Factors influencing mutual fund investment decisions-factor analysis

Abstract

Mutual funds become one of an important portal for many retail investors. The investor’s investment decision on mutual fund lies upon many factors namely easy liquidity, high flexibility, stability of returns, minimum initial investments, tax benefits and professional management. The product related factors and behaviour related factors were considered for the study. Investor’s behaviour may change from period to period even if the other variables influencing the behaviour are held constant. With this context, this study attempts to analyse the influence of behavioural and product related factors on mutual fund investment decisions. Coimbatore city was willfully selected to satisfy the objectives of the study and Purposive sampling technique was employed for data collection from 60 investors of different mutual fund schemes. Principal Component Analysis was employed to analyze the influence of behavioral and product related factors on mutual fund investment decisions. The nine fund behaviour related variables were condensed into two factors namely “external scheme qualities” and “internal scheme qualities”. The six product linked variables were analyzed and grouped as two factors which are named as “Reputation” and “Performance”.