International Journal of Research and Development - A Management Review (IJRDMR)

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Awareness and Knowledge of Mutual Fund among the Investors with

Special Reference to Chennai A Critical Study
1
S. Prasanna Kumar & 2S. Rajkumar
Research Scholar, R & D Centre, Dept. of Commerce, Bharathiar University, Coimbatore.
Asst. Prof., Dept .of Commerce, Loyola College, Chennai.
Asst. Prof. Department of management Studies, Pachaiyappas College, Chennai.

bank agencies, intermediaries, etc. Mutual fund is

Abstract:-In this study, it is discussed about the mutual
fund knowledge and awareness among the investors with a
special reference to Chennai city. It is difficult to selective
group the investors in a sample as such the population of
Chennai city is large in number. Compared to earlier days
the investment options are changing from risk free to
riskier investments. The analyses also shows that compared
to earlier days the growth of investments in the stock
market increased to significant level compared to other
conventional investments which are of lesser risks and
lower returns. The ignorance of investors about mutual
fund coupled with aggressive selling by promising higher
returns to the investors have resulted into loss of investors
confidence due to inability to provide higher return. This
necessitates the Asset Management Companies (AMCs) to
understand the fund/scheme selection/switching behaviour
of the investors to design suitable products to meet the
changing financial needs of the investors. With this
background a survey was conducted among 250 Mutual
Fund Investors in Chennai to study the factors influencing
the fund/scheme selection by the Investors. For analyzing
the impact of knowledge and awareness of mutual fund
done through SPSS, one way ANOVA analysis has been
made. Hence, this study is made to evaluate the knowledge,
general and variable effects about the investors perception
and performance of investment avenues.
structured around a fairly simple concept of mitigating
the risk / loss by spreading the investments across
various avenues which is achieved by pooling the
investments. A mutual fund is a company that invests in
a diversified portfolio of securities. People who buy
shares of a mutual fund are its owners or shareholders.
Their investments provide the money for a mutual fund
to buy securities such as stocks and bonds. A mutual
fund can make money from its securities in two ways: a
security can pay dividends or interest to the fund or a
security can rise in value. A fund can also lose money
and drop in value. The company then manages the
money on an ongoing basis for individuals and
businesses. Mutual funds are an efficient way to invest
in stocks, bonds, and other securities for three reasons:
1. The securities purchased are managed
by professional managers.
2. Risk is spread out or diversified, because you
have a collection of different stocks and bonds.
3. Costs usually are lower than what you would pay
on your own, since the fund buys in large quantities.

Key Words: - Mutual Fund, Investors, awareness, II. REVIEW OF LITERATURE:

knowledge, Returns & Risk.
Vast numbers of studies have been conducted on the
I. INTRODUCTION performance evaluation of mutual funds in India. Some
of them are: Treynor (1965) presents a new way of
It is widely believed that MF is a retail product designed
viewing performance results. He attempted to rate the
to target small investors, salaried people and others who
performance of mutual funds on a characteristics line
are intimidated by the stock market but, nevertheless,
graphically. The steeper the line, the more systematic
like to reap the benefits of stock market investing. At the
risk or volatility a fund possesses. By incorporating
retail level, investors are unique and are a highly
various concepts, he developed a single line index, Tn,
heterogeneous group. Hence, designing a general
called Treynor index. The systematic risk is risk which
product and expecting a good response will be futile,
is common to all securities of the same class in the
though UTI could do this nearly for three decades
market. His index measures the risk premium of the
(1964-1987) due to its monopoly in the industry. In the
portfolio, where risk premium equals the difference
second phase of oligopolistic competition (1987-1992),
between the return of the portfolio and the riskless rate.
the public sector banks and financial institutions entered
The risk premium is related to the amount of systematic
the field, but with the then existing boom condition, it
risk assumed in the portfolio, the higher the value of Tn,
was a smooth sailing for the industry. Investors gain
the better the performance of fund. Sharpe (1966)
their knowledge about mutual fund through
explains in a modern portfolio theory context that the
advertisements in televisions, newspapers, e-articles,
expected return on an efficient portfolio and its
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associated risk (unsystematic risk) are linearly related. III. OBJECTIVES OF THE STUDY:-
By incorporating various concepts he developed a
Sharpe index. In this paper he attempted to rate the 1. To evaluate the knowledge level of investors about
performance on the basis of the optimal portfolio with mutual fund and its terms;
the risky portfolio and a risk-free asset is the one with 2. To evaluate the awareness level among investors;
the greatest reward-to-variability .The unsystematic risk
is related to particular security due to inefficient 3. To find out how the investor is influenced to make
management. Moreover he has examined 34 open-end investment in Mutual Fund;
mutual funds (period 1954-1963) and finds considerable RESEARCH METHODOLOGY:-
variability in the Sharpe ratio, ranging from 0.78 to 0.43.
He provides two potential explanations for the result that a. Sample Design:-
the cross-sectional variation is either random or due to The survey was conducted during the three months
high fund expenses or the difference is due to among 250 respondents as per simple random sampling.
management skills. Rajeswari and Ramamoorthy
(2001)have conducted the study titled "An Empirical b. Data Collection Method:-
Study On Factors Influencing The Mutual Fund/Scheme
The Primary data was collected by the researcher
Selection By Retail Investors", to understand the factors
through Questionnaire. The secondary data was from
influencing the fund selection behaviour of 350 mutual
Journals, Books, Magazines and few other websites.
fund investors in order to provide some meaningful
inferences for Asset Management Companies(AMC) to ANALYSIS & INTERPRETATIONS:-
innovatively design the products. The analysis was done
on the basis of product qualities, fund sponsor qualities Table No.1:- Demographic Factor of Investors (All
and investor services using questions framed on a five respondents are tabulated on percentage basis)
point Likert scale. The evaluation was done by factor Demographic Factor Mal Fema Tot (%)
analysis and principal component analysis to arrive at e le al
the findings of the study which were as follows: the No. of Respondents 197 53 250 100
most important product quality was the performance of Age Group:-
the fund followed by brand name of the scheme; sponsor a. Below 30 years 66 12 78 31
related factor that given more importance by the investor b. 31 years - 40 years 58 18 76 30
was the expertise of the sponsor in managing money and c. 41 years - 50 years 51 17 68 28
finally the investor service that was considered d. Above 51 years 22 6 28 11
important was the disclosures on investment objectives, Education Level : -
methods and periodicity of valuation in advertisements. a. Under Graduate 51 15 165 66
Singh and Vanita (2002)in the paper "Mutual Fund b. Post Graduate 18 5 57 23
Investors' Perceptions and Preferences-A Survey" have c. Professional 10 1 28 11
examined the investors' preferences and perception
Annual Income Level :-
towards mutual fund investments by conducted a survey
a. Below INR 1,50,000 19 13 80 32
of 150 respondents in the city of Delhi. The study has
b. INR 1.5 Lakhs -INR 32 8 100 40
investigated in the following research issues: 1) the
3 lakhs 28 0 70 28
basic objectives form Vestments and average time
c. Above INR 3 Lakhs
horizon; 2) investment experiences; 3) risk, return,
Employment Sector:-
safety and diversification; 4) preferences of financial
a. Private Sector 43 20 158 63
assets and investment schemes of mutual funds. The
findings of the study were that the investors' preferred to b Public Sector 18 0 45 18
invest in public sector mutual funds with an investment c. Self Employed 18 1 47 19
objective of getting tax exemptions and stayed invested Inference:-
for a period of 3-5 years and the investors evaluated past
performance. The study further concludes by stating that The above table depicts the demographic factors where
majority of the investors were dissatisfied with the in the information is collected from male respondents on
performance of their mutual fund and belonged to the a majority basis on the perception that they would be
category who held growth schemes. Acharya and Sidana more aware about mutual funds. Among the
(2007) attempted to classify hundred mutual funds respondents, people having basic graduation who are
employing cluster analysis and using a host of criteria interested to respond to the questionnaire are more in
like the 1 year total return, 2 year annualized return, 3 number. The income of respondents are scattered among
year annualized return, 5 year annualized return, alpha, the various income levels and 40% of respondents are
beta, R-squared, Sharpes ratio, mean and standard found to be in the income level between INR 1.5 Lakhs
deviation etc. The data is obtained from Value research to INR 3 Lakhs. Private sector employees are showing
online. They do find evidences of inconsistencies more interest to invest in mutual funds.
between the investment style / objective classification
and the return obtained by the fund. Test of Hypotheses:

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Hypothesis No.1:- Inference:-

Ho There is no significant difference between the The above table communicates the result with regarding
investors age and the knowledge level about mutual to the calculated value of F test. The calculated F
fund. value is less than the tabulated value at 5% level of
H1 There is significant difference between the significance for v1 = 3, and V2 = 296 degrees of
freedom. Hence, the null hypothesis is rejected and
investors age and the knowledge level about mutual
alternative hypothesis is accepted. It is proven from the
fund.
analysis that there is a significant difference between the
Table No 2: Statement Of Association Between The gender of the respondents and awareness about mutual
Investors Age And The Knowledge Level About Mutual fund.
Fund. Ho There is no significant difference between the
investors income group and the knowledge level about
ONE-WAY ANOVA TEST
mutual fund.
SUM OF DEGREE MEAN F
H1 There is significant difference between the
SQUARES OF SQUARE investors income group and the knowledge level about
FREEDOM mutual fund.
Between 1.025 3 0.352 Table No 4: Statement of Association between the
Groups 0.423 Investors income group and the knowledge level about
mutual fund.
Within 238.962 296 0.807
Groups ONE-WAY ANOVA TEST
SUM OF DEGREE MEAN F
Total 239.987 299 SQUARE OF SQUARE
S FREEDO
SIGNIFICANT VALUE: 0.737 M
Between 0.54 3.00 0.181
Groups 0.72
Inference:- Within 74.34 296.00 0.251
The above table communicates the result with regarding Groups
to the calculated value of F test. The calculated F Total 74.88 299
value is less than the tabulated value at 5% level of SIGNIFICANT VALUE: 0.541
significance for v1 = 3, and V2 = 296 degrees of INFERENCE:-
freedom. Hence, the null hypothesis is accepted and
alternative hypothesis is rejected. It is proved that there The above table communicates the result with regarding
is no significant difference between the investors age to the calculated value of F test. The calculated F
and the knowledge level about mutual fund. Therefore, value is less than the tabulated value at 5% level of
it can be understood that the knowledge level of the significance for v1 = 3, and V2 = 296 degrees of
investors associated with the respondent age. freedom. Hence, the null hypothesis is accepted and
alternative hypothesis is rejected. There is a least
Hypothesis No.2:- significant difference between the means of the income
Ho There is no significant difference between the group of investors and the knowledge level.
investors age and the awareness about mutual fund. Hypothesis No.3:-
H1 There is significant difference between the Ho There is no significant difference between the
investors age and the awareness about mutual fund. investors income group and the awareness about mutual
Table No 3: Statement Of Association Between The fund.
Investors Age And Awareness About Mutual Fund. H1 There is significant difference between the
ONE-WAY ANOVA TEST investors income group and the awareness about mutual
SUM OF DEGREE MEAN F fund.
SQUARES OF SQUARE Table No 5: Statement of Association between the
FREEDO Investors income group and the awareness about
M
mutual fund.
Between 0.985 3.00 0.328
Groups 1.316 ONE-WAY ANOVA TEST
Within 73.895 296.00 0.250 SUM OF DEGREE MEAN F
Groups SQUARE OF SQUARE
Total 74.880 299 S FREEDOM
SIGNIFICANT VALUE: 0.269 Betwee 1.40 3.00 0.465
n 1.8

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Groups 74
Within 73.49 296.00 0.248
Groups
Total 74.89 299
SIGNIFICANT VALUE: 0.134
Inference:-
The above table communicates the result with regarding
to the calculated value of F test. The calculated F
value is less than the tabulated value at 5% level of
significance for v1 = 3, and V2 = 296 degrees of
freedom. Hence, the null hypothesis is rejected and
alternative hypothesis is accepted. There is a significant
difference between the income group of investors and
awareness of mutual fund scheme. As all the investors
are generally aware about such procedure and they are
also aware product features that it is enforced by the
sponsors.
FINDINGS OF THE STUDY:-
a. In majority of the respondents the knowledge level
is confined to good knowledge. Approximately
10% of the respondents do not have proper
knowledge about Mutual funds.
b. The respondents are well acquainted with mutual
fund terms and many respondents do not know
technical terms like ENTRY LOAD, EXIT LOAD,
OPEN-ENDED & CLOSE-ENDED.
c. Table 4 shows that more than 50% of respondents
are educated about mutual funds through
advertisements, friends and relatives.
d. The respondents awareness level shows that many
people have knowledge about Growth and Income
Schemes rather than Balanced and Dividend
Schemes.
e. Many Respondents have clear knowledge about the
potential advantages of investing in mutual funds.
f. Bankers play the vital role in influencing the
respondents to invest in mutual funds and they
make the investor to invest in their banks mutual
fund schemes.
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IV. SUGGESTIONS
a. Mutual fund companies may try to educate the
investors to invest in mutual funds through regular
awareness programs.
b. Fund Managers should try to give clear information
about the mutual fund terms and various schemes.
c. Fund Agents may take steps to shrink the terms and
conditions and can make them easily
understandable to the prospective investors;
d. Mutual Fund Agencies may spread the information
about all the aspects of investing in mutual funds.
e. Various schemes may be introduced to attract
female respondents as the economy is leaning
towards womens financial empowerment.
V. CONCLUSION
In this survey, graduate respondents are chosen as they
have approachable knowledge about mutual fund. The
general knowledge & awareness level among the
individual investors are so good. Mutual funds are
cornering the maximum attention of the investors in
todays scenario be it individual or corporate investors.
This is because of the reason that there is a perception
amongst these investors that mutual funds give quick
and more returns as compared to other avenues and
instruments of investments. This is the most prominent
factor for the acceptance and growth of mutual funds
amongst the populace of India in recent times.
REFERENCES
[1] Arnold L. Redman, N. S. Gullett, Herman
Manakyan; The Performance of Global And
International Mutual Funds; Journal of Financial
and Strategic Decisions; Volume 13, No.1; 2000.
[2] Chang, E.C. and W.C. Lewellen, Market Timing
and Mutual Fund Performance, Journal of
Business 57, 1984, pp. 57-72.