A SURVEY ON INVESTORS’ CHOICE TOWARDS

VARIOUS
INVESTMENT ALTERNATE IN MUTUAL FUNDS
AT VADODARA CITY, GUJARAT

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 INDIRA GANDHI NATIONAL OPEN UNIVERISTY

SCHOOL OF MANAGEMENT STUDIES

PROGRAMME CODE: MP (MBA)

COURSE CODE: MS 100

PROJECT SYNOPSIS

ON

A SURVEY ON INVESTORS’ CHOICE TOWARDS VARIOUS

INVESTMENT ALTERNATE IN MUTUAL FUNDS
AT VADODARA CITY, GUJARAT

STUDY CENTRE: 0902 (VADODARA)

REGIONAL CENTRE : 09-(GUJARAT REGION)

PROJECT GUIDE : Kamlesh D Vala SUBMITTED BY : Vikas C Parmar

Enrolment No : 122611951

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 1. INTRODUCTION OF THE TOPIC

Meaning of Investment

In simple terms, Investment refers to purchase of financial assets. While Investment Goods are
those goods, which are used for further production.

Investment implies the production of new capital goods, plants and equipments. John Keynes
refers investment as real investment and not financial investment.
Investment is a conscious act of an individual or any entity that involves deployment of money
(cash) in securities or assets issued by any financial institution with a view to obtain the target
returns over a specified period of time.
Target returns on an investment include:
1. Increase in the value of the securities or asset, and/or
2. Regular income must be available from the securities or asset.

Types of Investment
A particular investor normally determines the investment types after having formulated the
investment decision, which is termed as capital budgeting in financial lexicon. With the
proliferation of financial markets there are more options for investment types.

According to the financial terminology investment means the following:

 Purchasing Securities in Money or Capital Markets.

 Buying Monetary or Paper Financial Assets in Money or Capital Markets.

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  Investing in Liquid Assets like Gold, Real Estate and Collectibles.

Investors assume that these forms of investment would furnish them with some revenue by way
of positive cash flow.

These assets can also affect the particular investor positively or negatively depending on the
alterations in their respective values. Investments are often made through the intermediaries who
use money taken from individuals to invest. Consequently the individuals are regarded as having
claims on the particular intermediary.

It is common practice for the particular intermediaries to have separate legal procedures of their
own.

Types of Investment :

Capital Investment , Equity Investment, Land As Investment, Stock Investment, Retirement

Investment Planning , Financial Market Investment , Share Market Investment , Portfolio
Investment , Gold Investment , Investment in Gold , Business Investment,
Real Estate Investment.

Following are some intermediaries:

Banks Mutual Funds ,Pension Funds , Insurance Companies , Collective Investment Schemes

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Investment Clubs

Investment in the domain of personal finance signifies funds employed in the purchasing of
shares, investing in collective investment plans or even purchasing an asset with an element of
capital risk. In the field of real estate, investments imply buying of property with the sole
purpose of generating income.

Investment in residential real estate could be made in the form of buying housing property, while
investments in commercial real estate is made by owning commercial property for corporate
purposes that are geared to generate some amount of revenue.

Advantages of mutual funds

Mutual funds have advantages compared to direct investing in individual securities. These
include:

• Diversification

• Ability to redeem daily at net asset value (the value of a proportional share of the fund's
assets)

• Professional investment management

• Ability to participate in investments that may be available only to larger investors

• Government regulation

Disadvantages of mutual funds

Mutual funds have disadvantages as well, which include:

• Fees

• Less control over timing of recognition of gains and losses

• Less predictable income

No opportunity to customize

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 2. RATIONAL OF STUDY
A mutual fund is registered with the Securities and Exchange Commission (SEC) and is overseen
by a board of directors (if organized as a corporation) or board of trustees (if amazed as a trust).
The board is charged with ensuring that the fund is managed in the best interests of the fund's
investors and with hiring the fund manager and other service providers to the fund. The fund
manager also known as the fund sponsor or fund management company, trades (buys and sells)
the fund's investments in accordance with the fund's investment objective. A fund manager must
be a registered investment advisor. Funds that are managed by the same fund manager and that
have the same brand name are known as a "fund family" or "fund complex".

Personal finance discipline demands every individual to plan for expenditure and savings against
current income. While moving up in the hierarchy of needs, one must simultaneously save
money for future. As one goes on in life, the standard of living rises, needs increases and the
expenditure to meet those needs also increases. Without proper financial planning the future can
be a miserable struggle to meet these demands.

Role of financial system is to enthuse economic development. As investors are getting more
educated, aware and prudent, they look for innovative investment instruments so that they are
able to reduce investment risk, minimize transaction costs and maximize returns along with
certain level of convenience. As a result there has been advent of numerous innovative financial
instruments such as bonds, company deposits, insurance and mutual funds.

Mutual funds score over all other investment options in terms of safety, liquidity, and returns and
are as transparent, convenient as it can get. Goal of mutual fund is to provide an efficient way to
make money. Different mutual funds have different risks, which differ because of the fund’s
goal, fund managers and investment styles.
The investment experts who invest the pooled money on behalf of investors of the scheme are
known as Fund Managers. These fund managers take the investment decisions pertaining to the
selection of securities and the proportion of investments to be made into them.

The following Diagram shows the concept of Mutual fund

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WHY MUTUAL FUNDS NEEDED?
Mutual Funds are becoming a very popular form of investment characterized by many
advantages that they share with other forms of investments and what they possess uniquely
themselves. The primary objectives of an investment proposal would fit into one or combination
of the two broad categories, i.e., Income and Capital gains. How mutual fund is expected to be
over and above an individual in achieving the two said objectives, is what attracts investors toopt
for mutual funds. Mutual fund route offers several important advantages.

Diversification: A proven principle of sound investment is that of diversification, which is the

idea of not putting all your eggs in one basket. By investing in many companies the mutual funds
can protect themselves from unexpected drop in values of some shares. The small investors can
achieve wide diversification on his own because of many reasons, mainly funds at his disposal.
Mutual funds on the other hand, pool funds of lakhs of investors and thus can participate in a
large basket of shares of many different companies. Majority of people consider diversification
as the major strength of mutual funds.

Expertise Supervision: Making investments is not a full time assignment of investors. So they
hardly have a professional attitude towards their investment. When investors buy mutual fund
scheme, an essential benefit one acquires is expert management of the money he puts in the fund.
The professional fund managers who supervise fund’s portfolio take desirable decisions viz.,
what scrip’s are to be bought, what investments are to be sold and more appropriate decision as
to timings of such buy and sell. They have extensive research facilities at their disposal, can
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spend full time to investigate and can give the fund a constant supervision. The performance of
mutual fund schemes, of course, depends on the quality of fund managers employed.

Liquidity of Investment: A distinct advantage of a mutual fund over other investments is that
there is always a market for its unit/ shares. Moreover, Securities and Exchange Board of India
(SEBI) requires the mutual funds in India have to ensure liquidity. Mutual funds units can either
be sold in the share market as SEBI has made it obligatory for closed-ended schemes to list
themselves on stock exchanges. For open-ended schemes investors can always approach the fund
for repurchase at net asset value (NAV) of the scheme. Such repurchase price and NAV is
advertised in newspaper for the convenience of investors.

Reduced risks: Risk in investment is as to recovery of the principal amount and as to return on
it. Mutual fund investments on both fronts provide a comfortable situation for investors. The
expert supervision, diversification and liquidity of units ensured in mutual funds reduces the
risks. Investors are no longer expected to come to grief by falling prey to misleading and
motivating ‘headline’ leads and tips, if they invest in mutual funds.

Safety of Investment: Besides depending on the expert supervision of fund managers, the
legislation in a country (like SEBI in India) also provides for the safety of investments. Mutual
funds have to broadly follow the laid down provisions for their regulations, SEBI acts as a
watchdog and attempts whole heatedly to safeguard investor’s interests.

Tax Shelter: Depending on the scheme of mutual funds, tax shelter is also available. As per the
Union Budget-2003, income earned through dividends from mutual funds is 100% tax free at the
hands of the investors.

Minimize Operating Costs: Mutual funds having large invisible funds at their disposal avail
economies of scale. The brokerage fee or trading commission may be reduced substantially. The
reduced operating costs obviously increase the income available for investors. Investing in
securities through mutual funds has many advantages like – option to reinvest dividends, strong
possibility of capital appreciation, regular returns, etc. Mutual funds are also relevant in national

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interest. The test of their economic efficiency as financial intermediary lies in the extent to which
they are able to mobilize additional savings and channeling to more productive sectors of the
economy.

RISKS EMBEDDED IN MUTUAL FUND INVESTMENTS

The Risk Return Trade-Off

The most important relationship to understand is the risk-return trade-off. Higher the risk greater
the returns/loss and lower the risk lesser the returns/loss.
Hence, it is up to the investor to decide how much risk he is willing to take. In order to do this
one must first be aware of the different types of risks involved with his investment decision.

Political/ government Policy Risk

Changes in government policy and political decision especially with regard to the tax benefits
may impact the business prospects of the companies leading to an impact on the investments
made by the fund. They can create a favorable environment for investment or vice-versa.
Therefore, stable monetary and fiscal policies are crucial to sustain a propitious investment
environment.

Liquidity Risk

Liquidity risk arises when it becomes difficult to sell the securities that one has purchased.
Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well as
internal risk controls that lean towards purchase of liquid securities.

Effect of Loss of Key Professionals and Inability to Adapt

An industries' key asset is often the personnel who run the business i.e. intellectual properties of
the key employees of the respective companies. Given the ever-changing complexion of few
industries and the high obsolescence levels, availability of qualified, trained and motivated
personnel is very critical for the success of industries in few sectors. It is, therefore, necessary to
attract key personnel and also to retain them to meet the changing environment and challenges

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the sector offers. Failure or inability to attract/retain such qualified key personnel may impact the
prospects of the companies in the particular sector in which the fund invests.
Exchange Risks

A number of companies generate revenues in foreign currencies and may have investments or
expenses also denominated in foreign currencies. Changes in exchange rates may, therefore,
have a positive or negative impact on companies which in turn would have an effect on the
investment of the fund.

Investment Risk

The sectoral fund schemes, investments will be predominantly in equities of select companies in
the particular sectors. Accordingly, the NAV of the schemes are linked to the equity performance
of such companies and may be more volatile than a more diversified portfolio of equities.

Risk Tolerance

Typically, risk is defined as short-term price variability. But on a long-term basis, risk is the
possibility that one’s accumulated real capital will be insufficient to meet his financial goals.
Individual tolerance for risk varies, creating a distinct "investment personality" for each investor.
Some investors can accept short-term volatility with ease, others with near panic. So whether
one’s investment temperament is conservative, moderate or aggressive, one needs to focus on
how comfortable or uncomfortable he will be as the value of his investment moves up or down.

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 3. OBJECTIVE OF THE STUDY

Objective of this study is to analyze the Past Performance of the various Mutual Funds Schemes
on the Basis of their Historical NAV’s and application of statistical tools on the same in
Vadodara market . This helps in understanding the customer's perception about performance of
mutual fund schemes in terms of both risk as well as return involved at Vadodara market. So
following are the specific objective of the study.

Professional objective :

 To explore the important aspects of Mutual Funds affecting the perception of mutual fund
investors.
 To find out the market risk of mutual fund in various plans.
 To examine the difference of perception of large and small mutual fund investors on the
basis of the explored aspects of mutual funds.
 To know the investment pattern of the investors in different schemes.
 The benefits made from the investment on the different schemes.
 To know the diversify portfolio of Mutual Fund.

Personal Objective
 Formulate an integrative business project through the application of multidisciplinary
knowledge
 Identify problems, define objectives collect and analyze information, evaluate risks and
alternatives, and leverage technology to enable qualitative and quantitative methods to
solve problems

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 5. RESEARCH METHODOLOGY

METHODOLOGY:
This study is mainly based on the primary data. Secondary data is only used for the development
of the research framework. A structured questionnaire is used as the main tool for data collection
about the consumer’s perception regarding the mutual funds.
1. Research Design:
A research design is a pattern or an outline of a research project’s working. It is a statement of
only the essential element of a study, those that provide the basic guidelines for the details of the
project. It comprises a series of prior decision that taken together provide master plans for
executing a research projects.
2. Sources of Data:
 Primary Source:
The primary data will be collected using sampling method and by survey using questionnaire.
 Secondary Source:
Secondary data includes information regarding present market scenario, Information regarding
Mutual Funds and competitors are collected by internet, Magazines and Newspaper and books.
3. Sample Planning:
 Sample Size: 35 to 40 units.
 Sample Extent: Vadodara city.
4. Type of information:
 I will collect facts, awareness, attitude, future action plan and reason using
questionnaire.
 My criteria for collection is Gender Wise , Age wise , Income group wise etc.
5. Type of questions:
 Close ended questions for dichotomous.
 Multiple choice type
6. Data Analysis using Statistical Tools and Interpretation:
Chi Square Test for Association Three hypotheses were made in this study and hypothesis testing
was done using Chi square. Both hypotheses were tested with 95% confidence level i.e. at 5%
significant level

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 6. LIMITATIONS OF THE STUDY

As the study is based on primary and secondary data, the inherent limitation of the secondary
data would have affected the study.

1. The sample size chosen is covered only a small portion of the whole population of
various scheme of Vadodara city.
2. Past performance may not guarantee the future return.
3. Micro level data have been taken in analysis; Macro level data may affect the returns.
4. Only educated group is targeted here.
5. Convenience sampling used here has its own limitations
6. There have been some inaccuracies due to non – cooperative and rude behavior of the
respondents.
7. Since this is single city analysis , so national level view can't to obtained.

Data collected cannot be asserted to the free from errors, as the sample size restricted to the
employees. This study need to be interpreted carefully. They can provide clues to the company’s
performance or financial situation. But on their own, they cannot show whether performance is
good or bad. It requires some quantitative information for an informed analysis to be made.

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 7. OUTCOME FROM THE PROJECT

INDEX OF FINAL PROJECT REPORT

1. INTRODUCTION OF RATIONAL OF STUDY

2. REVIEW OF LITERATURE
3. OBJECTIVES OF STUDY
4. RESEARCH METHODOLOGY
5. DATA ANALYSIS
6. FINDINGS AND CONCLUSIONS
7. OBSERVATIONS AND SUGGESTIONS
8. LIMITATIONS OF STUDY
9. BIBLIOGRAPHY
10. QUESTIONNAIRE
11. APPROVED SYNOPSIS

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