INVESTOR S PERCEPTION REGARDING MUTUAL FUNDS AND OTHER INVESTMENT TOOLS SANDEEP BANSAL* *Assistant professor, P.G. Dept. of Commerce & Management, Shree Atam Vallabh Jain College, Ludhiana.(Pb.), India ABSTRACT In the context of growing importance of mutual funds in the developing countries like India, majority of the investors prefer mutual funds as a good tool of investment. Mutual funds pool the savings of small investors and made the investment in blue chip companies. Due to these reasons the present study s main objective are to analyze investor s perception regarding the mutual fund industry in India and other investment tools. Large number of new other investment tools could have led to competition with the mutual funds for their existence. The study made a comparative analysis of the mutual fund and other investment tools. The study aims to help understand the investors behavior towards mutual fund and various other investment plan like PPF, FD life insurance, equity etc. The study required design a questionnaire and to do a primary survey on investor perception towards mutual Funds and other investment tools The target respondents of the primary survey were walk in investors in ICICI bank and various professional people. The data gathered from the primary survey and secondary survey and to find various factors that affect an investor decisions while choosing Mutual Fund plan other investment plan and risk factors which involve in mutual fund. The findings of the study reveal that mostly investors are not aware about all investment tools and mostly see the transparency in investment tools during invest in particular tools KEYWORDS: Mutual funds, PPF, Investors, Transparency. INTRODUCTION Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Different investment avenues are available to investors. Mutual funds also offer good investment opportunities to the investors. Like all investments, they also carry certain risks. The investors should compare the risks and expected yields after adjustment of tax on various instruments while taking investment decisions. A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset Management Company (AMC) and custodian. Asset Management Company (AMC) approved by SEBI manages the funds by making 187
investments in various types of securities. Mutual fund in India is regulated by SEBI. SEBI is doing every effort to motivate the investors for investing in mutual fund by providing various educational awareness programs The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV). Mutual funds invest the money collected from the investors in securities markets. Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date. NAV is required to be disclosed by the mutual funds on a regular basis - daily or weekly - depending on the type of scheme. The fluctuations in the stock market prices cause the NAVs of the mutual funds to fluctuate, but the same has no impact on the value or the interest on the fixed deposits. Thus, we can safely say that the investor has invested in two unrelated asset classes - a very important thing to keep in mind while building a diversified portfolio. The mutual fund industry can be broadly put into four phases-first phase-: 1964-87-:Unit trust of India (UTI) was established on 1965 by an act of parliament. It was set by Reserve bank of India and functioned under the regulatory and administration control of RBI. In 1978 UTI was delinked from the RBI. The first scheme launched by UTI was unit scheme 1964. Second Phase - 1987-1993 (Entry of Public Sector Funds)-: Entry of non-uti mutual funds. SBI Mutual Fund was the first followed by Canra bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC in 1989 and GIC in 1990. The end of 1993 marked Rs.47, 004 as assets under management. Third Phase - 1993-2003 (Entry of Private Sector)-: With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. As at the end of January 2003 there were 33 mutual funds. Fourth phase- since February 2003-: This phase has bitter experience for UTI. It was bifurcated into two separate entities one is specified undertaking of the UTI with AUM of RS.29835 crores ( as a January 2003 ). The specified undertaking of Unit Trust Of India functioning under an administrator and under the rules framed by govt. of India does not come under the purview of the mutual fund regulation. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. Schemes of MF---Open-ended Fund/ Scheme These schemes 188
do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices. Close-ended Fund/ Scheme: A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. Growth / Equity Oriented Scheme: The aim of growth funds is to provide capital appreciation over the medium to long- term. Income / Debt Oriented Scheme: The aim of income funds is to provide regular and steady income to investors. Balanced Fund: The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. Money Market or Liquid Fund: These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Gilt Fund: These funds invest exclusively in government securities. Government securities have no default risk. Index Funds-: replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc Sector specific funds/schemes: These are the funds/schemes, which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals. Tax Saving Schemes: These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. Load or no-load Fund: A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time one buys or sells units in the fund, a charge will be payable. Main advantages of mutual fund are that diversification is possible and maintain the liquidity. Main disadvantages of mutual fund are When making decisions about your money, fund managers don't consider your personal tax situation. Objectives of the study-: To study the risk factors which involves in mutual funds To study the various investment tools. To study the investor s perception and awareness regarding mutual fund and other investment tools Significance of the study-: the significance of the study is that by study we can the various risk factors which involve in mutual fund and various factors which affect the investor s attitude for choose particular investment tools for investment. 189
Review of literature Jambodekar (1996)-: conducted a study to assess the awareness of MFs among investors, to identify the information sources influencing the buying decision and the factors influencing the choice of a particular fund. The study reveals among other things that Income Schemes and Open Ended Schemes are more preferred than Growth Schemes and Close Ended Schemes during the then prevalent market conditions. Investors look for safety of Principal, Liquidity and Capital appreciation in the order of importance; Newspapers and Magazines are the first source of information through which investors get to know about MFs/Schemes and investor service is a major differentiating factor in the selection of Mutual Fund Schemes. Shankar (1996)-: points out that the Indian investors do view Mutual Funds as commodity products and AMCs, to capture the market should follow the Consumer product distribution model. Since 1986, a number of articles and brief essays have been published in financial dailies, periodicals, professional and research journals, explaining the basic concept of Mutual Funds and highlight their importance in the Indian capital market environment. They touch upon varied aspects like Regulation of Mutual Funds, Investor expectations, Investor protection, Trend in growth of Mutual. Sikidar and Singh (1996)-: carried out a survey with an objective to understand the behavioral aspects of the investors of the North Eastern region towards equity and mutual funds investment portfolio. The survey revealed that the salaried and self employed formed the major investors in mutual fund primarily due to tax concessions. UTI and SBI schemes were popular in that part of the country then and other funds had not proved to be a big hit during the time when survey was done. Sunder (1998)-: conducted a survey to get an insight into the mutual fund operations of private institutions with special reference to Kothari Pioneer. The survey revealed that awareness about Mutual Fund concept was poor during that time in small cities like Visakhapatnam. Agents play a vital role in spreading the Mutual Fund culture; open-end schemes were much preferred then; age and 5 income are the two important determinants in the selection of the fund/scheme; brand image and return are the prime considerations while investing in any Mutual Fund. Shanmugham (2000)-: conducted a survey of 201 individual investors to study the information sourcing by investors, their perceptions of various investment strategy dimensions and the factors motivating share investment decisions, and reports that among the 190
various factors, psychological and sociological factors dominated the economic factors in share investment decisions. Shukla and Kumar (2009)-: The project contains the brief description of the mutual fund industry in general. It also includes the study and comparison of other investment products available in the market like Insurance plans, ULIP, Mutual Funds, Savings account, Provident funds, Postal savings and Fixed Deposits and Stocks available in the market. A survey was conducted to gather primary data to judge the factors that influence investors before they invest in any of the investment tools and thus the first part of the paper scrutinizes the investor s perception and analyzes the relation between the features of the products and the investors requirements. RESEARCH METHODOLOGY Study of this project is descriptive, because various other persons have already done the study on mutual fund. The research design is the pattern or an outline of a research project working. The sample size for the study is 30 investors. These investors are selected through convenience sampling. The data for the study is collected with the help of structured questionnaire. Questionnaire was prepared to study; The investor s perception regarding mutual fund and other investment tools A survey was conducted keeping in view the objective of the study. The questionnaire contained both open ended and close ended questions. There is two types of data are available, one is primary data second one is secondary data. I had need both types of data for complete my research. Primary data is that data which is not collected by any person earlier. It is a fresh data. E.g. personnel interview etc. Secondary data is that which is already collected by someone. e.g. Journals, magazines, internet etc. For the purpose of analyzing raw data was summarized into a master table and from this table the results have been derived. The questions, which have alternative choices, were analyzed by taking percentage. In case open ended questions, the general suggestions were summarized and it is presented through pie Diagrams. Analysis of data about the investors awareness about various investment tools, what is their first preference to particular investment tools, which instrument has more return and more risk. 191
LIMITATIONS OF THE STUDY Due to time constrains, the primary data was collected for a small sample and simple analysis tools are applied. The sample size is not large to generalize the study. The respondents of the survey were unwilling to share any information regarding investment. DATA ANALYSIS Investors perception regarding mutual fund and other investment tools-: 1 Are you aware about various investment tools? Investment tools No. of investors Percentage (%) About all investment tools 7 23% Only about mutual fund and 8 27% equity, fixed, PPF Only about fixed deposit 8 27% Only about life insurance and 6 20% PPF Fixed, life insurance & PPF 1 3 Interpretation-:The above table and pie chart state that 27% investor aware about mutual fund, equity, fixed, PPF.27 % aware only about fixed deposit, 23% aware about all investment tools,20% aware about life insurance plan and PPF, and 3% investor are aware about fixed D. life insurance, PPF. 2. Do you know the procedure of investment in mutual fund, life insurance plan, equity, PPF and fixed deposit.? Investment tools No. of investors Percentage (%) Knows the procedure about 28 94% above all investment tools Only knows about PPF 1 3% investment procedure Knows the procedure of investment in PPF, FD, life insurance plans 1 3% 192
Know the procedure about all investment tools Knows the procedure only of PPF Knows the procedure of PPF, FD, LI Interpretation-: Above table and pie chart state that 94% investors know the procedure of investment in all investment tools, 3% only know the procedure of investment in FD. 3% investors know the procedure of investment in PPF, FD and life insurance. What are the various investment plans you invest in? Investment tools No. of investors Percentage (%) Mutual fund 6 20 Equity 2 7 PPF & Life insurance plan 3+3 10+10 Fixed deposit 7 23 All investment tools 9 30 Invest in all investment tools Invest in only fixed deposit Invest in only MF Invest in PPF Invest in life insurance plan Invest in equity Interpretation-: With the analysis of table and pie chart we can find that 30% investors invest in all investment tools, 23% in fixed deposit, 20% in mutual fund, 10% in PPF, 10% in life insurance plan and 7% invest in equity. 193
Which instrument of investment has more risk? investment tools No. of investors Percentage (%) Equity 19 63 Mutual fund 6 20 Life insurance 5 17 Equity has more risk MF has more risk Life insurance has more risk Interpretation-: After analysis the table and pie chart we can find out that 63% investors say that equity has more risk, 20% say that mutual fund has more risk and 17% investors say that life insurance has more risk. Which instrument of investment has more return? Investment tools No. of investors Percentage (%) Equity 15 50 Mutual fund 5 17 PPF 3 10 Fixed deposit 1 3 Life insurance 3 10 All investment tools 3 10 3rd Qtr 10% 5th Qtr 10% 4th Qtr 10% 6th Qtr 3% 2nd Qtr 17% 1st Qtr% 50% Equity has more return MF has more return PPF has more return Life insurance has more return All investment tools has more return FD has more return Interpretation-: After analysis of table and pie chart we can find out that 50% investors say equity has more return, 17% say MF has more return, 10 % said PPF has more return, 3% 194
say FD has more return, 10% say life insurance has more return and 10% say all investment tools has more return. What is your first preference for investment? Investment tools No. of investors Percentage (%) Fixed deposit 9 30 PPF 7 24 Mutual fund 6 20 Life insurance 4 13 Equity 4 13 1 ST preference to FD 1 ST preference to PPF1 ST preference to mutual fund1 st preference to life insurance1 st preference to equity Interpretation-: With the analysis of above table and pie chart we can say that 30% investor give the first preference to FD, 24% investors give the 1 st preference to PPF and 20% investors give the 1 st preference to mutual fund, 13% give 1 st preference to life insurance and 13% to equity. Which instrument of investment is more tax beneficial? Investment tools No. of investors Percentage (%) Life insurance plan 7 23 Mutual fund 6 20 PPF 6 20 Fixed deposit 6 20 Equity 2 7 All investment tools 3 10 195
Life insurance plan is more tax beneficial Mutual fund is more tax beneficial PPF is more tax beneficial Fixed deposit is more tax beneficial All investment tools tax beneficial Equity is more tax beneficial Interpretation-: From above analysis, we can find that 23% investors state that life insurance plan is more tax beneficial, 20% investors say that PPF is more tax beneficial, 20% say that mutual fund is more tax beneficial, 20% in the favor of FD. Moreover 7% investors say that equity is more tax beneficial, and 10% investors say that all the investment tools are tax beneficial. Which instrument of investment is more transparent according to rules and regulation? Investment tools No. of investors Percentage (%) Fixed deposit 11 37 Life insurance 5 17 Mutual fund 4 13 PPF 4 13 Equity 2 7 All investment tools 4 13 5th Qtr 13% 4th Qtr 13% 3rd Qtr 13% 6th Qtr 7% 2nd Qtr 17% 1st Qtr 37% FD is more transparent Life insurance is more transparent Mutual fund is more transparent PPF is more transparent All investment tools are transparent Equity is more transparent 196
Interpretation-: The above table and pie chart states that 37% investors say that fixed deposit is more transparent according to rules and regulation. 17% say that life insurance is more transparent. 13% investors tell that mutual fund is more transparent. Moreover 13% investors say that PPF is more transparent, 7% investors state that equity is more transparent and 13 % investors say all investment tools are transparent. What type of fund you preferred the most? Types of fund in mutual No. of investors Percentage (%) fund Growth fund 23 77 Income fund 7 23 Growth fund Income fund Interpretation-: With the analysis of pie cart and table we can say that 77% investors preferred the growth fund and 23% investors preferred the income fund. What type of scheme in mutual fund you prefer? Investment scheme in No. of investors Percentage (%) mutual fund Open ended 18 60 Close ended 12 40 Prefer open ended scheme Prefer close ended scheme 197
Interpretation-: After the analysis of above table and pie chart we can say that 60% investors preferred open-ended schemes in mutual fund and 40% investors preferred the close ended scheme What type of return expected from investment instrument? Types of return No. of investors Percentage (%) Annually 24 80 Quarterly 6 20 s Expected annually return Expected quarterly return Interpretation-: Above table and pie chart states that 80% investors like annually return and rest 20% like quarterly. What type of information resources used by you? Information resources No. of investors Percentage (%) Internet 9 30 All resources 3 10 Internet, newspaper, magazines 2 7 Financial advisor 16 53 198
Mostly use financial advisor Mostly use only internet Use the all information resource Use internet, newspaper, magazines Interpretation-: From the analysis of above table and pie chart we can find out that 53% investors use the financial advisor resource for investment. 30% use the internet. 7% use internet, newspaper, magazines. Moreover 10% use all information resource. What feature of any investment tools that attract most while using a specific investment plan? Features No. of investors Percentage (%) Return 11 37 Transparency 12 40 Return & transparency 4 13 Return & flexibility 3 10 Attract transparency Attract return Attract return & transparency Attract return and transparency Interpretation-: Above table and pie chart state that 37% investors see the return while invest in particular investment tools. 40% only see the transparency. 13% investor see the return and transparency and 10% investors see the return and flexibility both. 199
What percentage (%) of your salary goes to saving in mutual fund, insurance, equity etc.? Amount of salary No. of investors Percentage (%) 10-20 13 43 21-30 16 53 31-40 1 4 Up to 21-30 Up to 10-20 Up to 31-40 Interpretation-: From the analysis of above table and pie chart we can say 43% investors invest 10-20% amount of their salary. 53% investors invest 21-30% of their salary and only 4% investors invest 31-40% of the salary. Reason for investment in mutual fund? Reasons No. of investors Percentage (%) Return 9 30 Tax saving 9 30 Tax saving & return 12 40 For tax saving & return Only for return Only for tax saving 200
Interpretation-: From the analysis of above table and pie chart we can find out that 30% investors invest in mutual fund only for return. 30% investors invest only for tax saving and 40% investors invest for tax saving and return both. The reason for investment in insurance? Reasons No. of investors Percentage (%) Return 6 20 Tax saving 5 17 Return & tax saving 9 30 Return & for family 10 33 For return and family For return and tax saving Only for return Only for tax saving Interpretation-: From the analysis of above table and pie chart we can find out that 20% investors invest in insurance plan only for return. 17% investors invest only for tax saving and 30% investors invest for tax saving and return both. 33% investors invest only for return and for family The reason for investment in equity? Reasons No. of investors Percentage (%) Return 25 83 For family 1 4 Tax saving & return 4 13 201
2nd Qtr 4% 3rd Qtr 13% Only for return 1st Qtr 83% Only for family For Tax saving & return Interpretation-: From the analysis of above table and pie chart we can find out that 83% investors invest in equity only for return. 4% investors invest only for family and 13% investors invest for tax saving and return both. FINDINGS The study states that 27% investor aware about mutual fund, equity, fixed, PPF.27 % aware only about fixed deposit, 23% aware about all investment tools, 20% aware about life insurance plan and PPF, and 3% investor are aware about fixed D. life insurance, PPF. The study states that 40% investors are fully aware about FD,38% investors are fully aware all tools about,6% only fully aware about MF, 6% little aware about equity,6% little aware about PPF & insurance and 4% investors not aware about equity, MF, life insurance The study states that 94% investors know the procedure of investment in all investment tools, 3% only know the procedure of investment in FD. 3% investors know the procedure of investment in PPF, FD and life insurance. With the study of project we can find that 30% investors invest in all investment tools, 23% in fixed deposit, 20% in mutual fund, 10% in PPF, 10% in life insurance plan and 7% invest in equity. After the study of the project we can find out that 50% investors say equity has more return, 17% say MF has more return, 10 % said PPF has more return, 3% say FD has more return, 10% say life insurance has more return and 10% say all investment tools has more return. With the study of project we can say that 30% investor give the first preference to FD, 24% investors give the 1 st preference to PPF and 20% investors give the 1 st preference to mutual fund, 13% give 1 st preference to life insurance and 13% to equity. With the study of project we can find that 23% investors state that life insurance plan is more tax beneficial, 20% investors say that PPF is more tax beneficial, 20% say that mutual fund is more tax beneficial, 20% in the favor of FD. Moreover 7% investors say that equity is more tax beneficial, and 10% investors say that all 202
the investment tools are tax beneficial. The study states that 37% investors say that fixed deposit is more transparent according to rules and regulations. 17% say that life insurance is more transparent. 13% investors tell that mutual fund is more transparent. Moreover 13% investors say that PPF is more transparent, 7% investors state that equity is more transparent and 13 % investors say all investment tools are transparent. CONCLUSION Study is on the bases of questionnaire filled by the investors on the talks & conversations with investors of ICICI bank in Chandigarh. However, most of investors are not aware about various investment plans but still they invest, said that they don t have the time to spend over collection of information regarding particular investment tools. All employee people mostly invest for tax saving, rest for return and liquidity. 53% investors invest 21-30% of their salary. Mostly investors are agree that fixed deposit is more transparent than other investment tools. 53% investors have told equity has more risk and 50% investors says equity has more return so we can say more risk than more return. Forget the information about particular investment plan, 53% investors use the financial advisor recourse and only 7% use the internet so we can conclude still people are not very technical they have no knowledge about various technical tools of information. REFERENCES 1. Animesh kumar shukla and satish kumar.c-: 2009)-: Factors affecting investors preference for mutual fund in India. 2. Anjan Chakrabarti and Harsh Rungta, 2000, Mutual Funds Industry in India : An indepth look into the problems of credibility, Risk and Brand, The ICFAI Journal of Applied Finance, Vol.6, No.2, April, 27-45.Balwant Jain ( March 2010 ), PPF allows you to have your cake and eat it too 3. DR.Gursharn Singh Kainth,2007, Mutual fund industry in India-: investor s perception regarding business, finance, investment and marketing. Article Views: 4903, 15-More articles from this author, 4. Dr. Tapan K Panda Faculty Member Indian Institute of Management, Lucknow,Dr Nalini Prava Tripathy,Post Doctoral Research Scholar Regional College of Management, Bhubaneswar (2000 ) Customer Orientation in Designing Mutual Fund Products 5. Gupta, L.C., 1994, Mutual Funds and Asset Preference, Society for Capital Market Research and Development, Delhi. 6. Kavitha Ranganathan Madurai Kamaraj University,2006, A Study of Fund Selection Behaviour of Individual Investors Towards Mutual Funds - with Reference to Mumbai City. 7. Kulshreshta, C.M., 1994, Mastering Mutual Funds, Vision Books, New Delhi. 8. Madhusudan V. Jambodekar, 1996, Marketing Strategies of Mutual Funds Current Practices and Future Directions, Working Paper, UTI IIMB Centre for Capital Markets Education and Research, Bangalore 9. MS.T.R.Rajeswari, prof.v.e Rama Moorthy, Prasanthi Nilayam- ( 2001 ), An Empirical Study on Factors Influencing the Mutual Fund/Scheme Selection by Retail Investor s 203
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