Professional Documents
Culture Documents
Proposal: Analysis of The Preference Level of Investors in Mutual Fund in Ahmedabad
Proposal: Analysis of The Preference Level of Investors in Mutual Fund in Ahmedabad
Mutual funds can be invested in many different kinds of securities. The most common are
cash, stock, and bonds, but there are hundreds of sub-categories. Stock funds invest primarily
in the shares of a particular industry, such as technology or utilities. These are known as
sector funds. Bond funds can vary according to risk (e.g., high-yield or junk bonds,
investment-grade corporate bonds), type of issuers (e.g., government agencies, corporations,
or municipalities), or maturity of the bonds (short- or long-term). Both stock and bond funds
can invest in primarily U.S. securities (domestic funds), both U.S. and foreign securities
(global funds), or primarily foreign securities (international funds).Most mutual funds'
investment portfolios are continually adjusted under the supervision of a professional
manager, who forecasts the future performance of investments appropriate for the fund and
chooses those which he or she believes will most closely match the fund's stated investment
objective. A mutual fund is administered through a parent management company, which may
hire or fire fund managers. Mutual funds are liable to a special set of regulatory, accounting,
and tax rules. Unlike most other types of business entities, they are not taxed on their income
as long as they distribute substantially all of it to their shareholders. Also, the type of income
they earn is often unchanged as it passes through to the shareholders. Mutual fund
distributions of tax-free municipal bond income are also tax-free to the shareholder. Taxable
distributions can be either ordinary income or capital gains, depending on how the fund
earned those distributions.
A mutual is a set up in the form of trust, which has sponsor, trustee, assets management
company (AMC) and custodian. Sponsor is the person who acts alone or in combination with
another body corporate and establishes a mutual fund. Sponsor must contribute at least
40% of the net worth of the investment managed and meet the eligibility criteria prescribed
under the Securities and Exchange Board of India (Mutual Funds) regulations, 1996. The
sponsor is not responsible or liable for any loss or shortfall resulting from the operation of
the schemes beyond the initial contribution made by it towards setting up of Mutual Fund.
The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian
Trusts Act, 1882 by the Sponsor. Trustee is usually a company (corporate body) or a board of
trustees (body of individuals). The main responsibility of the trustee is to safeguard the
interest of the unit holders and also ensure that AMC functions in the interest of investors
and in accordance with the Securities and Exchange Board of India (Mutual Fund)
Regulations 1996 the provisions of the Trust deed and the offer Document of the respective
schemes. The AMC is appointed by the Trustees as the investment Manager of the Mutual
Fund. The AMC is required to be approved by SEBI to act as an asset management company
of the Mutual Fund. The AMC if so authorized by the Trust Deed appoints the Registrar and
Transfer Agent to agent the mutual fund. The registrar processes the application form,
redemption requests and dispatches account statements to the unit holders. The Registrar
and Transfer agent also handles communications with investors and updates investor
records.
STRUCTURE OF MUTUAL FUND SEBI
SEBI
TRUSTEE SPONSOR
AMC
OPERATION
MKT./SALES
FUND MANAGER
MKT./SALES
MUTUAL FUND
DISTRIBUTER
SCHEMES
INVESTOR
MUTUAL FUND OPERATION FLOW CHART
COMPARISION BETWEEN INVESTMENT IN BANK AND MUTUAL FUND
every month
The net asset value, or NAV, is the current market value of a fund's holdings, usually
expressed as a per-share amount. For most funds, the NAV is determined daily, after the close
of trading on some specified financial exchange, but some funds update their NAV multiple
times during the trading day. Open-end funds sell and redeem their shares at the NAV, and
so process orders only after the NAV are determined. Closed-end funds (the shares of which
are traded by investors) may trade at a higher or lower price than their NAV; this is known
as a premium or discount, respectively. If a fund is divided into multiple classes of shares,
each class will typically have its own NAV, reflecting differences in fees and expenses paid
by the different classes. Some mutual funds own securities which are not regularly traded on
any formal exchange. These may be shares in very small or bankrupt companies; they may
be derivatives; or they may be private investments in unregistered financial instruments (such
as stock in a non-public company). In the absence of a public market for these securities, it
is the responsibility of the fund manager to form an estimate of their value when computing
the NAV. How much of a fund's assets may be invested in such securities is stated in the
fund's prospectus.
CALCULATION OF NAV
The most important of the calculation is the valuation of the assets owed by the funds. Once
it is calculated, the NAV is simply the net value of assets divided by the number of units
outstanding. The detailed methodology for the calculation of the asset value is given below.
Net Asset value =Sum of market value of shares/debentures + Liquid assets/cash held (if
any) +Dividends/interest accrued-Amount due on unpaid assets -Expenses accrued but not
paid
REVIEW OF LITERATURE
Singh and Jha (2009) conducted a study on awareness & acceptability of mutual funds and
found that 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.
Ramamurthy and Reddy (2005) conducted a study to analyze recent trends in the mutual fund
industry and draw a conclusion that the main benefits for small investors due to efficient
management, diversification of investment, easy administration, nice return potential, liquidity,
transparency, flexibility, affordability, wide range of choices and a proper regulation governed
by SEBI. The study also analyzed about recent trends in mutual fund industry like various exit
and entry policies of mutual fund companies, various schemes related to real estate,
commodity, bullion and precious metals, entering of banking sector in mutual fund, buying and
selling of mutual funds through online.
Anand and Murugaiah (2004) had studied various strategic issues related to the marketing of
financial services. They found that recently this type of industry requires new strategies to
survive and for operation. For surviving they have to adopt new marketing strategies and tactics
that enable them to capture maximum opportunities with the lowest risks in order to enable
them to survive and meet the competition from various market players globally.
OBJECTIVES
1. To study and analyze the impact of various demographic factors on investors attitude
towards mutual fund.
2. To study about the factors (on the basis of rank) responsible for the selection of mutual funds
as an investment option.
RESEARCH METHODOLOGY
The study is basically an analytical study based on primary research as well as also related to
the analysis of the attitude of investors towards mutual funds. In order to conduct this study,
250 investors in Ranchi region have been selected by sampling method and mainly
questionnaire has been used for collecting the data.
All the data required for this analytical study has been obtained mainly from primary sources,
but at times, secondary sources of data have also been considered.
The data collection method used to obtain the desired information from primary sources has
been through direct interview and questionnaire has been used as an instrument.
Basically, targeted populations belong to the Ranchi region and considering an individual
investor as a sampling unit. Judgment sampling has been used for colleting the sample.
draw sound conclusions, many statistical techniques basically Chi-square test for testing of
hypothesis has been used and for analyzing the various factors responsible for
investment in mutual funds, ranking was done on the basis of weighted scores and scoring was
done on the basis of scale. Chi- Square test of goodness of fit has been used. It is a powerful
test for testing the significance of the discrepancy between theory and experiment as given by
Karl Pearson. It enables us to find if the deviation of the experiment from theory is just by
chance or it is really due to the inadequacy of the theory to fit the observed data. If O i , (i=1,
2n) is a set of observed(experimental) frequencies and Ei (i=1,2,..n) is the corresponding
set of expected(theoretical or hypothetical) frequencies ,then Karl Pearsons Chi-Square is
given by
n O E 2 n
(2n1) n
ii where Ei
Oi follow Chi-Square distribution with (n-1) d. f.
i1 Ei i1
i1
This is an approximate test for large values of n.
TESTING OF HYPTHOSIS
FINDINGS
The Study was aimed at identifying the level of attitude towards the
mutual funds. The study shows that out of 250 respondents 71
respondents have a positive attitude, 117 respondents have a neutral
attitude and 62 respondents have a negative attitude towards the
mutual funds.
During the study, it was found that the investors basically invested in
mutual funds due to high return potential, transparency, liquidity,
flexibility and affordability (see table VI). Respondents were asked to
rank these factors according to the preference and assigned ranked from
1 to 5(see table-VII).For analyzing the various factors responsible for
investment in mutual funds,
CONCLUSION
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 mutual funds are concerned,
return potential and liquidity have been perceived to be most attractive
by the invertors followed by flexibility, transparency and affordability.
Apart form the above, in India there is a lot of scope for the
growth of mutual fund
companies provided that the funds satisfy everybodys needs and sharp
improvements in service standards and disclosure.
Data Analysis
.
( c) Investement Avenue preferred by the investor
Majority of the investors prefer investing in mutual funds ( 30%)
followed by fixed deposit, gold/silver and insurance. Only 5 %
prefer direct investment in stock market.
Higher Return
Low Risk
Company Reputation
Investors are giving more importance to higher return, less risk and reputation of the
company before investing in any mutual fund.
Diversification of portfolio and tax benefit are the main factors of mutual fund that allure the
investors.