chapter vii perception of mutual fund...

CHAPTER VII

PERCEPTION OF MUTUAL FUND INVESTORS

7.1. Introduction

A mutual fund collects the savings from small investors, invest

them in Government and other corporate securities and earn income through

interest and dividends, besides capital gains. It works on the principle of a ‘small

drop of water can make a mighty ocean’. Hence, a mutual fund is nothing but a

form of collective investment. It is a group of various investors coming together

who transfer their surplus funds to a professionally qualified organization to

manage it. To get the surplus funds from the investors, the fund adopts a simple

technique. Each fund is divided into a small fraction called ‘units’ of equal value.

Each investor is allocated units in the proportion to the size of his investment.

Thus, every investor, whether big or small, will have a stake in the fund and can

enjoy the wide portfolio of the investment held by the fund. Hence, mutual funds

enable millions of small and large investors to participate in and derive the

benefit of the capital market growth. It has emerged as a popular vehicle of

creation of wealth due to high return, lower cost and diversified risk.

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The fund mobilization by mutual funds in India has been increased

since their inception in 1964. i.e., with the launch of US 64 flagship scheme of

UTI. Again it was in 1987 and 1989, when public sector banks and corporations

entered in the mutual funds market. Further keeping in tune with the objective of

new economic policy of 1991, mutual funds market was thrown open to private

sector in India. Since 1993, the investment trend shifted in favour of private

sector funds. The corpus of mutual funds crossed Rs.120000 crores marks in

India. In November 2002 with almost 60 per cent of the total investment going

into private sector mutual funds. Today as on March 31st 2010, the total AUM is

614545.98 crores1. The fact that the money so invested comes out of the hard

earnings of investors apparently bring home the direct need of studying what the

investors feel about mutual funds. In this chapter an attempt has been made to

study the perceptions of investors towards mutual funds. It includes the analysis

of knowledge of investors, awareness and reasons for withdrawal of mutual fund

units.

7.2. Knowledge about Mutual Funds

It represents the investors’ knowledge on mutual funds. Investors

who invest their money into mutual fund must have some knowledge about their

investment. Blank investment always gives negative results. The investor with

high knowledge may have its own influence to select the type of mutual funds

and also the time of buying and selling of mutual funds in the market. So a

mutual fund investor should have the basic knowledge about mutual funds like

the nature of mutual fund, how it works, how the money is turned into returns ,

1. www.amfiindia.com

188

what are the parties involved in this operations, how the value is calculated etc.

Then only the investor can successfully involve in the field and make necessary

changes to earn good returns. In this study the investor’s knowledge level is

analysed by the use of t-statistics.

TABLE 7.1

KNOWLEDGE ABOUT MUTUAL FUNDS AMONG THE INVESTORS

S.

No.

Knowledge on

Mean Score among

Investors

T-Statistics

Small Large

1 Type of funds 2.3465 3.6544 -3.8186*

2 Fund’s investment

Objective

2.1172 3.7086 -4.1782*

3 Portfolio of the fund 2.2085 3.4147 -3.5644*

4 Portfolio manager 2.0042 3.1182 -3.0961*

5 Net Asset Value 2.2017 3.2496 -2.8541*

6 Lock in Period 2.3396 3.6541 -2.9691*

*significant at five percent level.

Source: Primary data.

The table 7.1 indicates the mean score of the knowledge of

investors among the two group of investors and the respective ‘t’ statistics. The

small investors have good knowledge about type of funds and lock in period

since their respective mean scores are2.3465 and 2.3396. Among large investors,

they have good knowledge on fund’s investment objective and type of funds

since their respective mean scores are 3.7086 and 3.6544. Regarding the

knowledge of mutual fund investors, the significant difference among the small

and large investors have been identified in type of funds, fund’s investment

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objective, portfolio of the fund, portfolio manager, net asset value and lock in

period since the respective ‘t’ statistics are significant at five percent level.

7.3. Awareness of Investors

It represents the awareness level of mutual fund investors. Indian

investors are not much aware of mutual funds. As per the survey of CAMS in

major cities, the survey results shows that, the awareness is weak, considering

especially the percentage of households that invest today, there is less than 50 per

cent awareness of funds2. Awareness is the highest in the metros where nearly

half of all savers know about mutual funds3. Most of the mutual fund companies

along with the Association of Mutual Funds in India (AMFI) have started

investor awareness programme. UTI mutual fund this year launched one of the

largest investor education initiatives under the name ‘Swatantra’ for creating

awareness about the concepts of financial planning and benefits of investing in

mutual funds in over 300 cities in the country. This study analyses the awareness

level of investors with the help of ‘t’ test.

2. Vetrivel R., (2007), ‘Awareness on Mutual Fund Investments Weak’, The Hindu-Business

Line, Aug14, http://www.thehindubusinessline.com/2007/08/14/stories/2007081452481500.

htm. 3. Vijaya Rathore, (2008), ‘Low Awareness of Mutual Funds Snags AMCs’ Bid to Expand

Base’, Livemint - The Wall Street Journal. http://www.livemint.com/ 2008/08/04231928/

Low-awareness-of-mutual-funds.html

190

TABLE 7.2

LEVEL OF AWARENESS ON THE TERMS IN MUTUAL FUND

MARKET

S.

No. Terms

Mean Score among

Investors T-Statistics

Small Large

1 New Fund Offer(NFO) 1.8996 3.8144 -4.2082*

2 Systematic Investment Plan

(SIP)

2.9891 4.0869 -3.4541*

3 Systematic Withdrawal Plan

(SWP)

2.0445 3.2081 -2.6881*

4 Asset Management Company 1.7868 3.0844 -2.3844*

5 AMFI 2.2089 3.4509 -2.6039*

6 Exchange Traded Fund 1.7033 2.9969 -2.3317*

7 Key Documents 2.0541 3.4162 -2.6417*

8 Systematic Transfer Plan

(STP)

2.1149 3.1773 -3.5082*

9 SEBI 2.0884 3.3845 -2.9086*

10 ELSS 2.2669 3.4086 -3.0841*

Overall 2.1157 3.4028 -3.2962*

*significant at five percent level.


The small investors are much aware of Systematic Investment

Plan (SIP), ELSS and AMFI since its means scores are 2.9891, 2.2669 and

2.2089 respectively. Among large investors, they are having good awareness

about Systematic Investment Plan (SIP), NFO and AMFI since its mean score of

4.0869, 3.8144 and 3.4509 respectively. Regarding the level of awareness, the

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significance difference among the small and large investors have been identified

in the case of New fund offer (NFO), Systematic Investment Plan (SIP),

Systematic Withdrawal Plan (SWP), Asset Management Company, AMFI,

Exchange Traded Fund, Key Documents, Systematic Transfer Plan (STP), SEBI,

and ELSS since their respective ‘t’ statistics are significant at five per cent level.

7.4. Perception on Mutual Funds

It means the investors perception about mutual funds different

aspects. The perception may differ from investor to investor. Seventeen variables

are selected from different areas to analyse the perception of investors. Investors

are asked to rate the above said funds at five point scale according to their

perception. These statements were framed considering the developments in

mutual fund industry over time. The means score of each statement have been

computed to exhibit the opinion of mutual funds among the two types of

investors. The results are summarized in Table.7.3.

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TABLE 7.3

PERCEPTION ON MUTUAL FUNDS

S.

No.

Variables Related to Mutual

Funds

Mean Score among

Investors

T-Statistics

Small Large

1 Mutual Funds are useful for

small investors

3.8667 3.6241 0.5446

2 Mutual Funds give higher

return than other investments

3.6643 3.0846 2.1569*

3 Mutual Funds are healthy for

Indian financial environment

3.8049 3.1107 2.4397*

4 Private sector mutual funds

are not good

2.6673 2.5239 0.1843

5 ELSS schemes are good for

tax saving

3.0441 3.8969 -2.8974*

6 Mutual funds with large

corpus perform better

3.1408 3.9337 -2.7646*

7 Mutual funds having

diversified portfolio gives

better returns

3.0639 3.9082 -3.1745*

8 Close ended mutual funds are

not good

2.6508 2.9791 -1.0336

9 Mutual Funds with high NAV

is good for investment

3.1446 2.0344 3.2765*

10 Public sector mutual funds are

safe

3.6887 2.6739 3.1144*

11 Mutual Fund investment is an

asset for future

3.4073 3.8944 -1.1908

12 Mutual fund investments are

the substitutes for share

investment

2.9484 3.6677 -2.0596*

13 New Fund offers are good

than existing fund

3.0339 3.5886 -2.1144*

14 Growth option is good for

long term

3.1144 3.8089 -2.6674*

15 Dividend payout option is

good in tax saving schemes

3.3084 3.9508 -2.2342*

16 Bearish market is good for

investment

3.1468 3.8244 -2.5896*

17 Bulky investment is not

advisable in bullish market

3.0229 3.7083 -2.7345*

*Significant at five percent level.


193

Among small investors, majority of them accept the perception,

mutual funds are useful for small investors, and mutual funds are healthy for

Indian financial environment and public sector mutual funds are safe since their

respective mean score of 3.8667, 3.8049 and 3.6887. The large investors

favoured opinion are mutual funds with large corpus perform better, mutual funds

with high NAV is good for investment and Mutual Fund investment is an asset

for future since their respective mean score of 3.9508, 3.9337 and 3.9082.

Regarding the opinion, the significant difference among the two group of

investors have been identified in the case of Mutual Funds give higher return than

other investments, Mutual Funds are healthy for Indian financial environment,

ELSS schemes are good for tax saving, Mutual funds with large corpus perform

better, Mutual funds having diversified portfolio gives better returns, Mutual

Funds with high NAV is good for investment, Public sector mutual funds are

safe, Mutual fund investments are the substitutes for share investment, New Fund

offers are good than existing fund, Growth option is good for long term, Dividend

payout option is good in tax saving schemes, Bearish market is good for

investment and Bulky investment is not advisable in bullish market since the

respective ‘t’ statistics are significant at five percent level.

7.4.1. Factor Analysis

To study the investors perception about important aspects in

mutual fund, factor analysis is used. The score of the investors’ opinion about

mutual fund have been included for the factor analysis. The rotated component

matrix for the various investment options is given in Table 7.4.

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TABLE 7.4

ROTATED COMPONENT MATRIX FOR INVESTORS OPINION

ABOUT MUTUAL FUND

S.

No. Variables

Factor Loading

F1 F2 F3 F4

1 Mutual Funds with high NAV

is good for investment 0.9207

2 Mutual Funds are useful for

small investors 0.8554

3 Mutual Funds are healthy for

Indian financial environment 0.7916

4 Bearish market is good for

investment 0.7208

5 New Fund offers are good than

existing fund 0.6396

6 Mutual fund investments are the

substitutes for share investment 0.5445

7 Mutual Funds give higher

return than other investments

0.8108

8 Mutual funds having diversified

portfolio gives better returns 0.7092

9 Mutual funds with large corpus

perform better 0.6117

10 Growth option is good for long

term

0.7168

11 Mutual Fund investment is an

asset for future 0.7024

12 Public sector mutual funds are

safe 0.6533

13 Dividend payout option is good

in tax saving schemes

0.8125

14 ELSS schemes are good for tax

saving 0.5224

Eigen Value 3.9654 3.0826 2.4587 1.5073

Percent of variation explained 27.45 18.82 16.09 10.66

KMO measure of sampling adequacy: .8144 Bartlett’s Test of Sphericity :

Chi-square=99.04 Significance Value : .000

Extraction Method: Principal component analysis

Rotation method: Varimax with Kaiser normalization

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The above table indicates the rotated factor loading for the

fourteen variables. It is clear from the table that all the 14 variables have been

extracted into 4 factors.

The number of variables in each factor, eigen value and the

percent of variation explained by the factor is presented in Table 7.5.

TABLE 7.5

IMPORTANT ASPECTS IN MUTUAL FUNDS

S.

No.

Important

Aspects

Number of

Variables

in

Discriminant

Coefficient

Eigen

Value

Percent

of

Variation

Explained

Cumulative

Percent of

Variation

Explained

1 Investment 6 0.7908 3.9654 27.45 27.45

2 Return 3 0.8214 3.0826 18.82 46.27

3 Future 3 0.7911 2.4587 16.09 62.36

4 Tax savings 2 0.8334 1.5073 10.66 73.02

*Significant at zero percent level.

The important factors regarding the perception of investors about

mutual funds are investment, return, future and tax savings since their eigen

values are 3.9654, 3.0826 and 2.4587 respectively.

Opinion about investment consists of 6 variables with percent of

variation explained of 27.45 per cent. Return consists of 3 variables with the

percent of variation explained of 18.82 percent. Opinion regarding future to the

extent of 16.09 percent. The next factors is opinion about tax savings since its

respective eigen values are 1.5073 and the percent of variation explained by the

two factor is 10.66 percent.

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7.5. Level of Perception among Small and Large Investors

Investors opinion about mutual fund is again analyzed with the

help of ‘t’ test. Both small and large investors level of opinion is examined.

Opinion regarding important aspects in mutual fund is confined to investment,

return, and future and tax savings. The result of ‘t’ test is exhibited in table 7.6.

TABLE 7.6

LEVEL OF OPINION ON IMPORTANT ASPECTS IN MUTUAL FUNDS

S.No.

Important Aspects in Mutual

Funds

Mean Score among

Investors

T-

Statistics Small Large

1 Investment 3.3242 3.3083 0.3096

2 Return 3.2896 3.6422 -2.6644*

3 Future 3.1763 3.9239 -3.8865*

4 Tax savings 3.4035 3.4591 -0.4151



Majority of the small investors are favorable to the perception

about tax savings and investments since its means scores are 3.4035 and 3.3242

respectively. Among large investors, these factors are future and return since its

mean score of 3.9239, and 3.6422 respectively. Regarding the level of opinion

about important aspects of mutual fund, the significance difference among the

small and large investors have been identified in the case of ‘return’ and ‘future’

since their respective‘t’ statistics are significant at five per cent level.

7.5.1. Discriminant Factors among Small and Large Investors

Small investors and large investors opinion about mutual funds are

197

different. In order to identify the important discriminant factors among the two

groups of investors, the two group discriminant analyses have been executed.

Initially, the mean difference in all factors, its ‘t’ statistics and Wilks Lambda

have been computed to identify the significance and discriminant power of the

factors. The results are summarized in Table 7.7.

TABLE 7.7

MEAN DIFFERENCE AND DISCRIMINANT POWER OF IMPORTANT

ASPECTS OF MUTUAL FUND AMONG SMALL AND LARGE

INVESTORS

S.

No.

Important

Aspects in

Mutual Funds

Mean Score

among Investors Mean

Difference

T-

Statistics

Wilks

Lambda Small Large

1 Investment 3.3242 3.3083 0.0159 0.3096 0.2388

2 Return 3.2896 3.6422 -0.3526 -2.6644* 0.1486

3 Future 3.1763 3.9239 -0.7476 -3.8865* 0.1082

4 Tax savings 3.4035 3.4591 -0.0556 -0.4151 0.3446



The higher mean difference among the two group of investors

have been noticed in the case of future and return since their respective mean

differences are - 0.7476, and -0.3526. The lesser wilks lambda is noticed in the

case of future and return since their respective Wilks Lambda co-efficients are

0.1082 and 0.1486. The significant mean difference is noticed in the case of

factors namely return and future.

198

The relative contribution of discriminant factors in total

discriminant score is computed by the product of discriminant co-efficient and

the respective mean difference of the factor. The results are given in Table 7.8.

TABLE 7.8

RELATIVE CONTRIBUTION OF DISCRIMINANT ASPECTS IN

TOTAL DISCRIMINANT SCORE

S. No. Discriminant

Aspects

Discriminant

Coefficient

Mean

Difference Product

Relative

contribution

in TDS

1 Return -0.1736 -0.3526 0.0612 27.62

2 Future -0.2145 -0.7476 0.1604 72.38

Total 0.2216 100.00

Percent of cases correctly classified: 79.07.

The higher discriminant co-efficient is identified in the case

‘future’ since their respective discriminant co-efficient are -0.1736. It infers that

the above factors are major in the discriminant function compared to other

factors. The higher relative contribution to the total discriminant score is

identified in the case of future since their respective relative contribution is 72.38

per cent respectively. The estimated discriminant function correctly classifies the

cases to the extent of 79.09 per cent. The analysis reveals that the important

discriminant factor among the small and large investors are future.

7.6. Switching / Withdrawal Behaviour among the Investors

The investors may switch from one mutual fund to another in

same family funds or withdraw or redeem the units. It depends on their mindset,

current market condition, performance of the fund, service of mutual funds,

mismanagement etc. The switching/ withdrawal behaviour among the investors

199

are usually seen in the market since the investors are frequently sell their mutual

funds and invest in other funds. Peles (1997) established that there is evidence of

investor psychology affecting fund/scheme selection and switching4. The reasons

for switching/withdrawal are drawn from various reviews (Singh and Chander,

20045; Agarwal, 1992

6, Subash and Mukesh, 1992

7; Bal and Mishra, 1990

8; and

Baruna and Srinivasan, 19829). In the present study the included reasons for

switching are fourteen. The investors are asked to rate these fourteen reasons at

five point scale. The assigned marks on these scales range from 5 to 1

respectively. The means scores of the reasons among the small and large

investors have been computed to exhibit the importance of the reasons.

Regarding perception on the reasons, the significant difference among the two

group of investors have been analysed with the help of ‘t’ test. The results are

given in table 7.9.

4. Goetzman, W.N., and Peles, N., (1997), ‘Cognitive Dissonance and Mutual Fund Investors’,

The Journal of Financial Research, Vol.20(2), pp.145-158.

5. Singh Jaspal and Chander Subash, (2004), ‘An Empirical Analysis of Perceptions of

Investors towards Mutual Funds’, Finance India, Vol.XVIII (4), December, pp.1673-1692.

6. Agarwal, G.D., (1992), ‘Mutual Funds and Investors Interest’, Chartered Secretary,

Vol.22(1), January 23, pp.24-25.

7. Chandar Subash and Mahajan Mukesh, (1992),’Perception of Investors towards Mutual

Funds: An Empirical Investigation’, Indian Journal of Commerce, June, pp.117-119.

8. Bal, R.K., Mishra, B.B., (1990), ‘Role of Mutual Funds in Developing Indian Capital

Market’, Indian Journal of Commerce, Vol.43(165), pp.112-117.

9. Baruna, S.K., and Srinivasan, G., (1982), ‘Experiment on Individual Investment Decision

Making Process’, Working Paper No.423 (April-June), Indian Institute of Management,

Ahmedabad.

200

TABLE 7.9

REASONS FOR SWITCHING /WITHDRAWAL OF MUTUAL FUNDS

S. No. Reasons

Mean Score among


Small Large

1. Performance 3.8843 3.1145 2.9446*

2. Involvement of Companies 3.0441 3.9208 -3.1774*

3. Portfolio 3.1142 3.7569 -2.3969*

4. Return 3.8586 3.5776 1.0465

5. Fund managers efficiency 3.3341 3.9617 -2.0419*

6. NAV 3.7765 3.2143 2.1173*

7. Dividend Payment ratio 3.1442 3.6675 -2.0291*

8. Future scope of the fund 3.2084 3.9443 -2.8864*

9. Capital appreciation 3.1139 3.8969 -2.6971*

10. Consistency in

performance 3.1085 3.7734 -2.5084*

11. Adequate unit holders

information 3.2642 3.8086 -2.6676*

12. As per the advice of

Friends/Broker 3.6673 3.0667 2.1144*

13. Performance of Peer

groups 3.0239 3.8084 -2.9968*

14. Lack of investors Redressal

mechanism 3.1773 3.9965 -3.1408*



The important reasons for switching/withdrawal among the small

and large investors are performance, return and NAV since their respective mean

score of 3.8843, 3.8586 and 3.7765 whereas in the large investors case these

reasons are lack of investor redressal mechanism, fund managers efficiency and

future scope of fund since their respective mean score are 3.9965, 3.9617 and

201

3.9443. Regarding the perception on the reasons for switching/withdrawal the

significant difference among the two group of investors have been identified in

the case of performance, involvement of companies, portfolio, fund managers

efficiency, NAV, dividend payment ratio, future scope of the fund, capital

appreciation, consistency in performance, adequate unit holders information, as

per the advice of friends/broker, performance of peer groups and lack of investors

redressal mechanism since their respective ‘t’ statistics are significant at five per

cent level.

7.6.1. Reasons for Switching/Withdrawal

The important reasons for switching/withdrawal are analysed with

the help of factor analysis. The score on various reasons for switching have been

included for the study. The KMO measure of sampling adequacy and bartletts test

of sphericity have been conducted to test the validity of data for factor analysis.

Both these two test satisfy the conditions for validity of data since their KMO

measure is greater than 0.5 and the chi-square is significant at five percent level.

The factor analysis result in three important factors (reasons). The details of the

findings of factor analysis is summarized in Table 7.10.

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TABLE 7.10

ROTATED COMPONENT MATRIX FOR IMPORTANT REASONS FOR

SWITCHING/WITHDRAWAL OF MUTUAL FUNDS

S. No. Variables Factor Loading

F1 F2 F3

1 Return 0.9144

2 NAV 0.8596

3 Consistency in Performance 0.8142

4 Performance 0.7814

5 Dividend Payout Ratio 0.7304

6 Performance of Peer Groups 0.6179

7 Involvement of companies

0.8504

8 Lack of Investors Redressal

Mechanism 0.8011

9 Fund Manger Efficiency 0.7192

10 Adequate unit holders information 0.6269

11 Capital Appreciation

0.8246

12

Portfolio 0.7085

13 Future Scope of the fund 0.5869

Eigen Value 3.5686 2.7132 2.0671

Percent of variation explained 31.69 25.43 18.87

KMO measure of sampling

adequacy: .7664

Bartlett’s Test of Sphericity :Chi-square= 89.94

Significance Value : .000

Extraction Method: Principal component analysis

Rotation method: Varimax with Kaiser normalization

The above table indicates the rotated factor loading for the 13 variable. It

is clear from the table that all the 13 variables have been extracted into 3 factors.

203

TABLE 7.11

IMPORTANT REASONS FOR SWITCHING

S.

No.

Important

Reasons

Number

of

Variables

Rehabilits

Coefficient

Eigen

Value

Percent

of

Variation

Explained

Cumulative

Percent of

Variation

Explained

1 Lack of

Performance 6 0.7968 3.5686 31.69 31.69

2

Lack of

redressal

mechasnism

4 0.8144 2.7132 25.43 57.12

3 Lack of

Appreciation 3 0.7341 2.0671 18.87 75.99

*Significant at zero percent level.

The most important factor is lack of performance since its eigen

value is 4.0811. The ‘lack of performance factor explain the variables considered

for identify mutual fund problems to the extent of 31.69 per cent. It is followed

by the factors namely ‘lack of redressal mechanism since its eigen value is

2.7132. The variance explained by the above factor is 25.43. The last factor

narrated by the factor analysis is ‘lack of appreciation since its eigen value is

2.0671. The variance explained by the factor is 18.87 per cent.

7.6.2. Switching/withdrawal Behaviour among Small and Large

Investors

The important reasons for switching/withdrawal are lack of

performance, lack of involvement and lack of appreciation. The score of the

factors regarding important reasons for switching/withdrawal are drawn from the

mean score of the variables regarding the important problems mutual funds.

Regarding the importance given on factors, the significant difference among the

small and large investors have been analysed with the help of ‘t’ test. The results

are given in Table 7.12.

204

TABLE 7.12

INVESTORS VIEW ON IMPORTANT REASONS FOR

SWITCHING/WITHDRAWAL

S. No. Reasons

Mean Score among


Small Large

1. Lack of Performance 3.4660 3.5259 -0.4467*

2. Lack of Involvement 3.2049 3.9219 -3.1778*

3. Lack of Appreciation 3.1455 3.8660 -3.2368*



The important factors regarding the investors view on reason for

switching/withdrawal among small investor is lack of performance since their

respective mean score is 3.4660. Among large investors, the factor is lack of

involvement since their respective mean score is 3.9219. Regarding the

importance given on these factors, the significant difference among the two group

of investors have been identified in the case of lack of performance, lack of

involvement and lack of appreciation since their respective ‘t’ statistics are

significant at five percent level.

7.6.3. Discriminant Factors among Small and Large Investors

The reasons for switching/withdrawal of small investors and large

investors are different. In order to identify the important discriminant factors

among the two groups of investors, the two group discriminant analyses have

been executed. Initially, the mean difference in all factors, its ‘t’ statistics and

Wilks Lambda have been computed to identify the significance and discriminant

power of the factors. The results are summarized in Table 7.13.

205

TABLE 7.13

MEAN DIFFERENCE AND DISCRIMINANT POWER OF IMPORTANT

REASONS FOR SWITCHING

S.

No.

Important

Reasons

Mean Score

among

Investors Mean

Difference

T-

Statistics

Wilks

Lambda

Small Large

1 Lack of

Performance

3.4660 3.5259 -0.0599 -0.4667* 0.4861

2 Lack of

Involvement

3.2049 3.9219 -0.7170 -3.1778* 0.1634

3 Lack of

Appreciation

3.1455 3.8660 -0.7205 -3.2368* 0.1146



The higher mean difference among the two group of investors

have been noticed in the case of lack of appreciation and, lack of involvement

since their respective mean differences are - 0.7205 and -0.7170. The higher

discriminant power is identified in the case of lack involvement since their

respective Wilks Lambda co-efficient is 0.1634. The significant mean difference

is noticed in the case of factors namely lack of performance, lack of involvement

and lack of appreciation.

The relative contribution of discriminant factors in total

discriminant score is computed by the product of discriminant co-efficient and

the respective mean difference of the factor. The results are given in Table 7.14.

206

TABLE 7.14

RELATIVE CONTRIBUTION OF IMPORTANT REASONS IN TOTAL

DISCRIMINANT SCORE (TDS)

S.

No.

Important

Reasons

Discriminant

Coefficient

Mean

Difference Product

Relative

Contribution

in TDS

1 Lack of

Involvement -0.1031 -0.7170 0.0739 33.95

2 Lack of

Appreciation -0.1996 -0.7205 0.1438 66.05

Total 0.2177 100.00

Percent of cases correctly classified: 69.07.

The higher discriminant co-efficient is identified in the case lack

of appreciation since their respective discriminant co-efficient is -0.1996. It infers

that the above factors are major in the discriminant function compared to other

factors. The higher relative contribution to the total discriminant score is

identified in the case of lack of appreciation since their respective relative

contribution is 66.05 per cent. The estimated discriminant function correctly

classifies the cases to the extent of 69.07 per cent. The analysis reveals that the

important discriminant factors among the small and large investors is lack of

appreciation.

7.7. Conclusion

Mutual funds investment is one of the best avenue for investment.

The role of mutual fund investors are very important. The investors knowledge

level , awareness, opinion regarding mutual fund investment plays vital role in

the industry. In Kerala , most of the investors are educated and their knowledge

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and awareness level is good. The investors have good knowledge about the type

of funds, fund’s investment objective, portfolio of the fund, portfolio manager,

net asset value and lock in period. Investors are highly aware of the term, New

Fund Offer (NFO), Systematic Investment Plan (SIP), Systematic Withdrawal

Plan (SWP), Asset Management Company, AMFI, Exchange Traded Fund, Key

Documents, Systematic Transfer Plan (STP), SEBI, and ELSS. The important

factors extent the opinion of investors about mutual funds is investment, return,

future and tax savings. Regarding the reasons for switching/withdrawal the most

important factor is poor performance.