Investors Preference

for Investment in Mutual Funds:

An Empirical Evidence
Jaspal Singh* and Subhash Chander**

Since interest rates on investments like PPF, NSC, bank deposits, etc., are falling, the question to be
answered is: What investment alternative should a small investor adopt? Direct investment in capital
market is an expensive proposal, and keeping money in saving schemes is not advisable. One of the
alternatives is to invest in capital markets through mutual funds. This helps the investor avoid the risks
involved in direct investment. Considering the state of mind of the general investor, this article figures
out: (i) the preference attached to different investment avenues by the investors; (ii) the preference of
Mutual Funds schemes over others for investment; (iii) the source from which the investor gets
information about Mutual Funds; and (iv) the experience with regard to returns from mutual funds. The
results show that the investors consider gold to be the most preferred form of investment, followed by NSC
and Post Office schemes. Hence, the basic psyche of an Indian investor, who still prefers to keep his
savings in the form of yellow metal, is indicated. Investors belonging to the salaried category, and in the
age group of 20-35, years showed inclination towards close-ended growth (equity-oriented) schemes over
the other scheme types. A majority of the investors based their investment decision on the advice of
brokers, professionals and financial advisors. The findings also reveals the varied experiences of
respondents regarding the returns received from investments made in mutual funds.

T
he masses in India generally prefer to save in those instruments that are safe. The
safety of the money invested is not compromised, and at times, they do not mind
accepting lesser returns on their investment. An average small investor generally
advocates the phenomenon of risk aversity. But, return on investment in capital markets
comes with the associated risk.
With falling interest rates on investments like Public Provident Fund (PPF),
National Saving Certificate (NSC), bank deposits, etc., the question to be answered is:
What investment alternative should a small investor adopt? Going with direct investment
in capital market is an expensive proposal, and requires expert knowledge; and keeping
money in the above mentioned saving instruments does not seem advisable. Therefore,
the easy route left with the small investor for earning better return on investment is by
investing in mutual funds. But the volatile bourses in India have left the investors in a
fix, because the return on mutual fund investment will ride in the way the capital markets do.

Literature Review
Fant (1999) conducted a study by taking fund flow data for 1984 through 1995 of US
equities, classified as aggressive growth, growth, growth and income, and income-equity
categories, only. This study investigates the aggregate investment behavior of mutual fund
* Faculty Member, Department of Commerce and Business Management, Guru Nanak Dev University, Amritsar,
Punjab, India. E-mail:jassop@rediffmail.com
* * Professor, Department of Commerce and Business Management, Guru Nanak Dev University, Amritsar, Punjab,
India. E-mail: subh_chander@rediffmail.com

2006 IUP. All Rights Reserved.

Investors Preference for Investment in Mutual Funds: An Empirical Evidence 7
shareholders by analyzing the interaction of their demand for equity securities with stock
returns. Aggregate fund flows are broken down into four components (new sales,
redemptions, exchanges-in, and exchanges-out). The findings indicate that mutual fund
investors use new sales/redemptions differently from exchanges, which results in the
components reflecting varied information. The findings are not consistent with new sales/
redemptions reflecting the same return-related information as exchanges with a lag.
Investors appear to use exchanges, to time the market and/or engage in tactical asset
allocation. The study suggests that various components reflect different investor
objectives and information.
Dwyer, Gilkeson and List (2002) using data from a national survey of nearly 2000
mutual fund investors conducted a study to examine whether the risk taking behavior of
mutual fund investors is correlated with gender. The findings revealed that women exhibit
less risk taking than men in their most recent, largest and riskiest mutual fund investment
decisions. However, it was observed that the impact of gender on risk taking is
significantly weakened when investor knowledge of financial markets and investment is
controlled in the regression equation for the purpose of the study.
Singh and Vanita (2002) conducted a study on mutual fund investors perception and
preferences. For the purpose the objectives formed were: purpose and time horizon of
mutual fund investment, investors investment experiences, investors perceptions as
regards risk, returns, safety and diversification of mutual fund and investors preferences
for various types of financial assets and mutual fund schemes. A sample of 150 mutual fund
investors based in Delhi was selected for the survey. The results showed that, as against
UTI and other public sector mutual funds, the investors were increasingly moving towards
private sector mutual funds. Absolute returns from mutual funds and name of promoters
has been the basic criteria used for selecting mutual fund scheme. Public sector mutual
fund investors are not satisfied with the performance of their mutual funds. A majority
of the investors are not aware of the inherent risk in mutual fund investment. NSCs and
PPFs were the most preferred financial assets. Lastly, the investors preferred to invest in
the private sector, open-ended and balanced schemes of mutual funds.
Shu, Yeh and Yamada (2002) conducted a study by investigating the investment flows
of equity mutual funds in Taiwan, to identify if there are different patterns in buy and sell
behavior of mutual funds. For this purpose, the data of the open-end equity mutual funds
from the Taiwan Economic Journal from November 1996 to October 1999 was considered.
The results showed that there is a stark difference in the behavior of investors who invest
small amounts of money and those who invest large amounts in mutual funds. The
findings suggest that searching cost might be an important factor that affects investor
decisions. Small investors who are more likely to be small household investors, are prone
to buy large mutual funds that are well known, while large investors tend to buy small
funds that might require a costly search.
Qamar (2003) conducted a survey of 300 average urban middle class households in
Delhi to find out the investment preferences of households that are able to save, and to
identify the factors influencing saving behavior and investment preferences. Results
showed that there is a high propensity to save moderate-to-high proportions of the
income. It was found that the level of literacy, educational achievement, occupational
distribution and income profile of the respondents largely determine the saving and
investment pattern. The relationship between choice of investments like Bank deposits,

8 The IUP Journal of Behavioral Finance, March 2006

PPF, LIC and stock market instruments on one hand and education level, occupation and
income profile of the respondents on the other is found to be statistically significant at
1% level of significance.
The studies referred above have covered various behavioral aspects of the investor and
have attempted to analyze these from various aspects like investigating the investment
flows of equity mutual funds, to identify whether there are different patterns in buy and
sell behavior for mutual funds. Some have analyzed the level of literacy, educational
achievement, occupational distribution and income profile of the respondents to be the
determinant for the saving and investment pattern of investors. There are studies to
investigate the behavioral response of investors to know how funds with mediocre or
consistently poor performance are able to survive at all. Also, the studies have been
conducted to understand the investment behavior of mutual fund investors by analyzing
the interaction of their demand for equity securities with stock returns and a choice of
large mutual funds by small amount of investors and vice-versa. A study has also been
conducted to examine whether the risk taking behavior of mutual fund investors is
correlated with their gender.

Need and Objectives

It is a well established fact that in India, the household savings have a dominant role
in the capital formation in the country. The fund mobilization by mutual funds in India
has been on the increase since their inception in 1964, i.e., with the launch of US 64,
the flagship scheme of UTI. Again it was in 1987 and 1989, when public sector banks
and corporations entered the mutual funds market scene of the country. Further, keeping
in tune with the objective of New Economic policy of 1991, the mutual funds market
was thrown open to the private sector during 1993, in India. Since then, the investment
trend shifted in favor of the private sector funds. The corpus of mutual funds in India
has been swelling with almost 60% of the total mutual fund investment going into the
private sector mutual funds. Initialization of the policy of liberalization and reforms in
the financial sector has brought about a sea change in income, consumption, savings,
and investment pattern of average household in India. Presently, approximately 25% of
the total investment in the capital markets in India has been made by the small
individual investors, who total up to about two crores in number, either directly or
through mutual funds. Keeping the above in view, the dire need for undertaking this
study was felt because:
The money that has been invested from precious savings by the investors is invaluable;
The post UTI scam period has resulted in loss of confidence of the investors in mutual
fund investments;
The size of fund mobilization that has shown unprecedented growth since 1993(the
debut year of private sector mutual funds in India) may prove disastrous for small
investors in India in the absence of proper government control; and
The volatility of share markets in India makes an average, less informed, individual
retail investor extremely vulnerable to the atrocities of large operators in the market.
These facts obviate the need of studying what the investors feel about mutual funds.
It may also be mentioned here that little effort has been devoted by researchers in India
to study how the investors rate mutual funds for investment purpose.

Investors Preference for Investment in Mutual Funds: An Empirical Evidence 9

 Considering the state of mind of the general investor, this article attempts to
know:
The preference attached to the mutual funds over other avenues by the investors;
The mutual funds and their schemes preferred for investment;
The source from which the investor gets information about the mutual funds; and
The experience as regards returns from mutual funds.

Methodology
All those individuals who invest and those who intend to invest in mutual funds in the
near future, constitute the universe of this study. As no list of investors was available,
convenience and purposive sampling was used to select the respondents. In all, 273
responses out of 400 questionnaires distributed were received, and 260 responses (65%)
were found to be usable, which have been considered for this study. However, due care was
taken to select the respondents considering their age and occupation. The sample consists
of respondents from different occupational groups i.e., salaried (52.31%), professionals
(17.31%), business category (26.92%) and retired (3.46%). Also, age-wise grouping has
been done as: 20-35 years (44.62%), 35-50 years (40.77%), 50-60 years (10.0%) and above
60 years (4.62%). The analysis of the data has been made based on these two variables.
The simple techniques like, Weighted Average Scores (WAS), chi-square, mean and
median have been applied for the purpose of analysis of data.

Analysis and Discussion

The investors choice as regards different investment avenues have been discussed in Part-I.
The mutual funds schemes preferred for investment by investors have been discussed in
Part-II. In Part-III, sources that have been instrumental for obtaining information about
a specific fund of choice have been discussed. At the end, experience as regards return from
mutual funds has been discussed in Part-IV.

Part-I

Preference for Different Investment Avenues

The respondents were given a list of ten investment avenues in which they would prefer
to invest. They were asked to rank five most preferred investment avenues out of the given
ten by assigning ranks from one to five in
Table 1: Forms of Investment Preferred
the descending order of their preference for
an investment avenue. From the responses Form of Investment Mean Value Rank
recorded, mean values were calculated Real Estate 2.32 10
because median values were over lapping Shares/debentures 2.63 9
Mutual Funds 3.12 5
and to have clear results, mean values so
Fixed Deposit 2.92 8
calculated helped in making better Post Office Schemes 3.42 3
interpretation. These are presented in PPF 3.03 7
Table 1. UTI Schemes 3.09 6
The analysis of the Table 1 reveals that Gold 3.70 1
LIC Policy 3.13 4
Gold with mean value (3.70), NSC Schemes NSC, NSS Schemes 3.45 2
(3.45) and Post Office Schemes (3.42)

10 The IUP Journal of Behavioral Finance, March 2006

have been ranked first, second and third, respectively, among different forms of
investments available. This confirms the preference of investor for gold because of safety
of investment. This also points out the basic psyche of an Indian investor who still prefers
to keep his savings in the form of yellow metal. Again, NSC Schemes and Post Office
Schemes have been ranked above other forms of investment perhaps because of liquidity
available and government backing. Next in the row is LIC Policy (3.13), Mutual Funds
(3.12), UTI Schemes (3.09) and PPF (3.03). Least preferred has been Real Estate (2.32)
perhaps because of huge amount needed for investment and associated disclosure
problems. Direct Investment in Shares (2.63) is second last in the ranking list because
of high risk associated with stock market investment. Fixed Deposits with the banks, too,
have been ranked (2.92) lower on the ranking list.

Part-II

Preference for Mutual Fund Schemes

Schemes of mutual funds can be classified on the basis of time duration, and/or on the
basis of scheme objective. From time duration point of view mutual fund schemes can be
classified as open-ended or close-ended. Open-ended schemes neither are nor required to
be listed on any stock exchange nor are tradable in the market. These could be sold or
bought to or form that mutual fund only on the bases of current net asset value declared,
where as, close-ended schemes are listed with and are dealt in at stock exchanges like any
other security. On the basis of objective, schemes could be classified as growth, income and
balanced. Growth schemes will give appreciation in the unit value, Income schemes will
provide regular income to the investor and balanced schemes provides both. Respondents
were asked to express their preference regarding type of mutual fund i.e., open-ended or
close-ended they would like to or have invested in. The responses have been compiled
in Tables 2 (Occupation-wise) and 3 (Age-wise). Out of the total of 260 respondents,
117(45.0%) showed inclination towards open-ended and 143(55.0%) for close-ended
fund.
Analysis of the Table 2 depicts that out of 117 investors having preference for
open-end funds, 57(48.72%) belong to group O-1 followed by 32 (27.35%) in group
O-3. The choice for close-end funds has remained at the maximum by group O-1 scoring
79(55.24%) and second high for group O-3 scoring 38(26.57%). The chi-square value
indicates that, statistically, there is insignificant difference at 5% level of significance
among the occupation groups with regard to choosing among types of mutual funds for
investment purpose.
Age-wise analysis in Table 3 shows that the open-end funds group A-2 has maximum
preference with scores 54(46.15%) out of total of 117. This is followed by group A-1 with
Table 2: Type of Mutual Fund Scheme Preferred (Occupation-wise)
Type Group O-1 O-2 O-3 O-4 Total
(Occupation) (Salaried) (Self Employed) (Business) (Retired)
Open-end 57(48.72) 23(19.66) 32(27.35) 5(4.27) 117(45.0)
Close-end 79(55.24) 22(15.38) 38(26.57) 4(2.80) 143(55.0)
Chi-square value: 0.984 df: 2
Insignificant at 0.05 level.
Note: Figures in parenthesis represent the percentage.

Investors Preference for Investment in Mutual Funds: An Empirical Evidence 11

 Table 3: Type of Mutual Fund Scheme Preferred (Age-wise)
Type Group A-1 A-2 A-3 A-4 Total
(Age in Years) (20-35) (35-50) (50-60) (>60)
Open-end 45(38.46) 54(46.15) 11(9.40) 7(5.98) 117(45.0)
Close-end 71(49.65) 52(36.36) 15(10.49) 5(3.50) 143(55.0)
Chi-square value: 3.359 df: 2
Insignificant at 0.05 level.
Note: Figures in parenthesis represent the percentage.

45(38.46%). Regarding investment in close-end funds category, it is group A-1 with

71(49.65%) out of 143 respondents that leads and is followed by group A-2 with
52(36.36%) score. The chi-square value indicates that, statistically, there is insignificant
difference at 5% level of significance among the age groups with regard to choosing among
types of mutual funds for investment purpose.
Depending upon investors Table 4: Type of Fund Scheme Preferred
investment objectives, i.e., option of
accumulation or otherwise of return on Fund Scheme Code Responses (%)
investment, different types of schemes Growth (Equity) Type-1 129 (49.62)
are offered by mutual funds. The Income (Debt) Type-2 60 (23.08)
Balanced Type-3 34 (13.08)
respondents were asked to show their
Sector Specific Type-4 3 (1.15)
preferences for different types of mutual Tax Benefit Type-5 12 (4.62)
fund schemes. The idea behind getting * Type 1 and 4 2 (0.77)
this preference was to collect information Type 1 and 5 11 (4.23)
regarding the investors mindset for Type 2 and 5 6 (2.31)
making investment in mutual funds. The Type 3 and 5 3 (1.15)
responses so collected are presented in Total 260 (100.0)
Table 4. * Stands for combination of above referred schemes
From Table 4, it is observed that like Type 1 and 4, which stands for sector specific
majority of the investors preferred growth oriented mutual fund scheme and so on.
Type-1 129(49.62%) scheme followed by Note: Figures in parenthesis represent the percentage.
Type-2 60(23.08%) and Type -3
34(13.08%) schemes. Type-4 3(1.15%) and Type-5 12(4.62%) schemes are always floated
as one of the combination with Type-1, 2 or 3 only but vice-versa is not true. Hence for
Occupation-wise (Table 4(a)) and Age-wise (Table 4(b)) analysis of scheme preferences
Type-4 and 5 and the combinations i.e., 1 and 4, 1 and 5, 2 and 5 and 3 and 5 have been
merged with scheme type of given combination group.
Table 4(a): Type of Fund Schemes Preferred (Occupation-wise)
Scheme Group O-1 O-2 O-3 O-4 Total
(Occupation) (Salaried) (Self Employed) (Business) (Retired)
Growth (Equity) 65 (44.82) 27 (18.62) 46 (31.73) 7 (4.83) 145 (100)
Income (Debt) 46 (62.16) 12 (16.21) 14 (18.92) 2 (2.71) 74 (100)
Balanced 25 (60.97) 6 (14.64) 10 (24.39) 0 41 (100)
Chi-square value: 5.732 df: 6
Insignificant at 0.05 levels.
Note: Figures in parenthesis represent the percentage.

12 The IUP Journal of Behavioral Finance, March 2006

 Table 4(b): Type of Fund Schemes Preferred (Age-wise)
Scheme Group A-1 A-2 A-3 A-4 Total
(Age in Years) (20-35) (35-50) (50-60) (>60)
Growth (Equity) 57 (39.31) 68 (46.89) 12 (8.28) 8 (5.52) 145 (100)
Income (Debt) 38 (51.35) 22 (29.73) 10 (13.51) 4 (5.41) 74 (100)
Balanced 21 (51.22) 16 (21.62) 4 (9.76) 0 41 (100)
Chi-square value: 7.311 df: 6
Insignificant at 0.05 levels.
Note: Figures in parenthesis represent the percentage.

The occupation-wise analysis as shown in Table 4(a) depicts that 65(44.82%) in group
O-1 preferred Type-1 scheme, followed by 46(31.73) in group O-3. It is again observed in
group O-1 46(62.16%) that higher preference for Type-2 scheme is given, whereas group
O-4 showed no choice for Type-3 scheme, with 0(0%) score. The chi-square value
indicates that, statistically, there is insignificant difference at 5% level of significance
among the occupation groups with regard to choosing types of schemes of mutual funds
for investment purpose.
Table 4(b) showing age-wise data reveals that group A-2 68(46.89%) showed highest
preference for Type-1 scheme followed by group A-1 with 57(39.31%). However, Type-2
scheme has been a preferred choice for group A-1 38(51.35%), followed by group A-2 with
22(29.73%). Group A-4 again showed nil preference 0(0%) for Type-3 schemes. The chi-
square value indicates that, statistically, there is insignificant difference at 5% level of
significance among the age groups with regard to choosing among types of schemes of
mutual funds for investment purpose.
To sum up the analysis, it can be said that the investors belonging to salaried category
and in the age group of 20-35 years showed inclination towards close-ended, growth
(equity) oriented schemes over other scheme types. This is perhaps because close-ended
schemes have a fixed time duration that is presumed to be leaving an option in the hands
of an investor either to quit a particular scheme at a specified time. And a scheme of time
duration of 8-9 years having objective of investing in equities of different companies are
expected to yield good returns. Sector specific fund schemes are not much sought after.
Even the objective of investment for availing any tax rebate is not in investors agenda.
Investment in fund units is done for earning good return. Hence, investors do not mind
ignoring stock investment risk while investing in growth (equity) schemes.

Part-III

Source of Fund Information

Investors decision to invest in a particular mutual fund is affected by different sources
from where information about working of that fund becomes available to an investor. The
respondents were asked to respond against eight identified sources, which have been
instrumental for obtaining information about a specific fund of their choice. Responses
have been presented in Table 5.
The respondents were asked to tick one or even more than one sources of information,
if applicable. Examination of Table 5 reveals that majority of the investors i.e., 145

Investors Preference for Investment in Mutual Funds: An Empirical Evidence 13

(55.77%) base their investment decision on Table 5: Source of Fund Information
the advice of brokers, professionals and
financial advisors. Second major source that Source Frequency (%)
influences investors choice are the newspaper Bankers 52 (20.0)
advertisements 129(49.62%). Reviews of Brokers/Professional/
financial experts published in finance journals Financial Advisors 145 (55.77)
also have an impact on the investors choice Friends Advice 59 (22.69)
to some extent 98(37.69%). A friends advice Newspaper 129 (49.62)
59(22.69%), bankers recommendations Finance Journal 98 (37.69)
52(20.0%) and TV ads 32(12.31%) affecting TV 32 (12.31)
the choice of mutual funds have been relegated Internet 40 (15.38)
to lower segment by investors. Advertisement
Note: Figures in parenthesis represent the
on Internet as a source of information for percentage.
investors about a mutual fund too has a low
impact at 40(15.38%), perhaps because of less number of investors using Internet.

Part-IV

Return from a Mutual Fund

Table 6: Return from a Mutual Fund
The respondents were asked to express their
experience regarding return received from a Return Scale Frequency % Value
fund on their investment in mutual fund over Very High 1 0.5
the scale ranging from very high to very low. High 43 20.4
Out of 260 respondents, 211 have already Average 78 36.9
invested in mutual funds. Therefore, remaining Low 50 23.7
49 responses have been excluded from the Very Low 39 18.5
total only for analyzing experience regarding Total 211 100.0
returns from mutual fund investment. Table 6
shows the responses of 211 respondents over the scale.
On examining Table 6, it could be inferred that 78(36.9%) respondents said that they
have received reasonable returns on their investment. 50(23.7%) respondents said the
returns received have been lower than expected. 43(20.4%) respondents however
confirmed that they received higher returns than expected. On the other hand, 39(18.5%)
respondents received very low returns against their expectations and only 1(0.5%)
respondent claimed to have received very high return above expectation.
Tables 7 and 8 tabulate occupation-wise and age-wise experience with returns received
from mutual funds.
Occupation-wise analysis in Table 7 depicts that it is group O-1 with 35(44.87%)
responses which claimed to have reasonable returns on investment in mutual fund
followed by group 32(41.03%) respondents in group O-3 23(58.97%) respondents in group
O-1 said to have received very low returns as against no such experience with returns has
been encountered by group O-4 0(0%). However, it is group O-4, i.e., the retired category
again, which has nil response regarding experience of very high return 0(0%), sharing the
same experience for this level with group O-3 0(0%). It is only group O-2 that too having
1(100%) response claiming to have received such returns. From mutual funds point of
view, the fund will not differentiate in providing returns on the investment made on the

14 The IUP Journal of Behavioral Finance, March 2006

 Table 7: Return from a Fund (Occupation-wise)
Return Group O-1 O-2 O-3 O-4 Total
(Occupation) (Salaried) (Self Employed) (Business) (Retired)
Very High 0(0) 1(100.0) 0(0) 0(0) 1(100)
High 26(60.47) 9(20.93) 5(11.63) 3(6.98) 43(100)
Neither High Nor Low 35(44.87) 9(11.53) 32(41.03) 2(2.57) 78(100)
Low 28(56.0) 9(18.0) 10(20.0) 3(6.0) 50(100)
Very Low 23(58.97) 3(7.69) 13(33.34) 0(0) 39(100)
Chi-square value: 24.56 df: 6
Insignificant at 0.05 levels.
Note: Figures in parenthesis represent the percentage.

Table 8: Return from a Fund (Age-wise)

Return Group A-1 A-2 A-3 A-4 Total
(Age in Years) (20-35) (35-50) (50-60) (>60)
Very High 0 (0) 1 (100) 0 (0) 0 (0) 1 (100)
High 16 (37.21) 18 (41.86) 6 (13.95) 3 (6.98) 43 (100)
Neither High Nor low 36 (46.15) 32 (41.02) 7 (8.98) 3 (3.85) 78 (100)
Low 18 (36.0) 18 (36.0) 10 (20.0) 4 (8.0) 50 (100)
Very Low 15 (38.46) 23 (58.97) 1 (2.57) 0 (0) 39 (100)
Chi-square value: 16.0 df: 12
Insignificant at 0.05 levels.
Note: Figures in parenthesis represent the percentage.

basis of occupation of the investors. But perception of investors about the return received
from the mutual fund may differ. It is intriguing to note here that the chi-square value
is statistically significant at 5% level of significance among the occupation groups; with
regard to return received from mutual funds, i.e., the occupation groups differ significantly
in their perception about the returns received from the mutual fund.
The age-wise analysis in the Table 8 shows the maximum respondents 36(46.15%)
claiming to have received reasonable returns are in group A-1 followed by group A-2 with
32(41.02%) respondents. None of the respondents from age group A-4, i.e., greater than
60 years experienced very high or very low returns from mutual funds. This situation is
almost true for group O-3 with (0%) responses for very high return level and only
1(2.57%) respondent for very low return level. The chi-square value indicates that,
statistically, there is insignificant difference at 5% level of significance among the age
groups with regard to the returns received from the mutual funds.
In conclusion, occupation-wise and age-wise analysis of experience as to returns
received, it could be said that quite a large number of respondents belonging to salaried
category and those in the age group of 35-50 years, showed varied experiences with regard
to the returns received from investments made in mutual funds. No investor except one
in professional category, said to be in receipt of very high returns than expected on their
investment in mutual funds. The chi-square test shows that respondents belonging to
different occupations have different perceptions with regard to the returns received from
mutual funds.

Investors Preference for Investment in Mutual Funds: An Empirical Evidence 15

Conclusion
The following conclusions can be drawn based on the findings of the study:
Gold with mean value (3.70), NSC Schemes (3.45) and Post Office Schemes (3.42)
have been ranked at first, second and third place among different forms of investments
available. This confirms the preference of investor for gold because of safety of
investment. This also points out the basic psyche of an Indian investor who still prefers
to keep his savings in the form of yellow metal. Again NSC Schemes and
Post Office Schemes have been ranked above other forms of investment perhaps
because of liquidity available and government backing. Mutual funds, however, have
been ranked at 5th place.
Investors belonging to the salaried category and in the age group of 20-35 years, showed
inclination towards close-end, growth (equity) oriented schemes over others. This is
perhaps because close-end schemes have a fixed time duration that is presumed to be
leaving an option in the hands of an investor either to quit a particular scheme at a
specified time. And a scheme of time duration of 8-9 years having objective of
investing in equities of different companies are expected to yield good returns. The
chi-square value indicates that statistically, at 5% level of significance, the occupation
of investors does not affect their choice for a particular type of fund for investment.
It is also true for age-wise analysis. Sector specific fund schemes are not much sought
after. Even the objective of investment for availing any tax rebate is not on the
investors agenda. Investment in fund units is done for earning good returns. For that,
investors do not mind ignoring stock investment risk by investing in growth (equity)
schemes. Chi-square values point out that statistically at 5% level of significance, there
is no influence of occupation or age of investor on making decision regarding choice
of a type of a scheme.
Majority of the investors, i.e., 145(55.77%) base their investment decision on the
advice of brokers, professionals and financial advisors followed by independent review
of newspaper ads and reviews of financial experts for investment decision in mutual
funds.
Analysis of experience as to returns received, highlighted the finding that quite a large
number of respondents belonging to the salaried category and those in the age group
of 35-50 years, showed varied experiences as regards returns received from investments
made in mutual funds. This is perhaps due to the fact that category of salaried investors
are active investors, as majority of them regularly track the better performing funds and
they are more into collecting information about funds. Also, the age group of 35-50
years is the one where investors have surplus money and want to make more and more
of it for rainy days. Therefore, they keep on shifting the venues. No investor, except
one in the professional category, is said to be in receipt of very high returns than
expected on their investment in mutual funds. The chi-square value is statistically
significant at 5% level of significance among the occupation groups, with regard to
returns received from mutual funds, i.e., the occupation groups differ significantly with
regard to their perception about the returns received from the mutual fund. >

Reference # 36J-2006-03-01-01

16 The IUP Journal of Behavioral Finance, March 2006

References
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Websites
1. www.amfi.com
2. www.rbi.org.in
3. www.sebi.com

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