PUNJAB AGRICULTURAL UNIVERSITY

Synopsis of Research Problem of MBA Student

Name of the student

AMANDEEP KAUR GREWAL

Admission No

L-2014-BS-03-MBA

Major Subject

Business Management

Field of Specialization

Financial management

Minor Subject

Economics

Major Advisor

Dr. Mohit Gupta

1. Title
ATTITUDE AND BEHAVIOR TOWARDS SYSTEMATIC INVESTMENT PLANS: A STUDY OF
MUTUAL FUND INVESTORS IN LUDHIANA CITY
2. Introduction
Investment is activity that is engaged in by people who have saving, or in other words people
invest their savings. Investment involves employment of fund with the aim of achieving additional
income or growth in values. There are large numbers of investment avenues for investors. Livestock,
land and precious metals are some of the traditional investment options. During 19th century,
revolution in investment took place through the banking system as it provide many investment options
like Fixed deposits (FDs), government bonds, Public Provident Fund (PPF) to its investors. With the
development of capital market, investment in stocks became a good option for generating higher
returns. However, greater risk and lack of knowledge about the movement of stock prices were also
associated with them. Therefore, mutual funds emerged as an ultra modern method of investment to
lessen the risk at low cost with experts knowledge. Some of them are highly risk and some others are
almost risk less, investor has to choose proper avenues from among them depending on his
preference, needs and ability to take risk. The options of investments are huge, all of them having
different risk-reward trade off.
A mutual fund is a legal vehicle that enables a collective group of individuals to pool their
surplus funds and collectively invest in instruments / assets for a common investment objective. The
money that is collected from investors is then invested in the capital market such as shares, debentures
and other securities by fund manager. Any capital gains or losses from such investments are passed on
to investors in proportion of the number of units held by them.

It is advisable to spread out the investments rather than lump-sum ones. Here, Mutual Fund
proves to be beneficial as they provide features like systematic investment plans. The punch line
famous in the investment industry Systematic Investment Plans Small Savings, Big Returns holds
very well. Nowadays investing through SIP is treated as a very beneficial route of making investment
in mutual funds. The plan of investing the fixed amount of money every month or quarter over an
extended period of time without considering the market is up or down is known as Systematic
Investment Plan.
This scheme helps reduce the average cost per unit of investment through a method called
Rupee Cost Averaging. Rupee cost averaging is an effective market-timer mechanism that eliminates
the need to time the markets. All one has to do is to invest a fixed, pre-decided amount of money on a
pre-decided date over a long period of time. Since the amount invested per month or quarter is
constant, one buys more units when the price is low and fewer units when he price is high. As a result
the average unit cost will always be less than the average sale price per unit, irrespective of the market
rising, falling or fluctuating.
Systematic investing in a mutual fund is the answer to preventing the drawbacks of equity
investment and still enjoying the high returns. This protects the investor from market instability and
helps him to draw maximum benefit as the investment is done at regular basis irrespective of market
conditions. It gives opportunities to small investors to invest their small amount and to take
advantages of financial market. As common investor doesnt have enough time and resources, SIP
proves to be a viable option for them. It is very similar to the regular saving schemes like recurring
deposits. Mutual Fund gives us many reasons for investing through SIP. One reason is it reduces risk
because of Rupee Cost Averaging. Second is SIP can be started with very small amount of money. So
it is lighter on the wallet. Other is timing the market is not necessary. Moreover long term financial
goal can be aligned with SIP as it helps to build for future by the power of Compounding. One other
reason for choosing SIP is that it follows disciplined approach towards investment and thus helps in
controlling the emotions and helps us inculcate the habit of saving and building wealth for the future.
The investment priority of a person is based on several factors like his/her awareness,
environment, level of exposure, intensions, beliefs, responsibilities and so on. Every individual is
unique because of the individuality of his/her behavioral traits. These traits perhaps, assume a
comprehending the need for investments and making the necessary decision with the help of
discretion. This uniqueness indeed, becomes an inevitable challenge to be analyzed. If explored
properly, the underpinning reality of discrepancies in the investment planning, apparently branch out
due to this uniqueness of every individual when he/she turns to be an investor. Since investing

through SIP, has become one of the major instruments, it becomes inevitable to study the attitude and
behavior of mutual fund investors to the same.
In this context, this study is aimed to achieve the following objectives:
1)

To study the importance of sources of information regarding systematic investment plan.

2)

To study the attitude of mutual fund investors toward systematic investment plan.

3)

To study the behavior of mutual fund investors toward systematic investment plan.

3. Review of Literature
A brief review of relevant studies has been presented in following section.
Ippolito (1992) analyzed that vigilance among mutual fund investors plays an important role
in generating an efficient equilibrium in that market. The results indicated that investors react to new
information about product quality in the mutual fund industry and they react disproportionately where
the expected payoffs are higher. Moreover, returns within mutual funds are serially correlated.
Capon et al (1996) investigated the manner in which consumers make investment decisions
for mutual funds. Investors reported that they consider many nonperformance related variables. When
investors are grouped by similarity of investment decision process, a single small group appears to be
highly knowledgeable about its investments. However, most investors appear to be naive, having little
knowledge of the investment strategies or financial details of their investments.
Leggio and Lien (2001) found Dollar Cost Averaging strategy to be sub optional
form a mean variance expected utility of wealth perspective. They introduced a behavioral rationale
for the persistence of dollar cost averaging. Using prospect theory to create an alternative utility
function that does not require investor to be strictly risk averse, they empirically tested statmans
conjecture for four investment strategies and for alternative stock investments. They found that loss
aversion does not explain the existence of dollar cost averaging investment strategy.
Rajeswari and Ramamoorthy (2002) studied the financial behaviour and factors influencing
fund/scheme selection of retail investors by conducting Factor Analysis using Principal Component
Analysis, to identify the investors underlying fund/scheme selection criteria, so as to group them into
specific market segment for designing of the appropriate marketing strategy. By understanding of the
different mutual fund products, the investors can earn better returns. Behavior of an investor changes
even with change in single factor of fund.
Chalam (2003) found the important factors influencing the investment on mutual funds are
return, capital appreciation, tax saving purpose, liquidity, marketability and safety. Majority of the

investors prefer in real estate investments, followed by mutual fund schemes, gold and precious
metals. Majority of the investors in mutual funds are employees. They preferred only growth options
compared to income options. Majority of the investors are very much interested to take the reinvestment benefit rather than the regular dividend.
Ranganathan (2006) studied that financial literature considers that investors are rational. But
that is not the case as the investors behavior is dynamic factor, which is based upon belief, perceptions
and expectations. He examined the various factor influencing the behavior of investor while selecting
funds and puts light on behavior finance. The researcher treated financial market as an aggregate of
statistical observation, technical and fundamental analysis. It studied how the financial behavior of
investors affects the financial market, particularly, the mutual funds which have become an important
portal for the small investors.
Sultana (2010) studied that the characteristics of the Indian individual investors and an
attempt to discover the relationship between a dependent variable i.e. Risk Tolerance level and
independent variables such as Age, Gender of an individual investor. Indian investors are high
income, well educated, salaried, and independent in making investment decisions and conservative
investors. From the empirical study it was found that irrespective of gender, most of the investors
(41%) had low risk tolerance level and many others (34%) have high risk tolerance level rather than
moderate risk tolerance level. It was also found that there is strong negative correlation between age
and risk tolerance level of the investor.
Singh (2012) examined that most of respondents were still confused about the mutual funds
and have not formed any attitude towards the mutual fund for investment purpose. It has been
observed that most of the respondents having lack of awareness about the various function of mutual
funds. Moreover, as far as the demographic factors are concerned, gender, income and level of
education significantly influence the investors attitude towards mutual funds. On the other hand the
other two demographic factors like age and occupation have not been found influencing the attitude of
investors towards mutual funds.
Rathnamani (2013) concluded that many investors preferred to invest in mutual fund in order
to have high return at low level of risk, safety and liquidity. The world of investment has been
changing day to day, so investors preferences toward investment pattern also changed. In the
demographic profile most of the investors are willing to invest only 10% in their annual personal
income, around 39% of investors belongs to age range of 31 to 40 years. In this study investors were
found willing to take moderate and low level risk and most of the investors belonged to moderate
investment style. In order to have more investors to invest in mutual funds, mutual fund companies

have to bring some awareness program about the benefits of investing in mutual funds, and the safety
and security provided by mutual fund companies in this changing stock market situation.
Kumar and Bansal (2014) found that most of the investor used to invest in mutual fund for not
more than 3 years and they used to quit from the fund which were not giving desired results. Equity
option and Systematic investment planning mode of investment were on top priority in investors list.
It was also found that maximum number of investors did not analyze risk in their investment and they
were depending upon their broker and agent for this work. It is required from government and
regulatory bodies point of view that more laws should be there to secure the funds of investors to be
exploited, more tax rebate should be given on mutual fund investment, proper and effective grievance
system, right of investor education, and more control on asset management companies should be
there.
It is evident from the above literature that majority of the investors prefer fist safety and
security for the investment and secondly they are interested to get maximum benefits for their
investments. In light of above literature, the study will attempt to identify the attitude and behavior of
investors towards systematic investment avenues in mutual fund.
4. Research Methodology
For the completion of objectives primary data will be collected from mutual fund investors in
Ludhiana city. The population of study consists of all the mutual fund investors in Ludhiana city. For
the purpose of study, mutual fund investor is operationally defined as Investor who has invested in
any of the equity mutual fund scheme of any asset management company through systematic
investment plan for atleast two years and is currently pursuing the same. A list of mutual fund
branches operating in Ludhiana city will be prepared. From the prepared list 10 branches will be
selected randomly and from each of the selected branch, name and contact details of atleast 20 mutual
fund investors who are investing through SIP will be collected. Therefore, sampling frame will consist
of 200 investors and from the sampling frame 100 investors will be randomly selected. Primary data
will be collected through structured and non-disguised personally administered questionnaire.
Questionnaire will consists of variables relating to sources of information, attitudes and behavior
towards Systematic Investment Plan. Appropriate statistical tools after identifying nature of data
distribution will be applied.
5. Collaboration(if any): Nil

6. References
Capon N, Fitzsimons G J and Prince R A (1996) An individual level analysis of the mutual fund
investment decision. J Finan Serv Res 10: 59-82.
Chalam G V (2003) Investors behavioural pattern of investment and their preferences of mutual
funds. Southern Economist 41:13-16.
Ippolito R A (1992). Consumer reaction to measures of poor quality: Evidence from mutual funds. J
Law Econ 35:45-70.
Kumar V and Bansal P (2014) A Study on Investors Behavior towards Mutual Funds in Rohtak,
Haryana. Int J Eng Mgt Res 4: 224-28.
Leggio K B and Lien D (2001) Does loss aversion explain dollar cost averaging? Finan Serv Rev 10:
117-127.
Rajeswari T R and Ramamoorthy V E (2002) Performance evaluation of selected mutual funds and
investor behaviour, Ph.D thesis, Sri Sathya Sai Institute of Higher Learning.
Ranganathan K (2006) A Study of Fund Selection Behavior of Individual Investors towards Mutual
Funds: With Reference To Mumbai City. ICFAI J Behav Finan 3: 63-83.
Rathnamani V (2013) Investors Preferences towards Mutual Fund Industry in Trichy. IOSR J Busi
Mgt 6: 48-55.
Singh B K (2012) A study on investors attitude towards mutual funds as an investment option. Int J
Res Mgt 2:61-70.
Sultana S T (2010) An empirical study of Indian individual investors behavior. Global J Finan Mgt
2:19-33.

______________________
Signature of the student

ADVISORY COMMITTEE

Sr. No.

Name

Designation and Department

Dr. Mohit Gupta

Assistant Professor

(Major Advisor)

School of Business Studies

Dr. Gagandeep Banga

Associate Professor

(Member)

School of Business Studies

Dr. Jasdev Singh

Agricultural Economist

(Member)

Department of Economics & Sociology

Dr. L.M. Kathuria

Associate Professor

(Nominee of Dean PGS)

School of Business Studies

Signature

_____________________
(Approved)
Director