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7/30/2019 Investors Perception Towards Mutual Funds - Main Body
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CHAPTER 1INTRODUCTION
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1. INTRODUCTIONMutual funds have become extremely popular over the last 20 years. What was once just another
obscure financial instrument is now a part of our daily lives. Trillions of dollars are invested in
mutual funds all across the world. Mutual funds are so popular because they offer diversification
as they hold many investment positions, they are managed by professional money managers and
are less expensive than stocks as they do not carry hefty commissions.
Mutual funds is an investment vehicle that is made up of a pool of funds collected from many
investors for the purpose of investing in securities such as stocks, bonds, money market
instruments and similar assets. Mutual funds are operated by money managers, who invest the
fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual
fund's portfolio is structured and maintained to match the investment objectives stated in its
prospectus.
One of the main advantages of mutual funds is that they give small investors access to
professionally managed, diversified portfolios of equities, bonds and other securities, which
would be quite difficult (if not impossible) to create with a small amount of capital. Each
shareholder participates proportionally in the gain or loss of the fund. Mutual fund units, or
shares, are issued and can typically be purchased or redeemed as needed at the fund's current net
asset value (NAV) per share, which is sometimes expressed as NAVPS.
1.1A History of Mutual Funds
Mutual funds really captured the public's attention in the 1980s and '90s when mutual fund
investment hit record highs and investors saw incredible returns. However, the idea of pooling
assets for investment purposes has been around for a long time. Here we look at the evolution of
this investment vehicle, from its beginnings in the Netherlands in the 18th century to its present
status as a growing, international industry with fund holdings accounting for trillions of dollars
in the United States alone.
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In the Beginning
Historians are uncertain of the origins of investment funds; some cite the closed-end investment
companies launched in the Netherlands in 1822 by King William I as the first mutual funds,while others point to a Dutch merchant named Adriaan van Ketwich whose investment trust
created in 1774 may have given the king the idea. Ketwich probably theorized that
diversification would increase the appeal of investments to smaller investors with minimal
capital. The name of Ketwich's fund,Eendragt Maakt Magt, translates to "unity creates strength".
The next wave of near-mutual funds included an investment trust launched in Switzerland in
1849, followed by similar vehicles created inScotland in the 1880s.
The idea of pooling resources and spreading risk using closed-end investments soon took root
in Great Britain and France, making its way to the United States in the 1890s. The Boston
Personal Property Trust, formed in 1893, was the first closed-end fund in the U.S. The creation
of the Alexander Fund in Philadelphia in 1907 was an important step in the evolution toward
what we know as the modern mutual fund. The Alexander Fund featured semi-annual issues and
allowed investors to make withdrawals on demand.
The Arrival of the Modern Fund
The creation of the Massachusetts Investors' Trust in Boston, Massachusetts, heralded the arrival
of the modern mutual fund in 1924. The fund went public in 1928, eventually spawning the
mutual fund firm known today as MFS Investment Management. State Street Investors' Trust
was the custodian of the Massachusetts Investors' Trust. Later, State Street Investors started its
own fund in 1924 with Richard Paine, Richard Saltonstall and Paul Cabot at the helm. Saltonstall
was also affiliated with Scudder, Stevens and Clark, an outfit that would launch the first no-load
fund in 1928. A momentous year in the history of the mutual fund, 1928 also saw the launch of
the Wellington Fund, which was the first mutual fund to include stocks and bonds, as opposed to
direct merchant bank style of investments in business and trade.
Regulation and Expansion
By 1929, there were 19 open-ended mutual funds competing with nearly 700 closed-end funds.
With the stock market crash of 1929, the dynamic began to change as highly-leveraged closed-
end funds were wiped out and small open-end funds managed to survive.
Government regulators also began to take notice of the fledgling mutual fund industry. The
creation of the Securities and Exchange Commission (SEC), the passage of the Securities Act of
http://www.investopedia.com/terms/c/closed-endinvestment.asphttp://www.investopedia.com/terms/n/no-loadfund.asphttp://www.investopedia.com/terms/n/no-loadfund.asphttp://www.investopedia.com/terms/o/open-endfund.asphttp://www.investopedia.com/terms/s/securitiesact1933.asphttp://www.investopedia.com/terms/s/securitiesact1933.asphttp://www.investopedia.com/terms/o/open-endfund.asphttp://www.investopedia.com/terms/n/no-loadfund.asphttp://www.investopedia.com/terms/n/no-loadfund.asphttp://www.investopedia.com/terms/c/closed-endinvestment.asp7/30/2019 Investors Perception Towards Mutual Funds - Main Body
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1933 and the enactment of the Securities Exchange Act of 1934put in place safeguards to protect
investors: mutual funds were required to register with the SEC and to provide disclosure in the
form of a prospectus. The Investment Company Act of 1940put in place additional regulations
that required more disclosures and sought to minimize conflicts of interest.
The mutual fund industry continued to expand. At the beginning of the 1950s, the number of
open-end funds topped 100. In 1954, the financial markets overcame their 1929 peak, and the
mutual fund industry began to grow in earnest, adding some 50 new funds over the course of the
decade. The 1960s saw the rise ofaggressive growth funds, with more than 100 new funds
established and billions of dollars in new asset inflows.
Hundreds of new funds were launched throughout the 1960s until the bear market of 1969 cooled
the public appetite for mutual funds. Money flowed out of mutual funds as quickly as investors
could redeem their shares, but the industry's growth later resumed.
Recent Developments
In 1971, William Fouse and John McQuown of Wells Fargo Bank established the first index
fund, a concept that John Bogle would use as a foundation on which to build The Vanguard
Group, a mutual fund powerhouse renowned for low-cost index funds. The 1970s also saw the
rise of the no-loadfund. This new way of doing business had an enormous impact on the way
mutual funds were sold and would make a major contribution to the industry's success.
With the 1980s and '90s came bull market mania and previously obscure fund managers becamesuperstars; Max Heine, Michael Price and Peter Lynch, the mutual fund industry's top
gunslingers, became household names and money poured into the retail investment industry at a
stunning pace. More recently, the burst of the tech bubble and a spate of scandals involving big
names in the industry took much of the shine off of the industry's reputation. Shady dealings at
major fund companies demonstrated that mutual funds aren't always benign investments
managed by folks who have their shareholders' best interests in mind.
Despite the 2003 mutual fund scandals and the global financial crisis of 2008-2009, the story of
the mutual fund is far from over. In fact, the industry is still growing. In the U.S. alone there are
more than 10,000 mutual funds, and if one accounts for all share classes of similar funds, fund
holdings are measured in the trillions of dollars. Despite the launch ofseparate
accounts, exchange-traded funds and other competing products, the mutual fund industry
remains healthy and fund ownership continues to grow.
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1.1b TYPES OF MUTUAL FUND SCHEMES
Mutual fund schemes may be classified on the basis of its structure and its investment objective.
By Structure:
Open-ended Funds:
An open-end fund is one that is available for subscription all through the year. These do not have
a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV")
related prices. The key feature of open-end schemes is liquidity.
Closed ended Funds:
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years.The fund is open for subscription only during a specified period. Investors can invest in the
scheme at the time of the initial public issue and thereafter they can buy or sell the units of the
scheme on the stock exchanges where they are listed. In order to provide an exit route to the
investors, some close-ended funds give an option of selling back the units to the Mutual Fund
through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one
of the two exit routes is provided to the investor.
Interval Funds:Interval funds combine the features of open-ended and close-ended schemes. They are open for
sale or redemption during pre-determined intervals at NAV related prices
By Investment Objective
Growth Funds:
The aim of growth funds is to provide capital appreciation over the medium to long term. Such
schemes normally invest a majority of their corpus in equities. It has been proved that returns
from stocks, have outperformed most other kind of investments held over the long term. Growth
schemes are ideal for investors having a long term outlook seeking growth over a period of time.
Income Funds:
The aim of income funds is to provide regular and steady income to investors. Such schemes
generally invest in fixed income securities such as bonds, corporate debentures and Government
securities. Income Funds are ideal for capital stability and regular income.
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Balanced Fund:
The aim of balanced funds is to provide both growth and regular income. 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.
Money Market Funds:
The aim of money market funds is to provide easy liquidity, preservation of capital and moderate
income. These schemes generally invest in safer short-term instruments such as treasury bills,
certificates of deposit, commercial paper and inter-bank call money.
Other Schemes
Tax Saving Schemes:
These schemes offer tax rebates to the investors under specific provisions of the Indian Income
Tax laws as the Government offers tax incentives for investment in specified avenues.
Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemesare allowed
as deduction u/s 80C of the Income Tax Act, 1961.
Special Schemes
Industry Specific Schemes: Industry Specific Schemes invest only in the industriesspecified in the offer document. The investment of these funds is limited to specific
industries like InfoTech, FMCG, and Pharmaceuticals etc.
Index Schemes: Index Funds attempt to replicate the performance of a particular indexsuch as the BSE Sensex or the NSE 50
Sectoral Schemes: Sectoral Funds are those which invest exclusively in a specifiedsector. This could be an industry or a group of industries or various segments such as 'A'
Group shares or initial public offerings.
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1.1c BENEFITS OF MUTUAL FUND
Professional Management
Mutual Funds provide the services of experienced and skilled professionals, backed by a
dedicated investment research team that analyses the performance and prospects ofcompanies and selects suitable investments to achieve the objectives of the scheme.
Diversification
Mutual Funds invest in a number of companies across a broad cross section of
industries and sectors. This diversification reduces the risk because seldom do all stocks
decline at the same time and in the same proportion.
Affordability
A mutual fund invests in a portfolio of assets, i.e. bonds, shares etc. depending upon theinvestment objective of the scheme. An investor can buy into a portfolio of equities,
which would otherwise be extremely expensive.
Tax Benefits
There is no capital gains tax on mutual funds if invested for more than one year.
Dividends distributed by them are tax-free in the hands of the investor. Also
investments under ELSS are exempted under Section 80C of the Income Tax Act.
Return Potential
Over a medium to longterm, mutual funds have the potential to provide a higher returnas they invest in a diversified basket of selected securities
Low Costs
Investing in the capital markets because the benefits of scale in brokerage, mutual funds
are a relatively less expensive way to invest compared to directly custodial and other fees
translate into lower costs for investors.
Liquidity
In open ended schemes, the investor gets the money back promptly at MAV related
prices from the mutual fund. In closed ended schemes, the units can be sold on a stock
exchange at the prevailing market price or the investor can avail of the facility of direct
repurchase at NAV related prices by the mutual fund.
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Transparency
You get regular information on the value of your investment in addition to disclosure onthe specific investments made by your scheme, the proportion invested in each class of
assets and the fund managers investment strategy and outlook.
Flexibility
Through features such as regular investment plans, regular withdrawal plans and dividendreinvestment plans, you can systematically invest or withdraw funds according to yourneeds and convenience.
Well Regulated
All mutual funds are registered with SEBI and they function within the provisions of strictregulations designed to protect the interests of investors.
1.1d DISADVANTAGES OF MUTUAL FUNDS
There are certainly some benefits to mutual fund investing, but you should also be aware of the
drawbacks associated with mutual funds.
No Insurance
Mutual funds, although, regulated by the government are not insured against losses. That means
that despite the risk-reducing diversification benefits provided by mutual funds, losses can occur,
and it is possible (although extremely unlikely) that you could even lose your entire investment.
Dilution
Although diversification reduces the amount of risk involved in investing in mutual funds, it can
also be a disadvantage due to dilution. By holding a large number of different investments,
mutual funds tend to do neither exceptionally well nor exceptionally poorly.
Fees and Expenses
Most mutual funds charge management and operating fees that pay for the fund's management
expenses (usually around 1.0% to 1.5% per year). In addition, some mutual funds charge high
sales commissions, 12b-1 fees, and redemption fees.
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Poor Performance
Returns on a mutual fund are by no means guaranteed. In fact, on average, around 75% of all
mutual funds fail to beat the major market indexes, like the S&P 500.
Loss of Control
The managers of mutual funds make all of the decisions about which securities to buy and sell
and when to do so. This can make it difficult for you when trying to manage your portfolio.
Trading Limitations
Although mutual funds are highly liquid in general, most mutual funds (called open-
ended funds) cannot be bought or sold in the middle of the trading day.
Size
Some mutual funds are too big to find enough good investments. This is especially
true of funds that focus on small companies, given that there are strict rules about howmuch of a single company a fund may own.
1.1e MUTUAL FUNDS IN INDIA
The company that puts together a mutual fund is called an AssetManagement Company (AMC).
The Securities and Exchange Board of India (SEBI) mutual fund regulations require that thefunds objectives are clearly spelt out in the prospectus. In addition, every mutual fund has a
board of directors that is supposed to represent the shareholders' interests, rather than the
AMCs. (moneycontrol.com)
These products are now tailor made to suit specific needs of investors. Intensified competition
and involvement of private players in the race of MFs have forced professional managers to
bring innovation in mutual funds. Thus, mutual funds industry has moved from offering a
handful of schemes like equity, debt or balanced funds to liquid, money market, sector specific
funds, I index funds and gilt edged funds .With the entry of private sector funds in 1993, a new
era starting the Indian MFs industry giving the Indian investors a wider choice of fund families.In the course of time the number of MF houses went on increasing, with many foreign MFs
setting up funds in India and also the industry has witnessed several mergers and acquisitions.
But in India mutual fund could not get its expected heights. In a country of 120 crore people
there are only 4 crore (3.5 per cent) mutual fund unit investors. On the contrary in developed
countries like US, every second citizen is a mutual fund unit holder (Kelkar 2012).
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Our paper studies investors perception towards mutual funds .We try to find out va rious factors
which have affected the growth in mutual funds.
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1.2 REVIEW OF LITERATURE:
(Dr. Anjum, 2011) conducted a study on investors awareness and perception about mutual
funds. The present investigation outlined that mostly the investors have positive approach
towards investing in mutual funds. In order to maintain their confidence in mutual funds they
should be provided with timely information relating to different trends in the mutual fund
industry. For achieving heights in the financial sector, the mutual fund companies should
formulate the strategies in such a way that helps in fulfilling the investors expectations. Today
the main task before mutual fund industry is to convert the potential investors into the reality
investors. New and more innovative schemes should be launched from time to time so that
investors confidence should be maintained. All this will lead to the overall growth and
development of the mutual fund industry.
(Dr. Sharma, 2012) analyzed Indian Investors Perception towards Mutual Funds. The results
reveal that in order to secure the patronage of Indian investor mutual fund companies are
expected to ensure full disclosure and regular updates of the relevant information along with the
assurance of safety and monetary benefits.
(Singh & Jha, 2009) conducted a study on awareness & acceptability of mutual funds and foundthat consumers basically prefer mutual fund due to return potential, liquidity and safety and they
were not totally aware about the systematic investment plan. The invertors will also consider
various factors before investing in mutual fund.
(Dr. Singh, 2012) conducted a study on investors attitude towards mutual funds as an
investment option. The study shows that most of respondents are still confused about the mutual
funds and have not formed any attitude towards the mutual fund for investment purpose. It has
been observed that most of the respondents having lack of awareness about the various function
of mutual funds. Moreover, as far as the demographic factors are concerned, gender, income and
level of education have significantly influence the investors attitude towards mutual funds. On
the other hand the other two demographic factors like age and occupation have not been found
influencing the attitude of investors towards mutual funds. As far as the benefits provided by
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mutual funds are concerned, return potential and liquidity have been perceived to be most
attractive by the invertors followed by flexibility, transparency and affordability.
(Desigan, 2006) conducted a study on women investors perception towards investment and
found that women investors basically are indecisive in investing in mutual funds due to
various reasons like lack of knowledge about the investment protection and their various
investment procedures, market fluctuations, various risks associated with investment, assessment
of investment and redressal of grievances regarding their various investment related problems.
Savings is a habit specially embodied into women. Even in the past, when women mainly
depended on their spouses income, they used to save to meet emergencies as well as for future
activities. In those days, women did not have any awareness about various investment outlets.
But as time passed, the scenario has totally changed.
(Dr. Rao, 2011)analyzed investors perceptions towards mutual fund schemes. He analyzed that
the behavioural finance has been recognized as an important area in the study of recent finance
literature. It implicit objective is to discover and remedy the deviation from the rational decision
making in the investment process. The purpose of this study is to examine the role of various
social-economic factors affectively the investment decision of the investors. The results an
obtained from a survey and has been analyzed by the chi-squire test. The result shows that,
socio- economic factors are significantly influence the investment behaviour of the investors.
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1.3 NEED OF STUDY
The purpose of this paper is to study the investors perception and satisfaction towards the
mutual funds industries. It also aimed at identifying the section criteria investors seem to use in
selecting a mutual fund institution that suits the investors investment objective and also to
identify the factors that are responsible for selection of schemes floated by various organizations.
The study utilized the survey approach. The sample consisted of 100 respondents. The study tries
to find out that the expectations of customers towards the mutual fund companies and also
whether the companies satisfy the customers expectations. For this purpose we did analysis to
identify the gaps between the expectation and satisfaction level of the customers. This paper also
tries to identify the factors which influence the satisfaction level of customers with respect to
mutual fund companies.
1.4 FOCUS GROUP INTERVIEWParticipants in the summary mutual fund focus groups consider a number of criteria in making a
decision about an investment, including the following:
Control Risk Sale by prospectus Liquidity Minimum investment Tax benefits
In a discussion on stocks vs. mutual funds some respondents agreed that they would prefer
leaving details to others. They wont like to bother about ups and downs in investments and
would like to leave it to an expert.
While on the same time some participants didnt want to lose control of their investments. They
wanted to make the decisions themselves.
There was agreement on risk factor in investments. In case of Mutual funds risk factor is less,
because investment is diversified. This was unanimous opinion of participants.
Mutual funds are sold by prospectus. One respondent said that mutual funds prospectus is
usually very complex and confusing. Sometimes this acts as discouraging factor for investors.
Investors in open-ended mutual funds can buy and sell units at Net Asset Value (NAV) related
prices which are declared on a daily basis on all working days. For some respondents this is very
important factors, as the money can be liquidated easily.
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Few respondents were inclined to invest in mutual fund as minimum amount to be invested in
mutual fund is very low as compared to stocks.
Equity Linked Savings Schemes (ELSS) offer tax rebates to investors. Also, Dividend income
from Mutual Funds is tax-free in the hands of the investor.
1.5 OBJECTIVESMain objective of study is to test investors perception towards mutual funds. Sub-objectives
are:
To study the factors which influence the investors perception towards mutualfunds.
To study means of normative influence which determine the perception towardsmutual funds
To study how risk affects the investments in mutual funds To study effect of demographics on risk perception
1.6 HYPOTHESISH0a There is no Relation between gender and risk perception
H0bThere is no Relation between age and risk perception
H0cThere is no Relation between occupation and risk perception
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CHAPTER 2Research Methodology
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2. Research Methodology
This study examined risk perception of investors towards mutual funds. The survey approach
was used for this study. First, the research method is discussed after which the data collection
and analysis procedures are explained. Justifications for the suitability of the chosen methods arealso presented throughout the chapter.
Objective Hypothesis Dependent
And
Independent
Variables
Data
Collection
Instrument
To study the factors
which influence theinvestors
perception towards
mutual funds
There is noRelation between
gender and risk
perception
There is no
Relation between
age and risk
perception
There is no
Relation between
occupation and risk
perception
Risk Perception
AgeGender
Occupation
Likert scale
Nominal Scale
To study means of
normative
influence which
determine the
perception towards
mutual funds
To study how risk
affects the
investments in
mutual funds
To study effect ofdemographics on
risk perception
Table 2.1:Research Methodology
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2.1 Research Design
Research can be classified in one of three categories.
Exploratory research:Exploratory research has the goal of formulating problems more precisely, clarifying
concepts, gathering explanations, gaining insight, eliminating impractical ideas, and
forming hypotheses. Exploratory research can be performed using a literature search,
surveying certain people about their experiences, focus groups, and case studies.
Causal research
Causal research seeks to find cause and effect relationships between variables. Itaccomplishes this goal through laboratory and field experiments. If the objective is to
determine which variable might be causing certain behavior, i.e. whether there is a cause
and effect relationship between variables, causal research must be undertaken.
Descriptive researchDescriptive research is more rigid than exploratory research and seeks to describe users
of a product, determine the proportion of the population that uses a product, or predict
future demand for a product. As opposed to exploratory research, descriptive research
should define questions, people surveyed, and the method of analysis prior to beginningdata collection. In other words, the who, what, where, when, why, and how aspects of the
research should be defined. Such preparation allows one the opportunity to make any
required changes before the costly process of data collection has begun.
There are two basic types of descriptive research:
Longitudinal studies or Panel Research studies Cross-sectional studies
The study ofInvestors Perception Towards Mutual Funds Requires determining theproportion of the population that uses a product and define questions, people surveyed,
and the method of analysis prior to beginning data collection moreover the data gathered
in this type of design consists of responses from a sample which contains a large number
of sources.
Thus, this research qualifies as DESCRIPTIVE RESEARCH.
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Fig.2.1:Primary Data
2.1.1 Type of Research
The study undertaken is ofDescriptive Research in nature
2.1.2 Nature of Research
The study is quantitative in nature.
2.2 Data Collection
Secondary Data
Before going through the time and expense of collecting primary data, one should check for
secondary data that previously may have been collected for other purposes but that can be used
in the immediate study.
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Secondary data has the advantage of saving time and reducing data gathering costs. The
disadvantages are that the data may not fit the problem perfectly and that the accuracy may be
more difficult to verify for secondary data than for primary data.
Some secondary data is republished by organizations other than the original source. Because
errors can occur and important explanations may be missing in republished data, one should
obtain secondary data directly from its source. One also should consider who the source is and
whether the results may be biased. .
NOTE:
The nature of the study does not quite require any extensive usage of secondary sources of data.
But few journals were referred which introduce and elaborate the Investor perception
dimensions, for analyzing the primary data collected.
Primary Data
Often, secondary data must be supplemented by primary data originated specifically for the study
at hand. Some common types of primary data are:
Demographic and socioeconomic characteristics Psychological and lifestyle characteristics Attitudes and opinions Awareness and knowledge - for example, brand awareness Intentions - for example, purchase intentions Motivation BehaviourPrimary data can be obtained by communication or by observation. Communication involves
questioning respondents either verbally or in writing. This method is versatile, since one need
only to ask for the information, however, the response may not be accurate. Communication
usually is quicker and cheaper than observation. Observation involves the recording of actions
and is performed by either a person or some mechanical or electronic device. Observation is less
versatile than communication since some attributes of a person may not be readily observable,
such as attitudes, perception, knowledge, intentions, and motivation. Observation also might takelonger since observers may have to wait for appropriate events to occur, though observation
using scanner data might be quicker and more cost effective. Observation typically is more
accurate than communication.
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NOTE:
For the analysis of the Investors perception primary data was collected using questionnaire
containing 18 questions.
The data collection method chosen for this study was random sampling in which is which eachunit (e.g., persons, cases) in the accessible population has an equal chance of being included in
the sample, and the probability of a unit being selected is not affected by the selection of other
units from the accessible population.(Charles Teddlie and Fen Yu,(2007,p.79)
In terms of this study, random sampling was chosen because overall market analysis had to be
done to understand attitude of consumers towards beauty products. Thus, the population chosen
for this study was the 91 consumers who submitted their responses to online posted forms for
questionnaire.
2.2.1 Questionnaire
A questionnaire served as a data-gathering instrument. Questionnaire was posted online to
collect responses. It was based on scales (5-point Likert scales) to measure the variables
considered in this study.
The survey was done by using Google Docs to create a questionnaire. The survey was written
and implemented in English. The questions in the survey were designed based on the determined
research problem and questions as well as the theory presented in literature review. By
combining the theory with the research objectives, altogether 20 questions were formulated. All
the questions were close ended.
Questions were such that they covered all the dimensions of attitude under study. For example:
Risk: How do you rate the risks associated with Mutual Funds.
General Awareness: Do you have any knowledge about Mutual Funds?
Technical Knowledge: Do you know what is systematic risk
Apart from such questions, a Likert scale is used to measure upon factors such as liquidity, High
Return, Price etc. Factor analysis will be used to identify the factors which contribute maximum
towards the perception.
The order of the questions was designed so that it would be easy and convenient for the
respondents to answer and thus the questions do not follow the order of the literature review. The
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survey starts with questions related to age, occupation, gender and income in order to learn about
the demographics of the respondents. The questionnaire can be found in appendix I.
After making sure the survey was understandable and the link for online form worked as
intended, a link was posted online on various investment forums, mutual fund companies pages
on social networks.
TABLE 2.2:Questionnaire sections
Section A Demographics
Section B General Awareness
Section C Technical Knowledge
Section D Normative Influence
Section E Risk
Section F Factors
2.3 Data analysis
To arrive at pertinent analysis, the collected data was put to a planned statistical analysis using
SPSS package. After scoring the questionnaires the data of all the people was pooled and
tabulated. To arrive at certain conclusion regarding the hypothesis advanced in the process
investigation, the description of the statistical tools which were applied for the analysis of data.
STATISTICAL TOOLS FOR DATA ANALYSIS
Survey was conducted using Likert based questionnaire ranging from 1 = Strongly Disagree to 5
= Strongly Agree, and Nominal Scale.
Further SPSS 17.0 was used for analyzing the data.
2.3.1 FACTOR ANALYSISFactor analysis is a statistical method used to describe variability among observed
correlated variables in terms of a potentially lower number of unobserved variables
called factors. In other words, it is possible, for example, that variations in three or four observed
variables mainly reflect the variations in fewer unobserved variables. Factor analysis searches for
such joint variations in response to unobserved latent variables. The observed variables are
modelled as linear combinations of the potential factors, plus "error" terms. The information
gained about the interdependencies between observed variables can be used later to reduce the
http://en.wikipedia.org/wiki/Variable_(mathematics)http://en.wikipedia.org/wiki/Latent_variablehttp://en.wikipedia.org/wiki/Linear_combinationhttp://en.wikipedia.org/wiki/Errors_and_residuals_in_statisticshttp://en.wikipedia.org/wiki/Errors_and_residuals_in_statisticshttp://en.wikipedia.org/wiki/Linear_combinationhttp://en.wikipedia.org/wiki/Latent_variablehttp://en.wikipedia.org/wiki/Variable_(mathematics)7/30/2019 Investors Perception Towards Mutual Funds - Main Body
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set of variables in a dataset. Computationally this technique is equivalent to low rank
approximation of the matrix of observed variables. Factor analysis originated in psychometrics,
and is used in behavioural sciences, social sciences, marketing, product management, operations
research, and other applied sciences that deal with large quantities ofdata.
Factor analysis is related to principal component analysis (PCA), but the two are notidentical. Latent variable models, including factor analysis, use regression modelling techniques
to test hypotheses producing error terms, while PCA is a descriptive statistical technique. There
has been significant controversy in the field over the equivalence or otherwise of the two
techniques.
2.3.2 Chi-Square Analysis:
In order to compare observed data with data we would expect to obtain according to a specific
hypothesis Chi-Square Analysis is used. In order word Chi-Square Analysis is used to examine
differences with categorical variables. The Chi-Square Test is generally used to evaluate
differences between experimental or observed data and expected or hypothetical data. As a
goodness of fit test, it tells us how well a set of observations fits the outcome predicted by the
hypothesis being tested. It tells us whether there is a statistically significant difference between
what we observed and what we expected.
http://en.wikipedia.org/wiki/Low_rank_approximationhttp://en.wikipedia.org/wiki/Low_rank_approximationhttp://en.wikipedia.org/wiki/Psychometricshttp://en.wikipedia.org/wiki/Social_scienceshttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Product_managementhttp://en.wikipedia.org/wiki/Operations_researchhttp://en.wikipedia.org/wiki/Operations_researchhttp://en.wikipedia.org/wiki/Datahttp://en.wikipedia.org/wiki/Principal_component_analysishttp://en.wikipedia.org/wiki/Latent_variable_modelhttp://en.wikipedia.org/wiki/Latent_variable_modelhttp://en.wikipedia.org/wiki/Principal_component_analysishttp://en.wikipedia.org/wiki/Datahttp://en.wikipedia.org/wiki/Operations_researchhttp://en.wikipedia.org/wiki/Operations_researchhttp://en.wikipedia.org/wiki/Product_managementhttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Social_scienceshttp://en.wikipedia.org/wiki/Psychometricshttp://en.wikipedia.org/wiki/Low_rank_approximationhttp://en.wikipedia.org/wiki/Low_rank_approximation7/30/2019 Investors Perception Towards Mutual Funds - Main Body
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CHAPTER 3Results & Findings
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3. Results and FindingsFor the research, SPSS is used as the statistical data analysis tool as it offers greater flexibility in
data analysis and graphical representation. After scoring the questionnaires the data of all the
people was pooled and tabulated. Following steps were followed:
Data analysis Chart
Figure 3.1
To arrive at certain conclusion regarding the hypothesis advanced in the process investigation,
the description of the statistical tools which were applied for the analysis of data, is as follows:
Data Analysis Tests Used
Figure 3.2
A database in SPSSwas created for
logging incomingdata
Checked readability,
completeness andresponses byrespondent
Checked missingvalues prior running
analysis
Chi Square for relationship establishement
Cronbach alpha for reliability test
Factor analysis for finding factors responsible
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Chi Square Analysis:
Test is generally used to evaluate differences between experimental or observed data and
expected or hypothetical data. As a goodness of fit test, it tells us how well a set of
observations fits the outcome predicted by the hypothesis being tested. It tells us whether there is
a statistically significant difference between what we observed and what we expected.
Generally, Null hypothesis is that there is no significant difference between the observed results
and the ones expected. To test this hypothesis, the Chi-Square test is used.
First, calculate a number called the Chi-Square value then use a probability table to tell how
likely it is that we would get these results by chance alone. If the probability of getting our
observed results by chance is greater than or equal to 5% (p=0.05), then we conclude there is no
significant difference between the observed and expected results. We accept our hypothesis. If,
however, the probability of getting these results is less than 5% (p
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one method of checking dimensionality. Technically speaking, Cronbach's alpha is not a
statistical test - it is a coefficient of reliability (or consistency).
Cronbach's alpha can be written as a function of the number of test items and the average inter-
correlation among the items. i.e
Here N is equal to the number of items, c-bar is the average inter-item covariance among the
items and v-bar equals the average variance.
One can see from this formula that if you increase the number of items, you increase Cronbach's
alpha. Additionally, if the average inter-item correlation is low, alpha will be low. As the
average inter-item correlation increases, Cronbach's alpha increases as well (holding the number
of items constant).
Factor Analysis:
It is a statistical method used to describe variability among observed, correlated variables in
terms of a potentially lower number of unobserved variables called factors. In other words, it is
possible, for example, that variations in three or four observed variables mainly reflect the
variations in fewer unobserved variables. Factor analysis searches for such joint variations in
response to unobserved latent variables. The observed variables are modelled as linear
combinations of the potential factors, plus "error" terms. The information gained about the
interdependencies between observed variables can be used later to reduce the set of variables in a
dataset. Computationally this technique is equivalent to low rank approximation of the matrix ofobserved variables. Factor analysis originated in psychometrics, and is used in behavioural
sciences, social sciences, marketing, product management, operations research, and other applied
sciences that deal with large quantities of data.
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3.1 DEMOGRAPHIC VARIABLES
Age:
This Research Study contains age group categorized as follows:
Upto 22 years
23-35
35-45
45-55
Above 55 years
Figure 3.3: Age
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Table 3.1 : Age Frequency Table
Age Values Percentage
Upto 22 yrs 12 13.2%
23-35 61 67%
35-45 7 7.7%
45-55 11 12.1%
Total 91
Gender:
The survey includes 91 correspondents out of which 75 are Male and 16 are Female.
Figure 3.4: Gender
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Table 3.2: Gender Frequency Table:
Gender Values Percentage
Male 75 82.4%
Female 16 17.6%
Total 91
Education Level:
We have chosen people with different education leve to see the variation in the perception as
people having different education background have different thinking of investing in the mutual
funds. The
Figure 3.5 : Education
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Education level is divided as follows:
Under-Graduate
Graduate
Post-Graduate
Others
Table 3.3 : Education Frequency Table
Education Level Values Percentage
Under-graduate 0 0%
graduate 57 62.6%
Post graduate 34 37.4%
Others 0 0%
91
Income level
The income level of a family does have an impact on the consumption and saving capacity. The
monthly income level is categorized ,to check its impact on investors perception, as follows:
Less than Rs. 10,000
Rs. 10,001 to Rs. 15,000
Rs. 15,001 to Rs. 20,000
Rs 20,000 to Rs. 30,000.
Above Rs 30,001
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Fig. 3.6:Income Level
4. What is your monthly family income approximately?Table 3.4:Monthly Family Income
Frequency Percent
Rs. 10,001 to 15000 1 1.1Rs. 15,001 to 20,000 7 7.7
Rs. 20,001 to 30,000 2 2.2
Rs. 30,001 and above 81 89.0
Total 91 100.0
3.2Chi-Square Test:
All together 91 responses were received. Now to validate the data , listwise deletion has been
followed for the responses so received.
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3.2.1 Relation between Gender and Risk perception towards mutual funds:
Table 3.5:Chi Square Test-GenderChi-Square Tests
Value Df Asymp. Sig. (2-
sided)
Pearson Chi-Square 29.200a 5 .000
Likelihood Ratio 25.803 5 .000
Linear-by-Linear Association 11.081 1 .001
N of Valid Cases 91
a. 7 cells (58.3%) have expected count less than 5. The minimum expected
count is .18.
Since the significant value is .000 which is less than .05. our null hypothesis is rejected. The
Analysis shows that there is some relationship between gender of the investor and the risk
perception towards mutual funds. Thus, our null hypothesis was wrong and the alternativehypothesis turned out to be true.
This implies that male and female perceives risk involved in mutual funds differently.
3.2.2Relation between Age and Risk perception towards mutual funds:
Table 3.6 :Chi Square Test-AgeChi-Square Tests
Value df Asymp. Sig.
(2-sided)
Pearson Chi-Square 12.770a 15 .620
Likelihood Ratio 16.805 15 .331
Linear-by-Linear
Association.905 1 .342
N of Valid Cases 91
a. 20 cells (83.3%) have expected count less than 5. The minimum
expected count is .08.
Since the significant value is .620 which is more than .05. our null hypothesis is accepted. The
Analysis shows that there is some relationship between age of the investor and the risk
perception towards mutual funds. Thus, our null hypothesis is right and the alternative
hypothesis turned out to be wrong.
This implies that age factors does play role in perceiving risk involved in mutual funds
differently.
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3.2.3 Relation between Occupation and risk perception towards mutual funds:
Table 3.7: Chi Square Test-OccupationChi-Square Tests
Value Df Asymp. Sig. (2-
sided)
Pearson Chi-Square 47.781a 10 .000
Likelihood Ratio 49.107 10 .000
Linear-by-Linear Association 8.085 1 .004
N of Valid Cases 91
a. 11 cells (61.1%) have expected count less than 5. The minimum expected
count is .19.
Since the significant value is .000 which is less than .05. Our null hypothesis is rejected. The
Analysis shows that there is some relationship between Occupation of the investor and the risk
perception towards mutual funds. Thus, our null hypothesis was wrong and the alternative
hypothesis turned out to be true.
This implies that different streams of education does change the perception towards risk involved
in mutual funds .
3.3 Reliability Test:
Now to check the reliability of the factor analysis test various tests are followed. As a parametric
datas reliability is checked by Cronbachs alpha we used it for our analysis. The findings are as
follows:
A. Normative Influence factors:To find the factors that influence the investors to invest in a particular mutual fund, the seven
items were tested for reliability listed as television , internet , journals , family and friends,
Advertisements, Financial advisors and sales representatives.
Table 3.8:Reliability Statistics_1
Reliability Statistics
Cronbach's Alpha N of Items
.771 7
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Table 3.9:Intraclass Correlation Coefficient_1
Intraclass Correlation Coefficient
Intraclass
Correlationb
95% Confidence Interval
Lower Bound Upper Bound
Single Measures .325a .238 .428
Average Measures .771c .686 .840
Two-way mixed effects model where people effects are random and measures effects are fixed.
a. The estimator is the same, whether the interaction effect is present or not.
b. Type C intraclass correlation coefficients using a consistency definition-the between-measure variance is excluded from the
denominator variance.
c. This estimate is computed assuming the interaction effect is absent, because it is not estimable otherwise.
Now as the value of Cronbachs alpha is .77 which is more than .70 it is significant and hence
passes the test of reliability.
A. Factors changing the perception of investors towards mutual funds:To find the factors that helps the investors in decision making to invest in a particular mutual
fund, the fourteen items were tested for reliability listed as Liquidity, High Return, Professional
Management, Diversification, Brand Image, Price, Risk, Transparency, Re-dressal of grievances,
Private investment schemes Public investment, Frequency of returns,past experience, fixed rate
of return,knowledge about mutual funds.
.
Table 3.10:Reliability Statistics_2
Reliability Statistics
Cronbach's Alpha N of Items
.836 14
Table 3.11:Intraclass Correlation Coefficient_2
Intraclass Correlation Coefficient
c. This estimate is computed assuming the interaction effect is absent, because it is not estimable otherwise.
Intraclass
Correlationb
95% Confidence Interval
Lower Bound Upper Bound
Single Measures .267a .198 .357
Average Measures .836c .776 .886
Two-way mixed effects model where people effects are random and measures effects are fixed.
a. The estimator is the same, whether the interaction effect is present or not.
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b. Type C intraclass correlation coefficients using a consistency definition-the between-measure variance is excluded from the denomin
variance.
Now as the value of Cronbachs alpha is .836 which is more than .70 it is significant and hence
passes the test of reliability.
3.4 Factor Analysis:
A. Factors changing the perception of investors towards mutual funds:Table 3.12:KMO and Bartletts Test_1
KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .639
Bartlett's Test of Sphericity
Approx. Chi-Square 864.363
Df 91
Sig. .000
As it can be seen from the above table that the significance value is .639 which is greater than
.60. This is means factor analysis holds good for this sample data.
Table 3.13:Total Variance_1
Total Variance Explained
Component Initial Eigenvalues
Total % of Variance Cumulative %
1 5.085 36.323 36.323
2 3.216 22.975 59.298
3 1.540 10.998 70.295
4 1.337 9.553 79.849
5 .694 4.959 84.807
6 .623 4.447 89.255
7 .425 3.033 92.288
8 .303 2.161 94.449
9 .269 1.924 96.373
10 .171 1.225 97.59811 .132 .940 98.538
12 .104 .740 99.278
13 .066 .468 99.746
14 .036 .254 100.000
Extraction Method: Principal Component Analysis.
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From the above table it can be inferred that there are four significant factors having eigen value
greater than 1 and these 4 factors collectivelyaccounts for almost 80 % of the perception
phenomena.
Fig. 3.7
From the above graph, it can be seen there are total five points that are collectively showing
steepness of the graph and hence there are total four (5-1=4) factors contributing significantly
while others are showing gradual change in the graph.
Table 3.14:Rotated Component Matrix_1
Rotated Component Matrixa
Component
1 2 3 4
Liquidity .269 -.054 .826 .215
High Return .844 .042 .253 .172
Professional management .545 .624 .136 -.105
Diversification .627 .142 .141 .399
Price -.160 -.162 .568 .739
Risk .037 -.073 -.121 .874
Transparency .820 .248 .029 .022
Redressal of grievances .272 .830 -.058 -.040
Private investment scheme .099 .895 .073 -.053
public investment .022 .917 .030 -.080
Frequency of return .132 .200 .894 .048
past experience .687 .003 .535 -.179
Fixed rate of return .365 -.108 .377 .780
knowledge about mutual fund .891 .209 .034 .019
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Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 6 iterations.
Now these 4 factors can be found with the help of above table as follows:
1. Checking the first column significant value are .844(high return),.820(transparency),.891(knowledge about mutual fund)- these can clubbed into
transparency as a first factor.
2. Checking the second column significant value are .830(Redressal of grievances),.917(Public investment scheme),.895 (Private investment scheme)- these can clubbed into
security as a second factor.
3. Checking the third column significant value are .826(liquidity), .894(frequency ofreturn),- these can clubbed into Time frame of investment as a third factor.
4. Checking the fourth column significant value are .874(risk), .78(Fixed rate of return)-these can clubbed into Conservatism as a fourth factor.
B. Normative Influence factors
Table 3.15 KMO and Bartletts Test_2
KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .673
Bartlett's Test of SphericityApprox. Chi-Square 261.754Df 21
Sig. .000
As it can be seen from the above table that the significance value is .673 which is greater than
.60. This is means factor analysis on these items holds good for this sample data.
Table 3.16:Total Variance_2
Total Variance Explained
Component Initial EigenvaluesTotal % of Variance Cumulative %
1 3.238 46.254 46.254
2 1.657 23.678 69.932
3 .812 11.607 81.539
4 .528 7.547 89.086
5 .350 4.997 94.083
6 .249 3.555 97.638
7 .165 2.362 100.000
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Extraction Method: Principal Component Analysis.
From the above table it can be inferred that there are two significant factors having eigen value
greater than 1 and these 2 factors collectivelyaccounts for almost 70 % of the normative
influence phenomena.
Fig. 3.8
From the above graph, it can be seen there are total three points that are collectively showing
steepness of the graph and hence there are total two (3-1= 2) factors contributing significantly
while others are showing gradual change in the graph.
Table 3.17: Rotated ComponentMatrix
Rotated Component Matrixa
Component
1 2Television .593 .520
Internet .858 .223
Journals .843 -.144
Friends /Relatives .737 .303
Sales Representatives .080 .915
Advertisement -.037 .768
Financial Advisors .819 -.125
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Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 3 iterations.
Now these 2 factors can be found with the help of above table as follows:
1. Checking the first column significant value are .858(internet),.843(journals),.819(financial advisors)- these can clubbed into Professional Sources as
a first factor.
2. Checking the second column significant value are .915(Sales Representatives),.768(advertisements)- these can clubbed into Mass media as a second factor.
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CHAPTER 4
Conclusions
&
Recommendations
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4.1 Conclusions
We can conclude from our study that perception of investors depends on various factors. As
evident from analysis risk perception varies with occupation and gender. This means investorsrisk perception varies with level of occupation. This maybe because of varying levels of
knowledge and experience across various occupations. It may be possible that people in Business
occupation have better understanding of mutual funds than people in agricultural occupation.
Risk perception also varies with gender. It simply means males and females perceive risk
differently. Reason may be varying literacy rates among males and females. It also depends on
culture.
4.2 Recommendations
Based upon conclusions we recommend that Mutual fund companies should target investors
carefully. Risk perception of investors varies with gender & occupations, so companies should
do thorough research beforehand. As it might not be a good idea to target student occupation or
people with agricultural occupation. Companies can target a particular segment of population.
This would reduce cost and increase profitability.
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Appendix
Perception of Investors towards Mutual Funds
Dear Respondent,We, Ankita Mahajan, Gursimran Singh, Harsimran Singh and Karminder Kaur, students of UBS,
are conducting a research on Perception of Investors towards Mutual Funds as a part of our
MBA Course curriculum at UBS, Chandigarh. Please respond to the following questions.We assure you that your responses will be kept confidential. The purpose of this research is
purely academic.
1. Age
Up to 22 Years 23-35 Years 35-45 Years 45-55 Years More than 55 Years
2. Gender
Male Female
3. Qualification
Under-Graduate Graduation Post-Graduation Others
4. Occupation
Doctor Engineer Business Agriculture Others
5. What is your monthly family income approximately?
Up to Rs.10,000 Rs. 10,001 to 15000
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Rs. 15,001 to 20,000 Rs. 20,001 to 30,000 Rs. 30,001 and above
6. Do you save?
Yes No
7. Do you have any knowledge about Mutual Funds?
Yes No
8. Do you have knowledge of various types of mutual funds
Yes No
9. Do you know what is systematic risk
Yes No
10. Do u know what is unsystematic risk
Yes No
11. Do you know what is open end type mutual fund
Yes No
12. Do you know what is close end type mutual fund
Yes No
13. Which are the primary sources of your knowledge about Mutual Funds as an investment
option? *Corresponding to your choices how would you rate their influence on your final Mutual
Fund purchase decision. Please rank them on a scale of 1-5 with 1 representing minimalinfluence and 5 representing Strong influence
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1 2 3 4 5
Television
Internet
Newspaper /
JournalsFriends /Relatives
Sales
Representatives
Advertisement
Financial advisors
14. What kind of investments you wish to make?
Public Private
15. How do you rate the risks associated with Mutual Funds? *rating 1 for low and 5 for highrisk
1 2 3 4 5
16. According to you how much does systematic risk(Systematic risk is the risks inherent to the
entire market segment as interest rates) affects the Mutual funds investment. *rating 1 for low
and 5 for high risk
1 2 3 4 5
17. According to you how much does unsystematic risk(unsystematic risks are specific risks asNEWS that affects specific stock.) affects the Mutual funds investment. *rating 1 for low and 5
for high risk
1 2
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3 4 5
18. While investing your money, how these factors affect your decision ? *Corresponding to
your choices how would you rate their influence on your final Mutual Fund purchase decision.Please rank them on a scale of 1-5 with 1 representing minimal influence and 5 representing
Strong influence
1 2 3 4 5
Liquidity
High Return
ProfessionalManagement
Diversification
Price
Risk
Transparency
Re-dressal of
grievances
Privateinvestment
schemes
Public investment
schemes
Frequency ofreturns
Past Experience
Fixed rate of
returns
Knowledge about
Mutual Funds
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Select Bibliography/References
DR BIMAL ANJUM ; RAMANDEEP SAINI (2011) INVESTORS AWARENESS ANDPERCEPTION ABOUT MUTUAL FUNDS
Dr. Nishi Sharma (2012) Indian Investors Perception towards Mutual Funds
Singh, B. K. and Jha, A.K. (2009), An empirical study on awareness & acceptability of mutualfund, 49-55, Regional Students Conference, ICWAI.
Dr. Binod Kumar Singh (2012) : A study on investors attitude towards mutual funds asan investment option
Desigan et al (2006), Women Investors Perception Towards Investment: Anempirical Study, Indian Journal of Marketing.
DR.K.LAKSHMANA RAO (2011) analysis of investors perceptions towards mutual fundschemes
Business World Magazine Outlook Money Magazine www.mutualfundsindia.com www.amfiindia.com www.valueresearchonline.com. www.bseindia.com www.nseindia.com www.google.com www.moneycontrol.com www.moneycontrol.com
http://www.mutualfundsindia.com/http://www.mutualfundsindia.com/http://www.amfiindia.com/http://www.amfiindia.com/http://www.valueresearchonline.com/http://www.valueresearchonline.com/http://www.bseindia.com/http://www.bseindia.com/http://www.nseindia.com/http://www.nseindia.com/http://www.google.com/http://www.google.com/http://www.moneycontrol.com/http://www.moneycontrol.com/http://www.moneycontrol.com/http://www.moneycontrol.com/http://www.moneycontrol.com/http://www.moneycontrol.com/http://www.google.com/http://www.nseindia.com/http://www.bseindia.com/http://www.valueresearchonline.com/http://www.amfiindia.com/http://www.mutualfundsindia.com/7/30/2019 Investors Perception Towards Mutual Funds - Main Body
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