Chapter 1

Introduction
1.1 Background of the Study
The history of mutual fund dates back to 19th century when it was introduced in Europe, in
particular, Great Britain. Robert Fleming was set up in 1968 the first investment trust called
Foreign and Colonial Investment Trust which promised to manage the finances of the moneyed
classes of Scotland by spreading the investment over a number of different stocks. This
investment trust and other investments trusts which were subsequently set up in Britain and the
US, resembled today’s close – ended mutual funds. The first mutual in the U.S.,
Massachustsettes investor’s Trust, was set up in March 1924. This was the open – ended mutual
fund. The stock market crash in 1929, the Great Depression, and the outbreak of the Second
World War slackened the pace of mutual fund industry, innovations in products and services
increased the popularity of mutual funds in the 1990s and 1960s [ CITATION DrK13 \l 1033 ] . The
history of mutual fund in Nepal is not long. It was started with the establishment of NCM mutual
fund -2050 established by NIDC capital market. The fund was initially open-end type with Rs 10
par value. It was converted into close end fund in the name of NCM mutual fund 2059. The fund
has 10 million units outstanding with Rs 10 par value, and 10 year maturity period. The fund has
guaranteed at least 5 percent return to its investors. It listed in Nepal Stock Exchange (NEPSE)
(Pudel, et. al. 2016).

In this era of globalization and competition, the success of an industry is determined by the
market performance of its stock. The investors too like to invest only in the stock of those
companies from which they can get maximum gains. In early years of growth of mutual fund
industry, investors were available only with few investment avenues to invest their money. But
with the passage of time a lot of opportunities are available to the investors for investing their
money in different investment channels. One such channel is to invest in mutual fund along with
effective financial management. Mutual funds have seen a tremendous growth in the last few
years. This is the result of combined efforts of the brokerage houses and the fund managers who
come to one’s rescue by educating the investors and making them aware of the mutual fund
schemes by different modes of promotion [ CITATION Sai11 \l 1033 ]. Especially in a country like
Nepal, investment from financial organizations or even an individual has a great impacted on the
overall economy of the country. For the past few decades, the major investment opportunities
have emerged to give us proper financial results (i.e, collection of the investment and generation
of profit from the invested capital) are Hydro-electricity generation, Tourism and Agriculture.
Even though there are other sectors and opportunities to invest time, capital and labor in these
three are the most effective and productive in the long run. There are very few people in Nepal
who solely invested in high amounts. So for country like Nepal, one of the major sources of
investment is mutual fund.

Mutual Funds are a retail product which is designed for those who do not directly invest in the
share market because of its unpredictable and volatile nature. Mutual funds are recognized as a
mechanism of pooling together the investment of unsophisticated investors which are
professionally managed by fund managers for consistent return along-with capital appreciation
and has come as a much needed help for retail investors [ CITATION 15AS \l 1033 ]. All
investments whether in shares, debentures or deposits involve risk. Share value may go down
depending upon the performance of the company, the industry, state of capital markets and the
economy. While risk cannot be eliminated, but skillful management can minimize the risk.
Mutual Funds help to reduce risk through diversification and professional management. The
experience and expertise of Mutual Fund managers in selecting fundamentally sound securities
and timing their purchases and sales help them to build a diversified portfolio that minimizes risk
and maximizes returns.

In Nepal, NCM Mutual fund- 2050 was established by NIDC Capital Market as the first mutual
fund in 1993/94. It floated units of Rs 10 par value in the beginning. The fund was of an open-
end type. The fund performance well in the beginning, when there was a boom in the stock
market. However, its performance deteriorated in 1995 and its trading had to be suspended due
to excessive selling pressure. The fund was restructured into a closed-end fund to bring it back
into operation in the name of "NCM Mutual Fund, 2059" on August 9, 2002. The previous unit
holders were offered two options-either to refund or to participate in this new scheme. The fund
has 10 million units with Rs 10 face value. Out of the total units, it distributed 1.5 million units
to its management and trustee, 1.33 million to the unit holders of the previous mutual fund
scheme and the remaining 7.17 million units issued to the public.
Similarly, Citizen Unit Scheme (CUS) was operated by Citizen Investment Trust (CIT) as a
second collective investment scheme in 1994/95. It was incorporated under the Citizen
Investment Trust Act, 1990. It was established as an open-ended scheme with the face value of
Rs 100 per unit. CIT puts Rs 5 million as seed capital in the beginning. Mutual funds quickly
became popular because they guaranteed that investors could always redeem their shares for
their net asset values. Because mutual funds promise to redeem shares on demand, they invest
only highly marketable assets, such as stocks, bonds can be sold quickly if the funds need cash
to meet redemption. This open end fund has high liquidity.

1.2 Statement of the Problem

In conventional financial theory, investors are assumed to be rational wealth maximizes,

following basic financial rules and basing their investment strategies purely on the risk-return
consideration as the factors expected to influence investment decisions (Baker et al, 1977).
Traditional economic theory assumes that people are rational agents who make decisions
objectively to take advantage of the opportunities available to them. Investors think of
themselves as rational and logical. But when it comes to investing, their demographic factor,
emotional inclinations, ingrained thought patterns and psychological biases, color how they
perceive the world and how they make decisions. The controversy of this area of study was the
different findings that researchers came up with. For instance, Sing (2012) stated that there is no
association between age, occupation and attitude towards mutual funds. But there is an
association between sex, income, educational qualifications and attitude towards mutual funds.
As far as the benefits of the mutual funds are concerned, return potential and liquidity have been
perceived to be most attractive by investors, followed by flexibility, transparency and
affordability. Kumaret al. (2014) study concludes that as far as the demographic factors are
concerned, geography, age, occupation and income have significant influence on choice of
investment decisions in mutual fund. Joseph & Joseph (2015) study reveals that the investors’
perception is dependent on the demographic profile and assesses that the investor’s age and
annual savings have direct impacted on the investors’ choice of investment but no other
demographic factors like gender, occupation, educational level and educational background.
Subramanya (2015) concluded that the socio economic factors like age, gender, education,
income and savings of investors’ perception towards mutual fund is not encouraging but the age
of investors’ and saving habit of respondents is correlated. Hence, the mutual funds investor's
perception are different according to their demographic variables like age, gender, income,
saving and educational background. Therefore, the study deals with following issues.

 What are the investor’s perceptual factors towards the mutual fund in Kathmandu City?
 What are the most important factors that investor perceive towards mutual fund
investment?
 Is there any significant difference between demographic factors and perception towards
mutual fund investment? (Demographic factors are age, gender, income level,
educational background, education level, annual saving and occupation).

1.3Objective of the Study

The overall purpose of this study is to examine investor’s perception towards mutual funds. The
specific objectives of the study as follows:

a) To explore the investors perceptual factors towards mutual fund.

b) To identify the most important factors that investor perceive towards mutual fund
investment.
c) To explore whether there is any significant difference between demographic factors and
perceptual factors towards mutual fund investment.

1.4 Significant of the Study

Mutual fund is a retail product design to target small investors. It is evident that mutual funds
have at the top of the agenda over the last decade thus, constituted the majority of many
organizations’ portfolios. They have become worldwide phenomena and attached great
importance to global financial markets. Nowadays, an increasing number of investors are relying
on mutual fund as investment and retirement vehicles. Hence, designing a mutual fund product
and expecting a good response will be futile.

The better understanding of investors’ perception and outcomes is important for financial
planners because an understanding of how investors generally respond to market movements. It
helps investment advisors devise appropriate asset allocations strategies for their clients.
Companies would identify the most influencing factors on their investors’ perception which
affect their future policies and strategies eventually would affect their future plans. Similarly
Government would identify the most influencing factors on investors’ perception would affect
the required legislations and additional procedures needed in order to satisfy investors’ desires
and also to give more support to market efficiency. In this context, the present study is very
useful and relevant to examine the factors influencing the perception of investors, while making
decisions related to mutual fund investments and the features that investors look for in mutual
fund products.

1.4 Hypothesis

Joseph and Joseph (2015) stated that there is significance difference between perceptual factors
(knowledge and awareness, regulation and transparency, convenience and flexibility and return
and affordability) and age and annual saving towards mutual fund investment. Among the
gender, with regard to the perceptual factor – knowledge and awareness is high among the males
followed by convenience and flexibility. Similarly the study tested the same hypotheses in the
context of Nepal in the city of Kathmandu.
H01 - There is no significant difference between gender and perceptual factors towards mutual
fund investment.
H02 - There is no significant difference in perceptual factors with respect to different age groups.
H03 - There is no significant difference between educational background and the perception
towards mutual funds
H04 - There is no significant difference between educational level and the perception towards
mutual funds
H05 - There is no significant difference among occupation and perceptual factors towards mutual
fund investment.
H06 - There is no significant difference between income level and the perception towards mutual
funds
H07 - There is no significant difference among annual saving and perceptual factors towards
mutual fund investment.
1.5 Limitation of the study

The study has following limitations:

 The study has not been conducted over an extended period of time considering both
market ups and downs. The market state has a significant influence on the investor's
perception. The study cannot capture such situations.
 All the responses for the study were collected inside Kathmandu Valley. Therefore,
the study is limited to respondents residing in Kathmandu Valley only.
 The present study focused on individual investors but not institutional investors. So
the data were collected from the individual investor alone.
 Seven demographic variables are considered. Investor perception is also affected by
other variables besides the ones which are chosen for this study.

1.6 Organization of the Study

This study was organized into five chapters. The first chapter deals with introduction part. This
chapter contains various aspects of the study such as background of study, introduction of
mutual fund, statement of problem, objective of the study, significance of the study limitation
and organization of the study. Similarly, the second chapter deals with review the available
literature, theoretical framework and identifies the research gap in the field of mutual fund, it
includes study of related books, research works, journal and articles which are already published
and conducted different experts and researchers in the related fields. Likewise, the third chapter
deals with the researcher methodology which is defined the research design, nature and source of
data, population and sampling of the study, methods and tools of data collection and analysis.
Chapter forth deals with data presentation and analysis. Under this chapter researcher tested the
reliability of data, identified major perceptual factors of mutual funds investor, discussed about
the finding from the study and analysis the relevant data where it is significant or not. The last
chapter deals with the discussion of the finding, conclusions and implications of the study.
Similarly, a bibliography and annexure have been appended at the end of the study. The annex
includes communalities, total variance explained, scare plot and questionnaire.
 Chapter 2
Literature Review and Theoretical Framework
This chapter deals with the evidence and findings from past related studies from various
researchers. The studies and evidences were relevant for the future investigation regarding the
perception of investors towards the mutual funds in the Kathmandu valley. In this study there
reviewed some research papers, articles, books and GRP related to study, which contributed
some ideas and help in presenting of this study.

2.1 Meaning of Mutual Fund

A mutual fund is a financial intermediary that pools the savings of large number of investors for
collective investment in a diversification portfolio of securities with the objectives yields and
appreciation in their value. A fund is referred as ‘mutual’ as all its returns minus its expenses are
shared by the unit holders in proposition to the number of units owned by them. Retail investors
are steadily banishing the stock market and diverting savings into mutual funds sector. They
acquire stocks or bonds through mutual funds at lower trading costs and get the benefit of
diversification and risk minimization Khare (2007), Mutual fund companies continually
introduce new type of funds in an effort to attract investor capital and maximize assets under
management. The decision to introduce a new type of fund is affected by a number of variables,
including investor demand for the fund’s attributes. As argued by Khorana and Servaes (1999),
new fund types in high demand generate capital inflows and incremental revenue for the fund
company.
A Mutual fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money collection from investors’ is invested in capital market instrument
such as shares, debentures and other securities. The income earned through these investments
and the capital appreciations realized are shared by its unit’s holder in proportion to the number
of units owned by them. Thus a Mutual Fund is the most suitable investment to the common
man as it offers an opportunity, to invest in a diversified, professionally managed basket of
securities at relatively low cost.

2.2 Review of empirical evidences

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 MF Schemes.

Shanmugham (2000) conducted a survey of individual investors with the objective to study on
what information source does investor depends. The results explained that factors are an
economical, sociological and psychological factor which controls investment decisions. Mutual
funds have attracted the attention of global practitioners and academicians in India and abroad to
draw sound conclusions on the factors responsible for the selection of mutual funds as an
investment option.

Gilkar (2002) examined that empirical evidence with regard to the perceptions of mutual fund
investors and revealed that, the growth products were rated highest by the respondents, where as
income products had the least preference.
Singh and Chander (2003) pointed out that occupational status and age have immaterial
influence on the choice of scheme. However, the important factors in the selection of schemes
for retail investors were attributed to the past track record, safety and future growth prospects.
Investors also expected prompt service, reliable information and also repurchase facility from
the companies.

Mehru (2004) study covers the problem and perspectives of Mutual Funds related to structure,
investment, policies, performance and investors. Study suggested for greater transparency,
increased innovation, and better service to investors, liquidity and higher return to make Mutual
Fund scheme more popular and investor friendly. Singh (2004) study was undertaken to know
the perceptions of small investors, who are exploited in Indian capital market. The major
perception factors were; age of investors do not have impact on a decision to invest in mutual
funds; salaried and retired investors gave maximum weight-age to past performance of the
organization; professionals assigned maximum importance to availability of adequate
information.

Ramamurthy and Reddy (2005) carried out a study to analyze recent trends in the mutual fund
industry and concluded that the major benefits delivered to the small investors by mutual funds
are professional management, diversification of investment, convenient administration, return
potential, liquidity, transparency, flexibility, affordability, wide choice and proper regulation.
They also analyzed certain recent trends in the mutual fund industry such as, entry and exit of
mutual fund companies, compulsory certification of mutual fund sales/ marketing personnel,
mutual fund schemes related to real estate, commodity, bullion and precious metals, etc., shift
from income funds to money market funds, shift from banks to mutual funds and buying and
selling of mutual fund online.

Desigan, Kalaiselvi and Anusuya (2006) conducted a study on women investors’ perception
towards investment in general and found that women investor’s generally hesitate in investing in
mutual funds due to their lack of knowledge regarding investment protection, procedure of
making investment, market fluctuations, risk associated with investment, valuation of investment
and redressal of grievances regarding their investment related problems.
Julie (2006) examined the individual characteristics on behavioral biases 401 (K) plan allocation
decisions and found that higher salaried employees tend to make significantly better choices in
investment in company stock. As a result, he suggested that a sample of higher-income market
percipients is more likely to meet the diversification conditions.

Mittal and Gupta (2008) examined the awareness of the investors about mutual funds and
various factors affecting the investment decision in the mutual funds. The study revealed that
mutual funds had comparative advantage over other options due to high return, high safety, high
liquidity and high convenience with moderate volatility. When compared to other investment
options, it ranked third most preferred option, Insurance and government bonds having first and
second positions. The overwhelming majority (85%) of the respondents were aware of the
mutual fund product and risk associated with it and most of them were satisfied with the service
provided by mutual fund.

Parihar, Shrama and Parihar (2009) analyzed the association between demographic factors and
investment in mutual funds and also examined the factors responsible for investment in mutual
funds. Primary data has been used in this study. 200 investors have been taken from Agra region
by using judgmental sampling. The analysis of the data has been done with Chi square test. The
findings of the study have revealed that out of 200 investors, 57 investors have positive attitude
towards mutual funds, 95 investors have neutral attitude and remaining have negative attitude.
On the basis of Chi- square values the study concluded that there is significant relationship
between mutual funds with age, gender, income, education and occupation. As far as factors
responsible for investment in mutual fund are concerned they have ranked at number one high
return potential followed by liquidity and flexibility of investment.

Nidhi and Ravi (2009) identified critical gaps in existing framework for mutual fund and further
extent it to redesign existing mutual fund services. Study analyze investors perception,
expectations and unveils some extremely valuable information to support financial decision
making of mutual funds. 66.7% investors with working knowledge agree that actual returns from
mutual fund are not found to be satisfied.
Jalandhar, Gobindgarh, & Mohali (2011) stated that the Indian mutual fund has gained a lot of
popularity from the past few years. It is very important to know the investors’ perception about
this industry. The study analyses the mutual fund investments in relation to investor’s behavior.
Investors’ opinion and perception has been studied relating to various issues like type of mutual
fund scheme, main objective behind investing in mutual fund scheme, role of financial advisors
and brokers, investors’ opinion relating to factors that attract them to invest in mutual funds,
sources of information, deficiencies in the services provided by the mutual fund managers,
challenges before the Indian mutual fund industry etc.

Kandavel (2011) investigated the factors which influenced the retail investors regarding
preference for investment in the mutual funds. He identified that investment behavior of retail
investors do not have a high level of consistency due to the influence of different purchase
factors. He further opined that negative perceptions about mutual funds can be overcome
through proper induction of investor awareness program. It was also recommended that proper
segmentation and positioning of products by mutual fund companies are of utmost importance.

Simran, Bimal and Ramandeep (2011) analyzed that the mutual fund investment in relation to
investor’s behaviour. Investor’s opinion and perception has been studied relating to various
issues like type of mutual funds scheme, objective behind investing in mutual fund, role of
financial advisers and brokers, sources of information, deficiencies in the services etc.

Saha and Dey (2011) examined the saving objectives of the investors, preferred investment
option, features preferably by investors and conceptual understanding of mutual funds. Beside
these objectives the study has analyzed the schemes preferred by investors, qualities of the
scheme which affect the investors, information source and fund related attributes. The study is
based on primary data. 100 investors have taken and the enumerator has been appointed to fill
the questionnaire from the investors by personal interview. Those investors have taken who has
the knowledge of conceptual terminology of mutual funds. Pie charts, Chi Square test and factor
analysis has been used to analysis the data. They find that investors save their money for
purchase of assets and want to invest their money in bank. Among the financial instruments
mutual funds are preferred by investors. Investors prefer to invest tin growth plans and open
ended schemes. They prefer mutual funds for safety and liquidity. Chi Square values have shown
that there is significant relation between age and income and conceptual awareness levels of
individual investors but occupation has shown insignificant relation. Among the fund related
attributes investor want Intrinsic fund qualities, Flexibility investment facility and credibility of
Image. They concluded that success of the mutual funds is dependent on the psychology of the
investors. So there is need to study the financial behavior of investors.

Sharma (2012) analyzed the investor’s perspectives towards investment in mutual funds. She has
also examined the factors that may affect the selection of mutual funds schemes. She has
conducted a survey on 250 investors. She has analyzed the data through mean, SD, correlation
and factor analysis. The study has found the benefits which emerge out from investment and it
has grouped into three categories on the basis of factor analysis. The first category has related to
fund related attributes. Second has related to monetary benefits provided by the funds and the
last category has related to sponsor related attributes.

Vyas and Moonat (2012) studied the perception of mutual fund investors and revealed that most
of the respondents invested in equity options and they were aware of the risk associated with
mutual funds.

Rekha (2012) observed that even though there were encouraging factors contributing to the
expansion of the mutual fund industry, there were a few factors inhibiting its growth. The factors
have been endorsed to low levels of customer awareness and lack of knowledge about mutual
funds, limited innovation in product offerings, unwillingness to undertake even minimum risk,
inaccessibility in smaller towns and cities due to lack of efficient distribution network and
abysmal financial literacy.

Singh (2012) conducted a study to analyze the impact of various demographic factors on
investor’s attitude towards mutual funds and to find out the factors which leads for selection of
mutual funds by using Chi Square test. He has conducted this study on 250 investors. He has
found that there is no association between age, occupation and attitude towards mutual funds.
But there is an association between sex, income, educational qualifications and attitude towards
mutual funds. As far as the benefits of the mutual funds are concerned, return potential and
liquidity have been perceived to be most attractive by investors, followed by flexibility,
transparency and affordability.

Das (2012) identified the small investor’s perceptions on mutual funds and to analyze the factors
affecting small investors’ perception towards mutual fund. Small investors are now turning more
to mutual funds because of safety, liquidity, capital gains and transparency. The present
investigation outlined that mostly the small investors have positive approach towards investing
in mutual funds.

Vyas (2012) evaluated the forms of investment, mode of investment preferred by investors. He
has also examined the investor’s knowledge of risk and preference over switching of funds by
using Chi-Square test, Pearson’s correlation, mean and median. He has taken 363 investors for
the analysis of the data. He found that investors preferred investment in gold followed by bank
deposits, Life insurance schemes and post office schemes. Investors preferred lump sum
investment as compare to that of SIP. There has a significant relationship between occupation of
investors and mode of investment. Majority of the investors have the knowledge of risk factors
in mutual funds. Investors switched the investment only for the sake of profitability and
investors preferred existing schemes for investment and they preferred to invest in equity
schemes.

Rao and Daita (2013) attempted to analyze the influence of fundamental factors such as
economy, industry, and company on the performance of mutual funds. Efforts was made to carry
out an in-depth analysis of the economy through a collection of monthly data pertaining to key
macro-economic variables covering a period of 228 months spread over 19 years. The casual
relationship between real economic variables and their impact on statistics, correlation matrix,
and Granger’s causality test. To appraise the mutual fund industry various aspects such as assets
under management, investor type, and product classification were studied with the help of
percentage analysis.

Kumar and Arora (2013) attempt to study the perception of mutual fund investors regarding
respondents know how, advertisement media, attributes of successful fund manager, risk
tolerance, etc. Majority of respondents expressed their agreement with regard to mutual fund as
an investor friendly vehicle for small investors.

Rajaseker (2013) carried out to know about the investor’s perception with regard to their profile,
income, savings pattern, investment patterns and their personality traits. In order to the SIJ
Transactions on Industrial, Financial and business management understand the level of
investor’s preference, a survey was conducted taking in to consideration various parameters
involved in investors decision making. For the purpose of evaluation, a questionnaire survey
method was selected keeping in mind objectives of the study. The data was collected from
primary and secondary sources. The primary sources were collected from the investors who
invested in various avenues. The secondary sources are from books, journals and internet. Since
the investor population is vast a sample size of 150 was taken for the project. The data was
analyzed using the statistical tools like percentage analysis, chi square, weighted average. From
the findings, it was inferred overall that the investor are highly concerned about safety and
growth and liquidity of investments. Most of the respondents are highly satisfied with the
benefits and the service rendered by the reliance mutual funds.

Shraddha (2013) examined the impacts of various demographic fact ors on investors’ attitude
towards mutual fund. Outcome of the study revealed that the mutual funds are dynamic
investment avenues for all age groups. He further remarked that mutual fund companies should
focus on effective marketing of their products and schemes and must also emphasis on portfolio
management.

Kaushik, Kamboj, Kakkar (2013) studied the impact of investor’s age, income, education, risk
and return perception on the choice of investment between various financial avenues. The data
were collected from 250 respondents using a structured questionnaire. Chi square statistic was
used to establish the factors that were significantly affected by the selected dimensions. The
study disclosed the existence of critical gaps regarding the discrepancies in the risk, returns, and
service quality perceptions of the investors.

Kaur (2013) shown that investors prefer mutual funds rather than stock market. They consider
mutual funds as flexible mode for investment. Moreover they think that Asset Management
Companies (AMCs) acts very efficient to track the market. Investment in stock market is
complex and risky. As far as suggestions to investors are concerned investors should, consider
not only the returns but also the risks associated with these returns. Investors should consider
size of the fund, charges charged by funds, change in the corpus of funds and comparison with
peer schemes as well as with benchmark. Investors can make the investment decision by using
Sharpe measure, Treynor Measure and Jensen Alpha and Fama’s Measure. So the study
concluded that investors under the study prefer mutual funds over the stock market. To maintain
these preferences mutual fund companies should offer innovative schemes in the market to lure
the investors.

Kumar & Goel (2014) stated that mutual fund in Indian context is a challengeable phenomenon.
In a short span of less than one decade it has changed the investment pattern of medium and
small investors in India. Consequently study of mutual fund has become an essential ingredient
of any business and finance program. Besides, the investors should know how a mutual fund
operates and what should they expect from them, if they really want to benefit from this new
vehicle of investment. Mutual fund helps small investors to participate in the securities market
indirectly and thus help in spreading and reducing risk. The mutual fund is a vehicle that enables
millions of small and large savers spread across the country to participate in and derive the
benefits of the capital market growth. It is an alternative vehicle of intermediation between the
suppliers and the users of investible resources. This vehicle is becoming increasingly popular in
India due to higher investors’ return, relatively lesser risk and cost. In fact it is a more efficient
vehicle for creation of wealth.

Sehdev & Ranjan (2014) deals with preference and perception of investors towards mutual fund.
Its main objective is to study the factors responsible for the preference for mutual funds as an
investment option. The study also examines the investment objectives undertaken by investors
while investing in Financial Instruments and finds out the highly used/preferred source of
information for various investments options to invest in their most preferred Financial
Instrument. The data is collected from 160 respondents residing at Delhi through a structured
questionnaire. Descriptive statistics namely rank order, frequency tables, cross tabs, bar charts
and factor analysis are used for the purpose of data analysis. It is found that “Benefits &
Transparency” is the major factor that is responsible for the investor’s preference for mutual
funds. It is also observed from the study that most of the investors studied under study are
moderate risk taker and are interested in Balanced Fund, through which they can earn higher
returns at low risk. People in India still think with the perspective of savings rather than taking
risk and investing in high ended equity markets. Even investors who invest in mutual funds are
unclear about how they function and how to manage them. So, proper information must be
provided to the investors in order to increase the loyalty among the investors towards Mutual
Funds.

Kumar (2014) stated that Indian mutual fund industry is playing an important role to provide an
alternative avenue to an array of small active investors in a scientific and professional manner.
Investment objectives of investors vary due to various demographic factors. It is the need of the
hour to identify and measure certain demographic factors affecting investment objectives of
small active investors investing in mutual fund. The study focuses on small active investors of
Gangtok (Sikkim) and Siliguri (West Bengal) to fulfill this need. The study concludes that as far
as the demographic factors are concerned, geography, age, occupation and income have
significant influence on choice of investment decisions in mutual fund.

Sundar and Prakash (2014) examined the awareness among the investor community in choosing
the best mutual fund scheme as it conducted a comparative analysis of the mutual funds of three
AMCs. This study also showed that much information about mutual funds is not available
publicly. There is no information on fund styles or comprehensive league tables to allow the
comparison of mutual funds in the market.

Sehdev & Ranjan (2014) deals with preference and perception of investors towards mutual fund.
Its main objective is to study the factors responsible for the preference for mutual funds as an
investment option. The study also examines the investment objectives undertaken by investors
while investing in Financial Instruments and finds out the highly used/preferred source of
information for various investments options to invest in their most preferred Financial
Instrument. It is found that “Benefits & Transparency” is the major factor that is responsible for
the investor's preference for mutual funds. It is also observed from the study that most of the
investors studied under present study are moderate risk taker and are interested in Balanced
Fund, through which they can earn higher returns at low risk. People in India still think with the
perspective of savings rather than taking risk and investing in high ended equity markets. Even
investors who invest in mutual funds are unclear about how they function and how to manage
them. So, proper information must be provided to the investors in order to increase the loyalty
among the investors towards mutual funds.

Subramanya (2015) conducted that investor’s perception towards mutual fund, with
consideration of socio economic variables. To achieve objectives the primary data has been
collected through structured questionnaires. Secondary data has been collected from reports,
books, journals, magazines and other published data’s. For collecting the primary information
judgment sampling technique is used. The socio economic factors like age, gender, education,
income and savings of investors’ perception towards mutual fund is not encouraging but the age
of investors’ and saving habit of respondents is correlated.

Doditya (2015) reveals that the financial literacy among the new investors is vital to promote
mutual fund industry. Hence, the fund manager should create awareness among the investors
regarding mutual fund so that they can diversify saving of the household to their industry.

Joseph & Joseph (2015) reveals that the investors’ perception is dependent on the demographic
profile and assesses that the investor’s age and annual savings has direct impact on the investors’
choice of investment. The mutual fund industry today needs to develop products to fulfill
customer needs and help customers understand how its products cater to their needs. Retail
investors are now turning more to mutual funds because of convenience and transparency. The
study summarize that mostly the small investors have positive approach towards investing in
mutual funds.

Ganapathi (2015) shows that there is a significant association between educational qualification
of the investors and the risk tolerance level and occupation of the investors and the risk tolerance
level. The results further indicate that there is no significant association between occupation of
the investors and the level of knowledge of mutual fund and monthly savings of the investors
and the level of knowledge of mutual fund. Therefore, the investors have to consider the
prevailing rate of risk free returns and to compare the fund returns with it. Based on this the
selection of schemes and the choice of investment avenues can be decided. Due to the fund
manager’s poor risk bearing capacity, timing skill, stock selection ability, and imperfect
diversification the schemes had suffered with low return. Hence to increase the fund return the
concerned fund managers have to improve all these skills.

Arathy et. al. (2015) stated that mutual funds provide a platform for a common investor to
participate in the Indian capital market with professional fund management irrespective of the
amount invested. The Indian mutual fund industry is growing rapidly and this is reflected in the
increase in assets under management of various fund houses. Mutual fund investment is less
risky than directly investing in stocks and is therefore a safer option for risk adverse investors.
This project aims at finding out the factors affecting investment decision on mutual funds and its
preference over retail investors. This project also aims at finding about the factors that prevent
the people to invest in mutual funds. The findings will help mutual fund companies to identify
the areas required for improvement and can also improve their marketing strategies. It will help
the MF companies to create new and innovative product according to the orientation of
investors.

Mane (2016) concluded that mutual fund has emerged as a tool for ensuring one’s financial
wellbeing. As information and awareness is rising more and more people are enjoying the
benefits of investing in mutual funds. This research will introduce the customer perception with
regard to mutual funds that is the schemes they prefer, the plans they are opting, the reasons
behind such selections and also this research dealt with different investment options, which
people prefer along with and apart from mutual funds. Like postal saving schemes, recurring
deposits, bonds, and shares. The findings from this project is that most of the people are hesitant
in going for new age investments like mutual funds and prefer to avert risks by investing in less
riskier investment options like recurring deposits and so.