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M. Gurusamy
Assistant Professor
Department of Management Studies
Paavai College of Engineering
Pachal, Namakkal – 637 018
Tamil Nadu, India
ABSTRACT
Mutual Funds are financial intermediaries concerned with mobilizing savings of those who
have surplus income and channelization of these savings in those avenues where there is
demand of funds. Objectives of the study are to study the risk appetite of the investors; to
identify the reasons for investments in Mutual fund; to estimate the investors’ satisfaction
with investment in mutual fund; to study the choice of investment for tax benefits. The
simple random sampling technique was employed in the selection of the sample. The study
covers the customers in Salem City. Weighted average, simple percentage analyses are used
for analyzing the data collected. Findings of the study are maximum of the respondents are
belong to 21-30 years; maximum of the investors are earned Rs.1 lakh to 2 lakh per annum;
maximum of the investors are invested their money through mutual funds between 1-3 years;
The study revealed that mutual fund ranks as the most popular avenue for investment
followed by life insurance and fixed deposits with regard to the risk appetite of the
investors; it is found that the investors perceive that investments in mutual funds carry
moderate risk. The study also reveals that a better and steady return is the main reason for
investment in mutual fund.
Keywords : Mutual Fund, Capital Market, Investment, Risk, NAV, Diversification, SEBI, Financial
Intermediaries.
Introduction:
Investment means an asset or item that is purchased with the hope that it will generate income or appreciate in the
future. In economic sense, investment is the purchase of goods that are not consumed today but are used in the future to
create wealth. Investment goals vary from person to person, business to business. While some want security, others
give more weightage to returns alone.
There are various types of investments avenues like fixed deposits, post office schemes, bonds/debentures, Mutual
funds, Insurance, Shares, and Real estate etc. Mutual Funds are financial intermediaries concerned with mobilizing
savings of those who have surplus income and channelization of these savings in those avenues where there is demand
of funds.
Mutual Funds:
According to securities and exchange board of India (SEBI) regulations “Mutual Fund means a fund established in the
form of a trust by a sponsor to raise money by the trustee through the sale of units to the public under one or more
schemes for investing of securities in accordance with the regulations. Thus, a mutual fund collects money from the
investors, issues certificate to achieve mutual benefits in term of capital appreciation in such securities”.
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. The money that is collected is then invested in capital
market instruments such as shares, debentures and other securities. The income earned through these investments and
the capital appreciations realized 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.
Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced.
Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the
same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors
of mutual funds are known as unit holders. A mutual fund is required to be registered with Securities and Exchange
Board of India (SEBI), which regulates securities markets before it can collect funds from the public.
Mutual funds have a unique structure not shared with other entities such as companies or firms. India has a legal
framework within which mutual funds must be constituted. A MF in India is allowed to issue open end and close end
schemes under common legal structure. Therefore, a Mutual Fund may have several different schemes (open and close
end) at any point of time.
SEBI contemplated four-tier systems for managing the affairs of Mutual Funds ensuring arms length distance between
the sponsor and the fund. The four constituents were the sponsoring company, the fund, the custodians and the asset
management company. They are presented in a diagram
Review of Literature:
Mutual Fund sector poised growth had stated that the Indian Mutual Funds business stated to grow. Though there
are many challenges that need to be addressed to increase net mobilization of funds in sector. She concludes that
the Indian Securities market has bottomed out and the coming year could only show an up sharing (Vimalavasan,
2002). The growth, both in terms of size and choice in the Mutual Fund industry among emerging markets has
been impressive however; Mutual Fund research emerging markets hardly exist. In particular area the author
surveys the relative importance of factors considered important in the selection of Mutual Funds by financial
advisor. The impending liberalization of financial markets in the developing world, the findings would assist those
international Funds that are considering expand their operations in to these emerging markets (Balaramasamy,
2003). The Mutual Funds well small in size, few in number and were limited to simple concepts like equities,
bonds and balanced portfolios. The Mutual Fund industries or securities grew enormously in all measures from
number of assets. It increases the profits of investors and fund manager salaries. At last he conclude that the place
of investor’s assets placed in their care at the same level as their own profits will be remembered for many
decades to come better in future (Robert B.Gordon, 2002). Bankers admit that despite their conservative approach
to investments, it increases credit for double; a rate paper in the wake of triple “a” rated papers thinning out from
the market. Bankers, market participants always change their yield maximization strategies in keeping with
prevailing market conditions at any given time (Rukmani Vishwanth, 2003). The Indian Mutual Fund industry has
drawn lessons from the FMCG sector. The fund houses just like the corporate managers of FMCG companies,
have introduced new products that are minor variants to the existing ones. Fund houses attribute the introduction
of such plans to “investor fatigue”. He concludes that the fund houses incur additional expenses to market the new
product which further reduces the Net Asset Value (Venketesh, 2004).
It is identified from the above table that 84.0% of the respondents are belonging to male category and 16.0% of
the respondents are belonging to female category.
It is identified from the above table that maximum (44.0%) of the respondents belong to 21-30 years of age group
and respondents in the age group 31 to 40 years from another 35% of the sample. It can be inferred that majority
of the investors (nearly 79%) are in the age group of 21 to 40 years.
It is observed from the above table that 31.0% of the investors are unmarried and 69.0% of the respondents are married.
Table No.4: Occupation of The Respondents
Nature of employment No. of Respondents Percentage
Salaried 48 48
Business 36 36
Professional 13 13
Retired 1 1
Others 2 2
Total 100 100
It is noted from the above table that maximum (48.0%) of the investors are salaried people and 36% of the
respondents are business persons.
It is known from the above table that maximum (50.0%) of the investors are earned Rs. 1 lakh to 2 lakh per
annum another 21% of the respondents had an annual income between Rs.50,000 to Rs.1,00,000 and 19% of the
respondents had annual income between Rs.2,00,000 to Rs.3,00,000. Thus 90% of all respondents had an annual
income Less than Rs.3,00,000. The median income of the group was Rs.1,50,000.
Since the respondents have used more than one Investment Avenue, the total number of responses is more than
100. In terms of popularity of Investment Avenue, the ranking can be inferred from the table above.
It is known from the above table that 48.2% of the investors who have invested in mutual fund invested their
money through mutual fund for the reason of best returns when compared to other avenues.
The second most important reason in consistency of steady returns, which was the reason given by 32.5% of the
respondents who had invested in mutual funds. Combining both, it can be inferred that majority (80.7%) of the
people who invest in mutual funds choose this avenue due to either better returns or steady returns.
• It is revealed from the analysis that maximum of the investors’ opinion is moderate risk in mutual fund.
• It is found from the analysis that 59% of the respondents are satisfied and 31.3% of the respondents are highly
satisfied regarding the returns in mutual fund investment.
• It is noted from the analysis that 77% of the respondents are definitely invest through mutual fund in
forthcoming years.
• It is cleared from the analysis that maximum of the respondents are facing too much of choices as typical
hurdles of choosing the right investment.
• It is evident from the analysis that 56% of the respondents are preferred mutual funds as a tool for saving tax.
• It is stated from the analysis that maximum of the respondents are invested in tax saving scheme under mutual
funds as less than 10% of taxable income.
• It is inferred from the analysis that maximum of the respondents are having insurance as the other modes of
investment to save tax.
• It is identified form the above analysis that maximum of the respondents is that the factor ‘NAV appreciation’
makes to reason for selection of mutual funds.
Suggestions:
• The popularity of debt and gilt funds is very low. Emphasizing the fact that the risk level is low in such
schemes will help in increasing investments in such schemes.
• The time frame for most investors is 1 to 3 years. However investments in systematic investment plan (SIP) schemes
which are longer term investments can earn better returns. Hence investors must be educated about SIP schemes.
• Timely information regarding various schemes should be provided to investors so as to eradicate the hurdles
while choosing the right investment. So the role of financial advisors is prominent.
• While most of the investors are looking for better returns, only half are using the investments in mutual funds
for tax saving purposes. The investors must be educated about the tax benefits in investing in mutual fund to
attract more investments.
Conclusion:
The main objective of the study is to find out the investors preference towards various investment avenues like fixed
deposits, post-office schemes, bonds / debentures, share market, mutual funds and insurance. The study revealed that
mutual fund ranks as the most popular avenue for investment followed by life insurance and fixed deposits with regard
to the risk appetite of the investors; it is found that the investors perceive that investments in mutual funds carry
moderate risk. The study also reveals that a better and steady return is the main reason for investment in mutual funds.
The study in dictated that the majorities of the investors are satisfied with their investments in mutual fund.
Investments in insurance and housing are found to be the popular avenues for saving tax in addition to mutual funds
suggestions have been made to improve investments in mutual funds particular low risk schemes such as debt funds &
get funds and also by highlighting the tax advantages in investors in mutual funds.
References:
[1] Vimalavasan, “Mutual Fund sector period for Growth”, Business Line, November 8, 2002.
[2] Balaramasamy, “Evaluating Mutual Funds in an emerging market: Factors that matter to financial advisors”,
Journal of international journal of bank marketing, 2003 Vol-3.
[3] Robert B.Gordon sc.d: “Mutual Fund Profits Vs Investor welfare” rgordon145@aol.com, September 9, 2002.
[4] Rukmani vishwanath; “AA rated paper finds favor with mutual funds” Business Line, June 19, 2003.
[5] B.Venkatesh, “Investor Fatigue and Mutual Funds”, Business Line, June 21, 2004.
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