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A study on mutual funds and investors behavior

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  1. Introduction
  2. The major advantages offered by mutual fund to all investors
  3. Disadvantages of mutual funds
  4. History of mutual funds
  5. Major mutual fund companies in India
  6. Association of mutual funds in India
    1. The objectives of AMFI
  7. The regulatory framework
  8. Role of stock exchange
  9. Asset management company: AMC
  10. Types of mutual funds and investment plans
  11. The importance of accounting knowledge
  12. Tracking mutual fund performance
  13. Life cycle guide to financial planning
  14. Classification of investors needs
  15. Questionaire and research
  16. Recommendations and conclusion
  17. Appendices
  18. Bibliography

Mutual fund is a pool of money collected from investors and is invested according to certain investment options. A mutual fund is a trust that pools the saving of a no. of investors who share a common financial goal. A mutual fund is created when investors put their money together. It is, therefore, a pool of investor's fund. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the no. of units owned by them.

The most important characteristics of a fund are that the contributors and the beneficiaries of the fund are the same class of people namely the investors. The term mutual fund means the investors contribute to the pool and also benefit from the pool. The pool of funds held mutually by investors is the mutual fund.

A mutual fund business is to invest the funds thus collected according to the wishes of the investors who created the pool. Usually the investors appoint professional investment managers create a product and offer it for investment to the investors. This project represents a share in the pool and pre status investment objectives.

Thus, a mutual fund is the most suitable investment for a common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at relatively low cost.
If mutual funds are emerging as the favorite investment vehicle it is because of the many advantages. They have over other forms and avenues of investing parties for the investors who has limited resources available in terms of capital and ability to carry out detailed reserves and market monitoring. These are the major advantages offered by mutual fund to all investors:

[...] Even the mutual fund agents need to understand the accounting for the funds transaction with investors and how the fund accounts for its assets and liabilities, as the knowledge is essential for them to perform their basic role in explaining the mutual fund performance to the investor. For example, unless the agent knows how the NAV is computed, he cannot use even simple measures such as NAV change to assess the fund performance. He also should understand the impact of dividends paid out by the fund or entry/exit loads paid by the investors on the calculation of the NAV and therefore the fund performance. [...]


[...] Only a small segment of the investors still in Mutual Funds and the main source sources of information still are the financial advisors followed by advertisements in different media. The Indian investors generally invest over a period of 2-3 years. Also there is a tendency to invest in fixed deposits due to the security attached to it. In order to excel and make mutual funds a success, companies still need to create awareness and understand the psyche of the Indian customer. [...]


[...] THE ADVISOR'S PROSPECTIVE: If you are an intermediary recommending a mutual fund to a potential investor, he would expect you to give him proper advice on which funds have a good performance track record. If you want to be an effective investment advisor, then you too have to know how to measure and evaluate the performance of the different funds available to the investors. The need to compare the performance of the different funds requires the advisors to have knowledge of the correct and appropriate measures of evaluating the fund performance. [...]

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