A Study on Risk and Return Analysis in Mutual Fund Industry
A Minor Project Report Submitted in partial Fulfilment of the Requirement
of Applied Management Research course
BY
JEBIN REJU.
14MG20223
KRISTU JAYANTI COLLEGE OF MANAGEMENT AND TECHNOLOGY
K. Narayanapura, Kothanur P.O
Bangalore – 7
CONTENT
Chapter No. Title Pg No.
1 Research Design 3
2 Data Analysis and Interpretation 6
3 Findings, Conclusions and suggestions 17
4 Reference 18
5 Annexure 19
RESEARCH DESIGN
Introduction
This paper is the result of study of risk and return in mutual fund industry. A Mutual fund is the trust that pools the savings of a number of investors who share a common financial goal. It throws the light on how Mutual funds really work, how much risk involved in it and how they diversify themselves. Investing involves risk of loss of principal and is most concerned on the return of investment. The total risk, measured by standard deviation, can be divided into two parts, systematic and unsystematic risk. Unsystematic risk is also known as diversifiable risk. Systematic risk is also called as no diversifiable risk, unavoidable risk or market risk and can be measured by Beta. The research provided an interesting insight into awareness about the mutual fund, differences in age group, occupation, income levels, risk taking ability, of individuals, investment options preferred, etc.
The Indian capital market has been increasing tremendously during last few years. With the reform of economy, reform of industrial policy, reforms of public sector and reforms of financial sector, the economy has been opened up and many developments have been taking place in the Indian money market and capital market. In order to help the small investors, mutual fund industry has come to occupy an important place. This study helps me to understand how the people invest diversify in different sectors and in different companies to maximize the return and to minimize the risk involved in it. It also taught me how to take every experience in the right spirit and learn from each one.
Prudent investing requires information of key financial concepts and an understanding of your investment profile and how these works together to affect investing decisions and results. Saving and investing are often used interchangeably. However there are differences between the two. Savings refers to funds kept for making specific purchases in the relatively near future (usually 3 years or less) and for emergencies. Preservations of the principal and liquidity of the funds (ease of converting to cash) are essential aspects of savings. Consequently, savings generally yield a low rate return and do not maintain purchasing power. Investing, on other hand, focus on increasing net worth and achieving long term financial goals. Investing involves risk (loss of principal) and is to be considered only after you have adequate savings and have done proper risk management. In short investing is more concerned on the return of investment, while savings is on the return of capital. All investments involve some element of risk because the future value of an investment is uncertain.
The investors, who invest their money in the Mutual fund of any investment management company, receive an Equity Position in that particular mutual fund. When after certain period of time, whether long term or short term, investors sell the Shares of Mutual Funds, they receive the return according to the market conditions
OBJECTIVES OF THE STUDY
1. To study the measures of Risk and Return associated with Mutual Fund’s investments;
2. To analyse the risk appetite & investors preference while investing between EQUITY & DEBT;
Research methodology
SOURCES OF STUDY
The present study is totally based on the primary data. Secondary data only used for the reference. The data has been collected from the investors of age group of 18-60 above (people both with and without knowledge about mutual funds) and also collecting feedbacks against a well-designed questionnaire.
SAMPLING PROCEDURE:
The sample is selected in a random way, irrespective of them being investor or not or availing the services or not. It was collected through personal visits to the known persons, by formal and informal talks and through filing up the questionnaires prepared. The data has been analysed by using CHI-SQUARE test. The group has been selected and analysed has been done on the basis statistical tools available.
SAMPLE SIZE
The sample size of my report was limited to 26 respondents only
SAMPLE DESIGN
Data has been presented with the help of various graphs and table values require for doing CHI-SQUARE TEST.
SCOPE OF THE STUDY
A big boom has been witnessed in mutual fund industry in recent times. A large number of new players have entered the market and trying to gain market share in this rapidly improving market. The research has been conducted on my Topic “Analysis of risk and returns in mutual fund industry”
• To find out risk and returns in mutual fund
• To find out interesting insight into awareness of about the mutual fund
• To find out the differences in Age Group, Gender, Occupation etc
LIMITATIONS OF THE STUDY
• Some of the persons where not responsive
• Possibility of error in data collection because many of investors may have not given actual answers of my questionnaire
• Sample size is limited to 27 investors. The sample size may not represent the whole market
• Some respondents were reluctant to divulge personal information which can affect the validity of all responses
2 DATA ANALYSIS AND INTERPRETATION
Introduction
This Project was undertaken to study and analyse the risk and return in the Mutual fund Industry. The data was collected using Questionnaire which is analysed and presented below.
Demographical Profile
Table No. 2.1
Frequency table showing the gender of the respondents
Gender
Frequency Percent Valid Percent Cumulative Percent
Valid Male 15 57.7 57.7 57.7
Female 11 42.3 42.3 100.0
Total
26
100.0
100.0
3.
Source: Primary data
Figure 2.1
Figure showing the gender of the Respondents
Interpretation:
Out of the 26 respondents there are 15 male respondents and 11 are female respondents. The percentage of male and female is 57.7% and 42.3% respectively
Table No. 2.2
Frequency table showing the Age of the respondents
Age
Frequency Percent Valid Percent Cumulative Percent
Valid 18-23 Years 9 34.6 34.6 34.6
24-40 Years 12 46.2 46.2 80.8
40-60 Years 4 15.4 15.4 96.2
Above 60 Years 1 3.8 3.8 100.0
Total 26 100.0 100.0
Source: Primary data
Figure 2.2
Figure showing the Age of the Respondents
INTERPRETATION
Out of the 26 respondents there are 9 respondents (34.6%) who come between the age of 18 – 23 Years old and 12 respondents (46.2%) comes between the ages of 24-40 Years old and 4 respondents(15.4%) come between the age of 40-60 years old and one respondent (3.8%) come in the age group of 60 & above
Table No. 2.3
Frequency table showing the Satisfaction of investment of the respondents
Satisfaction of investment
Frequency Percent Valid Percent Cumulative Percent
Valid Highly satisfied 4 15.4 15.4 15.4
Moderate Satisfied 8 30.8 30.8 46.2
Satisfied 7 26.9 26.9 73.1
Not Satisfied 5 19.2 19.2 92.3
Not at all Satisfied 2 7.7 7.7 100.0
Total 26 100.0 100.0
Source: Primary data
Figure 2.3
Figure showing the Satisfaction of Investments of the Respondents
INTERPRETATION
Out of the 26 respondents 4 of them i.e.15.4% are Highly Satisfied, 8 of them i.e.30.8% are Moderately Satisfied, 7 of them i.e.26.9% are just satisfied, 5 of them i.e.19.2% are Not Satisfied and 2 of them i.e.7.7% are Not at all satisfied
CROSS TABULATION
Table No. 2.4
To Analyse Satisfaction of investment based on Gender
Gender * Satisfaction of investment Cross tabulation
Satisfaction of investment Total
Highly satisfied Moderate Satisfied Satisfied Not Satisfied Not at all Satisfied
Gender Male Count 2 5 5 3 0 15
% within Gender 13.3% 33.3% 33.3% 20.0% 0.0% 100.0%
Female Count 2 3 2 2 2 11
% within Gender 18.2% 27.3% 18.2% 18.2% 18.2% 100.0%
Total Count 4 8 7 5 2 26
% within Gender 15.4% 30.8% 26.9% 19.2% 7.7% 100.0%
Source: Primary data
FIGURE 2.4
Figure showing the Analysis of Satisfaction of investment based on Gender
INTERPRETATION
Out of the total 15 Male respondents 2 of the respondents (13.3%) are highly satisfied in their returns from their investment,5 of the respondents (33.3%) are Moderate satisfied in their returns from their investment,5 of the respondents (33.3%) are just satisfied in their returns from investment and 3 of the respondents (20.0%) are Not satisfied in their returns from investment.
Among the total 11 Female respondents 2 of the respondents (18.2%) are highly satisfied in their returns from their investment, 3 of the respondents (27.3%) are Moderate satisfied in their returns from their investment, 2 of the respondents (18.2%) are just satisfied in their returns from investment, 2 of the respondents (18.2%) are Not satisfied in their returns from investment and (18.2%) and 2 of the respondents (18.2%) are Not at all satisfied in their returns from investment
2)
Table No. 2.5
To analyse knowledge on mutual fund risk measures or its usage based on qualification
Profession * Knowledge Crosstabulation
Knowledge Total
Yes No Little Want to know
Profession Student Count 2 4 0 4 10
% within Profession 20.0% 40.0% 0.0% 40.0% 100.0%
Public Service Count 1 1 0 0 2
% within Profession 50.0% 50.0% 0.0% 0.0% 100.0%
Private Service Count 2 0 4 0 6
% within Profession 33.3% 0.0% 66.7% 0.0% 100.0%
Business Count 1 1 1 0 3
% within Profession 33.3% 33.3% 33.3% 0.0% 100.0%
Professional Count 2 0 0 0 2
% within Profession 100.0% 0.0% 0.0% 0.0% 100.0%
Retired Count 2 0 1 0 3
% within Profession 66.7% 0.0% 33.3% 0.0% 100.0%
Total Count 10 6 6 4 26
% within Profession 38.5% 23.1% 23.1% 15.4% 100.0%
Source: Primary data
Figure 2.5
showing the Analyse knowledge on mutual fund risk measures or its usage based
on qualification
INTERPRETATION
Out of the total 10 Student respondents 2 of the respondents (20.0%) have knowledge about the risk measures or its usage of mutual funds, 4 of the respondents (40.0%) don’t have knowledge about the risk measures or its usage of mutual funds, 4 of the respondents (40.0%) want to have knowledge about the risk measures or its usage of mutual funds. Out of the total 2 Public service respondents 1 of the respondents (50.0%) have knowledge about the risk measures or its usage of mutual funds and 1 of the respondents (50.0%) don’t have knowledge about the risk measures or its usage of mutual funds. Out of the total 6 Private service respondents 2 of the respondents (33.3.0%) have knowledge about the risk measures or its usage of mutual funds and 4 of the respondents (66.7%%) have little knowledge about the risk measures or its usage of mutual funds.
Out of the total 3 Business people respondents 1 of the respondents (33.33%) have knowledge about the risk measures or its usage of mutual funds and 1 of the respondents (33.33%) dont have knowledge about the risk measures or its usage of mutual funds and 1 of the respondents (33.33%) have little knowledge about the risk measures or its usage of mutual funds. Out of the total 2 professional 2 of the respondents (100%) have knowledge about the risk measures or its usage of mutual funds and Out of the total 3 Retired people respondents 2 of the respondents (66.7%) have knowledge about the risk measures or its usage of mutual funds and 1 of the respondents (33.33%) have little knowledge about the risk measures or its usage of mutual funds.
3)
Table No. 2.6
To analyse annual return based on the period of investment
Peroid * Annual Return Crosstabulation
Annual Return Total
00-30% 30-50% 50-80%
Peroid 0-2 Years Count 12 1 0 13
% within Peroid 92.3% 7.7% 0.0% 100.0%
2-5 Years Count 4 1 2 7
% within Peroid 57.1% 14.3% 28.6% 100.0%
5-10 Years Count 0 3 2 5
% within Peroid 0.0% 60.0% 40.0% 100.0%
10 & Above Count 0 0 1 1
% within Peroid 0.0% 0.0% 100.0% 100.0%
Total Count 16 5 5 26
% within Peroid 61.5% 19.2% 19.2% 100.0%
Source –Primary Data
Figure 2.6
Showing the analysis of annual return based on the period of investment
INTERPRETATION
Out of 26 respondents 13 comes under below 2 years of investment period, in which 12 were getting annual return of below 30%, 1 among them getting 30-50% as annual return. Among the 7 respondents which comes in between 2-5 Years of investment period, 4 were getting below 30% of annual return, 2 were getting 50-80% annual return and 1 among them is getting 30-50%. Among the 5 respondents which comes in between 5-10 years of investment period, 3 of them are getting 30-50% of return and 2 of them getting 50-80% of return on investment and one of them having an investment period of 10 years and above is getting an annual return of50- 80% .
CHI- SQUARE
1)
Hypothesis
H0 – There is no significant difference between gender and their choice of company
H1 – There is significant difference between gender and choice of company
Level of significance
Alpha must be greater than 0.05
Table 2.7
Chi-Square Tests
Value df Asymp. Sig. (2-sided)
Pearson Chi-Square 3.603a 3 .308
Likelihood Ratio 3.688 3 .297
Linear-by-Linear Association .275 1 .600
N of Valid Cases 26
a. 6 cells (75.0%) have expected count less than 5. The minimum expected count is 1.27.
INTERPRETATION
CHI- SQUARE test was conducted which shows that Pearson Chi-Square df=3 and p-value is .308 which is greater than 0.05 therefore accept H0
Conclusion
The test shows that there is no significant difference between gender and choice of company
2)
Hypothesis
H0 – There is no significant difference between period of investment and their return on investment
H1 – There is significant difference between period of investment and their return on investment
Level of significance
Alpha must be greater than 0.05
Table2.8
Chi-Square Tests
Value df Asymp. Sig. (2-sided)
Pearson Chi-Square 18.549a 6 .005
Likelihood Ratio 21.349 6 .002
Linear-by-Linear Association 13.444 1 .000
N of Valid Cases 26
a. 11 cells (91.7%) have expected count less than 5. The minimum expected count is .19.
INTERPRETATION
CHI- SQUARE test was conducted which shows that Pearson Chi-Square df=6 and p-value is .005 which is less than 0.05 therefore reject H0
Conclusion
The test shows that there is significant difference between period of investment and their return on investment
FINDINGS
• Out of the 26 respondents there are 15 male respondents and 11 are female respondents. The percentage of male and female is 57.7% and 42.3% respectively
• Out of the 26 respondents there are 9 respondents (34.6%) who come between the age of 18 – 23 Years old and 12 respondents (46.2%) comes between the ages of 24-40 Years old and 4 respondents(15.4%) come between the age of 40-60 years old and one respondent (3.8%) come in the age group of 60 & above
• Out of the 26 respondents 4 of them i.e.15.4% are Highly Satisfied, 8 of them i.e.30.8% are Moderately Satisfied, 7 of them i.e.26.9% are just satisfied, 5 of them i.e.19.2% are Not Satisfied and 2 of them i.e.7.7% are Not at all satisfied
Conclusion
The sample size was 26, Out of these 26 respondents there are 15male respondents and 11are Female respondents. The percentage of male and female are 57.7%and 42.3% respectively. The majority of respondents are in the age group of 24-40 followed by the age group of 18-23 and followed by the age group of 40-60 and there are very few who are of the age above 60.
Chi square test was conducted to find out the following:
• It has been found that there is no significant difference between gender and choice of company
• It has been found that there is significant difference between period of investment and their return on investment
REFERNECE
WEBSITES:
Http://en.wikipedia.org.
www.google.com.
QUESTIONNAIRE TO ANALYZE RISK AND RETURNS IN MUTUAL FUND INDUSTRY
1) Gender
Male
Female
2) AGE
18-23 years
24-40 years
40-60 years
Above 60 years
3) QALIFICATION
10th
12th
Under Graduate
Post Graduate
4) Working or Not Working
Student
Public Service
Private Service
Business
House Wife
Agriculture
Professional
Retired
5) Since how long are you investing?
0-2 Years
2-5 Years
5-10 Years
10 & Above
6) Are you satisfied with your investment returns?
Highly satisfied
Moderate satisfied
Satisfied
Not satisfied
Not at all satisfied
7) Type of company you like to invest in equity?
Small cap
Mid cap
Large cap
Micro cap
Super large cap
8) Annual returns you get from your investments?
00-30%
30-50%
50-80%
80% & Above
9) Do you pose any knowledge on mutual fund risk measures or its usage?
Yes
No
Little
Want to know
10) Are you satisfied with the financial services provided to you?
Highly satisfied
Moderate satisfied
Satisfied
Not satisfied