order of importance; Magazines and Magazines are the first source of details through which traders get to know about MFs / Schemes and the trader service is the significant identifying aspect in the choice of MFs.

Rajeshwari T.R and Rama Moorthy V.E (2002) analysed the economical behaviour and aspects impacting fund/scheme choice of retail traders by performing Factor Analysis using Major Component Analysis, to recognize the investor’ s actual fund/scheme choice requirements, so as to team them into particular industry section for developing of the appropriate technique.

Chapter 4: Theoretical Framework

Mutual Funds

Concept

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realised are shared by its unit holders in proportion to the number of units owned by them. Thus a mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:

Advantages of Mutual Funds

The advantages of investing in a mutual fund are:

Professional Management

Diversification

Convenient Administration

Return Potential

Low cost

Liquidity

Transparency

Flexibility

Choice of schemes

Tax benefits

Well regulated

Drawbacks of Mutual Funds

Mutual funds have their drawbacks and may not be for everyone:

No Guarantees: No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stock on their own. However, anyone who invests through a mutual fund runs the risk of losing money.

Fees and commissions: All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if you don’t use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund.

Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 per cent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made.

Management risk: When you invest in a mutual fund, you depend on the fund’s manager to make the right decisions regarding the fund’s portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers.

Types of Mutual Funds

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the industry.

By structure

Open- Ended Schemes

Close- Ended Schemes

Interval Schemes

By Investment Objective

Growth Schemes

Income Schemes

Balanced Schemes

Money Market Schemes

Other Schemes

Tax Saving Schemes

Special Schemes

Index Schemes

Sector Specific Schemes

Some of the major players on the Indian Mutual Funds are:

ABN AMRO Mutual Fund

Benchmark Mutual Fund

Birla Mutual Fund

BOB Mutual Fund

Canbank Mutual Fund

Chola Mutual Fund

Deutsche Mutual Fund

DSP Merrill Lynch Mutual Fund

Escorts Mutual Fund

Fidelity Mutual Fund

HDFC Mutual Fund

HSBC Mutual Fund

ING Vysya Mutual Fund

JM Financing Mutual Fund

Kotak Mahindra Mutual Fund

LIC Mutual Fund

Morgan Stanley Mutual Fund

Principal Mutual Fund

Prudential ICICI Mutual Fund

Reliance Mutual Fund

Sahara Mutual Fund

SBI Mutual Fund

Standard Chartered Mutual Fund

Sundaram Mutual Fund

TATA Mutual Fund

Taurus Mutual Fund

Unit Trust of India

UTI Mutual Fund

Chapter 5: Framework of Analysis

To understand the savings choice, scheme preference and goals for investment in MFs, and to recognize the sources impacting program choice, and the preferred method of interaction, the participants were asked to position their choices on a position range. The rankings will be determined by acquiring the weighted mean value of the responses. To distinguish the factors that impact the traders fund/scheme choice, different factors will be determined through a thinking period and proof from past research prior to the development of the set of questions at the time of the lead study.

Analysis will be based on the following factors:

A) Product Qualities

A1 Fund’s/Scheme’s performance record

A2 Fund’s/Scheme’s reputation or brand name

A3 Scheme’s expense ratio

A4 Scheme’s portfolio of investments

A5 Reputation of scheme(s), portfolio manager(s)

A6 Withdrawal facilities

A7 Favourable rating by a rating agency

A8 Innovativeness of the Scheme

A9 Products with tax benefits

A10 Entry and Exit load

B) Fund Sponsor Qualities

B1 Reputation of a sponsoring firm

B2 Sponsor offers a wide range of schemes with different investment objectives

B3 Sponsor has a recognised brand name

B4 Sponsor has a well-developed Agency Net Work/Infrastructure

B5 Sponsor has an efficient research wing

B6 Sponsor’s expertise in managing money

C) Investor Services

C1 Disclosure of investment objectives, method and periodicity of valuation in advertisement

C2 Disclosure of the method and periodicity of the scheme’s sales and repurchase in the offer documents

C3 Disclosure of NAV on every trading day

C4 Disclosure of deviation of the investments from the original pattern

C5 Disclosure of scheme’s investments on every trading day

C6 Mutual Fund Investors’ grievance redressal machinery

C7 Fringe benefit like free insurance, free credit card, loans on collateral,tax benefits etc.

This survey also tries assessing other factors that influence fund selection pattern of individual investors:

Savings Objective of Individual Investors

Savings Instrument Preference among Individual Investors

Current Attitude of Individual Investors towards the Following Financial Instruments, In the Indian Capital Market.

Mutual Fund Investment Preference in Future.

Mutual Fund Scheme Preference among Individual Investor

Scheme Preference by Operation among Individual Investors

Preferential Feature in Mutual Funds among Individual Investors

Preferable Route to Mutual Fund Investing Among Individual Investors

Preferred Mode of Communication in Mutual Fund Investing Among Individual Investors

Preference of Mutual Fund Investing Over Equity Investing

Mutual Fund Conceptual Awareness Level of Individual Investors

Top-of-Mind-Recall of Mutual Funds/Schemes among Individual Investors

Factors Influencing Fund/Scheme Selection by Individual Investors

Chapter 7: Findings and Discussions

Summarising the secondary data in the form of various survey samples and their results, research papers and journals we analyse the investor’s behaviour through answering following questions:

1. What is the savings purpose of individual investors?

Most of the individual investors choose their savings objective as ‘to save for retirement’. This exhibits the characteristics of the risk adverse investors. Thus for recommendation, the mutual fund companies should design their products to meet the investors purpose of savings.

2. What are the savings instruments preferred by individual investors?

Given the choice of different savings instruments like Bank deposits, shares, life insurance, gold, real estate etc. investors mostly prefer ‘Pension and Provident Fund’. It is the most widely chosen savings instrument among the consumers. Asset preference design of investors provides a knowing into the financial commitment mind-set of investors, which will impact the plan development for earning the person savings. This product help investors get frequent returns and it also safeguards the investment.

3. What is the Attitude seen in the Indian Capital Market towards the Following Financial Instruments?

Every financial instrument has different risk-return factor. Different individual have different choices, some may go for more risky instrument or some may go for less risky instrument and take less returns. It is thus individual preference of every investor. The mind-set of individual investors affects the fund selection behaviour. Investors are influence by different characteristics like investment goals, risk, tolerance, time frame. Individuals also have personal attributes while selecting the different financial instrument. Shares have the prospective to offer great profits with certainly little more of a risk. Whereas a bond may possess little risk but returns are also comparatively lower than the shares. The attitude of each one trader may be affected by their own financial commitment objectives. Different financial instruments like shares, mutual funds, debentures and Bonds were ranked. Shares were chosen as the most favourable of all. And other instruments like mutual funds, bonds and debentures were favoured comparatively lesser. With the high growth of mutual fund industry in Indian capital market, mutual funds will also become the preferred option among investors.

4. What will be the mutual fund preference in future?

When asked to the investors, most of them said ‘No’ about the growth of mutual fund investments in near future. While the subsequent majority of people said that they feel there is a significant opportunity of growth in the mutual fund investments in future. And other chunk of around 20% investors was not sure about the matter. There lies a great opportunity for the mutual fund companies to grow in future with a significant number of people saying yes. But these companies should focus on spreading awareness about mutual funds as many of the respondents were not sure about it. Mutual fund companies should prioritise investor sentiments and not only focus on individual profits.

5. Which Mutual Fund scheme is preferred by individual investor?

Investors have a variety of choices from Growth techniques to Fixed Income techniques. ‘Growth scheme’ is preferred by most of the investors. MF scheme preference for greater part of investors is ‘Growth Scheme’. The preference for growth or any other scheme is also affected by stock exchange conditions existing at enough duration of investment decision. The existing market conditions have persuaded investors to look for Growth schemes and income schemes. This further indicates the growing performance of investors.

6. Which Mutual Fund scheme is preferred (by operation) among individual investor?

By the characteristics of mutual funds majority of investors prefer ‘Open- Ended’ scheme. In India most of the mutual fund schemes are of open-ended in nature. The preference to Open- Ended scheme has also given due significance to ‘Liquidity’ .Very small percentage of people choose ‘Internal schemes’.

7. Why is mutual fund preferred among individual investors?

Mutual funds are preferred because of diversification of risk. It has a professional management and convenient administration. Mutual funds provides with tax benefit and liquidity. There is high level transparency in mutual funds and there are choices of schemes

8. What is the preferred route to mutual fund investing among individual investors?

There are different sources of information about mutual funds. Most likely available in the current scenario are newspapers, financial magazines, brokers and agents, television, business newspaper, e-mails. Most of the investor prefers newspapers and financial magazines. While some of the investor try to gain awareness through different sources. This brings light on the likelihood that MF investors spend time analysing the appropriate details before choosing any fund.

9. What is the preferred mode of communication in mutual fund investing individual investors?

Most of the individual investor around 30% uses internet facility to inquiry more about mutual funds. The study reveals that, 29% of the participants use online service to know more about MFs. Another 29% of participants want to get schedule or special details like NAV, results, bonus, change in resource mix etc. by individually viewing the workplace. While 30% of the participants choose to telephone the workplace and 12% in the study have no choices. The outcomes of the research show that almost equivalent significance is given to all ways of communication. This gives the idea of catapulting improvement in Online and telecom solutions in Indian. Now-a-days economical solutions are ‘just a phone call away’. There is also probability of more use of computerized solutions if created more ‘user friendly’.

10. Which is more preferred mutual fund or equity?

The appearance of a range of savings choices and the impressive increase in the popularity of Mutual funds, in the past few years in India, has started out up an entirely new area for value development and management. The reality is that most of the Indian investors is a greenhorn when it comes to financial markets. The causes are many; deficiency of chance, deficiency of conceptual knowing and the impact of fixed earnings alignment in the common Indian’s lifestyle. Around half the investors prefer to invest in mutual fund. The theory behind this is that, by combining together a huge gathering or amassing of person savings and investing them, using the expert verdict of the fund administrator, one propagates risk, uses volume buying and scientific information research, skills and so on. This seems to be a perfect option for the individual who does not have a lot of time, information and skills to make a sequence of judgments involving valuable savings. On the other side, there appeared another type of individuals, who do not want to be subject to the broker-friend-advisor system. These individual investors are able to communicate their own situation and risk preference. The research reveals yet another type of participants, ‘Do Not Know’, which amounts to around 20%. This classification may include people who either have a low attention stage about MF industry or still do not completely believe that MFs can get the same come back like that of equity shares.

11. What is the conceptual awareness level of individual investor about mutual funds?

Investors, while getting their financial commitment choices use exclusive inner features (influenced by their cognitive domain) and also yield to the demands of the external marketplaces. ‘Awareness’ connected to the intellectual industry. Hence, it is essential for the mutual fund companies to know the position of awareness about MFs among the investing public. This will allow them to make an external environment that can impact financial commitment choices of investors. The research reveals that the general awareness level about the mutual funds among individual investors is considerable. There are more than 50% of people having good awareness level about MFs. This could be attributed to the extensive advertising given to MF industry by the press for different factors. Broker training programmes and trader information programs structured by AMFI at local levels during 2003-04 could also have provided to this stage of attention. However, this research was based in a city of Pune where the attention stage may be significantly great. But, the litmus analyse for the industry is the development of the submission system to small city and non-urban areas where most of the small investors live. The process would be to inform these investors about the key benefits of investing in mutual funds in comparison to conventional savings instrument. Awareness levels are based only on Academic Qualifications. Mutual fund companies should take observe of this and follow a segmented technique in marketing the product and in developing attention.

Chapter 8: Conclusion

The presence of an array of savings and investments options and the impressive increase in the secondary market for financial resources in the past few years in India has started out up an entirely new area of value growth and management. An average Indian trader is a novice when it comes to marketplaces, the causes may be many: the absence of opportunity, lack of conceptual understanding and the impact of a fixed-income alignment in the Indian lifestyle. Salaried personnel mostly put their savings in mutual funds; the concept behind this is that by combining together a large personal savings and investing them, using the professional verdict of the fund manager, one mitigates risk, uses volume buying and scientific data research, skills and so on. Therefore it is seen as the ideal option for a personal who does not have the time, knowledge or experience to make a sequence of conclusions including his hard-earned benefits. Mutual Fund market in India has a large untapped market in urban areas besides the new marketplaces in semi-urban and non-urban places. This industry potential can be utilized by examining trader behavior to recognize their objectives and communicate trader's own situation and risk choice and then apply to an economical investment strategy that brings together the regular four: cash and equivalents, Government-backed bonds, debt, and equity.

Currently, more and more resources are coming into the market and their success relies on ideal marketing options of mutual fund companies, to endure and flourish in this extremely appealing market, in the face of such ruthless competitors. In addition, the accessibility to more benefits equipment with different risk-return mixture would make the traders more aware and selective. Running an effective MF needs complete knowing of the peculiarities of the Indian Stock Market and also the financial behaviour of the small trader.

Annexure – I

Questionnaire

Sir/Madam,

I am a student of B.Sc. Economics of Symbiosis School of Economics, Pune affiliated to Symbiosis International University (SIU). I am currently engaged in a study on of fund selection behaviour of individual investors towards mutual funds- With reference to Pune city. I would request you to kindly spare a few minutes of your valuable time to answer the questions stated below. Your feedback is earnestly solicited. All the relevant information provided by you shall be used for academic purpose only. Your help will go long way in assisting me to complete my Dissertation.

Thanking you,

Mridul Minz

TY B.Sc

Top of Form

Name

Sex

 Male

 Female

Age

 Below 30

 31-40

 41-50

 Above 50

Academic Qualifications:

 School Final

 Graduate

 Post-Graduate

 Professional Degree

Marital Status

 Married

 Unmarried

 Widow

 Widower

 Divorced

Occupation:

 Professional

 Business

 Salaried

 Retired

 Student

Annual Income in Rs:

 Below Rs. 1,00,000

 Rs 1,00,000 to 3,00,000

 Rs 3,00,000 to 5,00,000

 Above Rs 5,00,000

How much do you save annually (in Rs. Approx)

 Less than Rs 50,000

 Rs 50,001 to Rs 100000

 Above Rs 100000

Objectives of your savings are :

 To provide for Retirement

 For tax reduction

 To meet contingencies

 For children’ s education

 For purchase of assets

What is your current preference of savings avenue?

(Rank from 1 - first preference to 9 - last preference)

1st

2nd

3rd

4th

5th

6th

7th

8th

9th

Currency

Bank Deposits

Life Insurance

Pension & Provident Fund

Shares

Postal Savings

UTI & Mutual Funds

Real Estate

Gold

What is your current attitude towards the following Financial Instruments, in the Indian Capital Market?

Highly Favourable

Favorable

Some what favourable

Not very favourable

Not at all favourable

Shares

Debentures

Mutual Funds

Bonds

Where have you invested among the following?

 Mutual Funds

 Post office savings

 Fixed Deposits

 Shares

 PPF

 Others

If you have invested in mutual funds, what is your satisfaction level regarding mutual fund investment?

 Highly satisfied

 Satisfied

 Neutral

 Not satisfied

How did you come to know about Mutual fund investment schemes?

 Newspapers

 Reference Groups

 Televisions

 Magazines

 Mail

 Other: 

Do you think Mutual fund investing is a best alternative to equity investing?

 Yes

 No

 Do not know

Generally you prefer

(Please Rank from 1 - first preference to 5 - last preference)

1st

2nd

3rd

4th

5th

Growth schemes

Income schemes

Balanced schemes

Money Market schemes

Tax saving schemes

You prefer

 Open ended Schemes

 Close ended Schemes

 Interval Schemes

You prefer Mutual funds due to

(Rank from 1 to 7 down)

1st

2nd

3rd

4th

5th

6th

7th

Safety

Liquidity

Flexibility

Good Return

Capital appreciation

Professional Management

Tax Benefit

Fund Related Qualities

There are many qualities that could affect your selection of Mutual funds and Specific Schemes.

Please indicate importance of the following in your decision.

Highly Important

Important

Some what important

Not very Important

Not at all important

Fund performance record

Fund Reputation or brand

Scheme's portfolio of investment

Ratings by rating agency

Product with Tax benefits

Entry & Exit Load

Minimum initial investment

Fund Sponsor Qualities

Please Indicate

Highly Important

Important

Some what Important

Not very important

Not at all Important

Reputation of sponsoring firm

Sponsor has a recognized brand name

Sponsor has a well developed agency & network

Sponsor’ s expertise in managing money

Sponsor has a well developed research & infrastructure

Sponsor’ s past performance in terms of risk and return

Investor Related Services

Please Indicate

Highly Important

Important

Some what Important

Not very important

Not at all Important

Disclosure of investment objective in the advertisement 

Disclosure of periodicity of valuation in the advertisement 

Disclosure of the method and the periodicity of the schemes sales and repurchases in the offer documents   

Disclosure of NAV on every trading day

Disclosure of deviation of investments from the original pattern  

MF’ s Investor’ s grievance redressal machinery

Fringe benefits i.e., free insurance, credit cards, loans on collateral, tax benefits etc.

Please read the following statements and indicate your views

Select the appropriate

Yes

No

Do not know

Investment in M F helps you realize the benefits of stock Market investing.

M F investing gives a definite positive return.

Return of the Principal amount invested in any MF is assured.

MF returns and Principal are fully protected and guaranteed by Association of Mutual funds (AMFI)

Bank sponsored Mutual funds give a definite positive return which is greater than Bank fixed deposits rate for a similar period

Entry and exit out of Mutual funds is easy

Due to professional investment, a good return can be expected of MF

Ups and downs of stock Market will not affect the return from MF.

There are many MF schemes to meet the varied needs of INVESTORS.

AMFI protects the interests of MF industry and the unit holders.

Thank you very much for your kind co-operation and for taking time to complete this Questionnaire.

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