Determinants of investment behaviour of investors towards mutual funds

Abstract

Purpose Mutual funds in India have not been as favourable investment alternatives as in developed countries, as assets under management of mutual funds to gross domestic product in India have been 7-8 per cent compared to 37 per cent globally. Further, investor base of mutual funds has been narrow, as retail investors constitute 98 per cent of folios but contributed only 58 per cent of investments in September 2014. To broaden the investor base for mutual funds in India, it remains imperative to understand the determinants of investment behaviour of investors towards mutual funds. This study aims to achieve this objective. Design/methodology/approach Based on the theory of planned behaviour, the study examined the effect of awareness, attitude (perception for outcome) and socioeconomic conditions of an investor on his investment behaviour towards mutual funds with the logit model. The results are based on 450 valid responses from the primary survey in Delhi-NCR. Findings The research provided that investment behaviour could be explained with awareness, perception and socioeconomic characteristics of individual investors. Better awareness related to various aspects of mutual funds will have a positive effect on investment in mutual funds. Contrary to belief, risk perception for mutual funds had no effect on the investment decision. Further, socioeconomic characteristics such as age, gender, occupation, income and education of investors had an impact on the awareness about mutual funds. Research limitations/implications As the study has been confined to Delhi-NCR, it should be considered a pilot study and needs to be replicated in other states of India to have more robust results. Practical implications The study has implications for mutual funds and regulators. The study highlights a lack of awareness about mutual funds among particular sections of society as a reason for non-investment in mutual funds. The mutual funds and regulators need to focus on females, older age groups and middle-income groups in their efforts to improve their awareness about mutual funds. This would improve their investor base and flow of funds in mutual funds. Furthermore, the process of investment in mutual funds needs to simplified. Originality/value In an Indian context, this study has been the first attempt to understand the systematic relation between actual investment behaviour towards mutual funds and various determinants such as socioeconomic characteristics, awareness and attitude (perception) about mutual funds.

Performance risk analysis on mutual funds versus stock exchanges in young financial markets

“…In all three countries, the national stock exchange indexes (BET, SAX and BUX) had medians of mean returns smaller than those of mutual funds, indicating on overall lower returns and higher risks of the investments in shares quoted at the national stock exchanges, than in mutual funds. These results are consistent with conclusions of other authors (Bakker & Gross, 2004;Filip, 2018) according to which the investment portfolio diversification (Kaur & Kaushik, 2015) and collective investments diminish the risks (Chovancova & Zofcak, 2012). The use of mutual funds as a way of improving the investment management (Filip, 2018) leads to better investment results, as collective investments ensures a better administration of the risk and the application of specific techniques for portfolio management that can distribute the risks across different parts of the financial system (Baker & Gross, 2004).…”

Extending the Theory of Planned Behaviour: Impact of Past Behavioural Biases on the Investment Decision of Indian Investors

“…This finding can be attributed to the social pressures that are exerted by the reference group members (friends and family) which are also likely to cause a specific behaviour (Kashif, Zarkada, & Ramayah, 2016;Shahriar & Polonsky, 2013). It is important to note that India has a joint family system which increases the number of family members as the family expands through marriages (Kaur & Kaushik, 2016;Kothari & Mindargi, 2013). In this system, younger family members commonly seek the advice of their older family members before they embark on certain decision making (Gill, Biger, Mand, & Gill, 2011).…”

Kinerja Reksadana Saham di Situs Bareksa

“…Reksadana merupakan salah satu alternatif investasi yang diharapkan mampu mengatasi masalah yang dihadapi investor tersebut. Kaur & Kaushik (2015) menyatakan bahwa reksadana merupakan salah satu alternatif investasi yang menguntungkan di negara berkembang.…”