Executive Summary: Fund Selection Behavior

Fund Selection Behavior
Executive Summary
The Indian equity market has gained significantly during the last one year and mutual funds are not left far behind. Both the avenues have created wealth for investors. But the equity market has attracted much more attention than the mutual funds market. The reason behind this is that in India investment in the equity market has been there since long but the mutual fund market is still growing. For the creation of wealth through this avenue a proper understanding of mutual funds is a must. A mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus a mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. Mutual funds have opened up new vistas to millions of small investors by virtually taking investment to their doorstep. In India, a small investor generally goes for bank returns. He has limited access to price sensitive information and if available, may not be able to comprehend publicly available information couched in technical and legal jargons. He finds himself to be an odd man out in the investment game. Mutual funds have come as much needed help to these investors. MFs are looked upon by individual investors as financial intermediaries wherein portfolio managers process information, identify investment opportunities, formulate investment strategies, invest funds and monitor progress at a very
Kristu Jayanti College
low cost. Thus, the success of MFs is essentially the result of the combined efforts of competent fund managers and alert investors. A competent fund manager should analyze investor behavior and understand their needs and expectations to gear up the performance to meet investor requirements. Consumer behavior from the marketing world and financial economics has brought together to the surface an exciting area for study and research: Behavioral Finance. The realization that this is a serious subject is, however barely dawning. Analysts seem to treat financial markets as an aggregate of statistical observations, technical and fundamental analysis. A rich view of research waits this sophisticated understanding of how financial markets are also affected by the financial behavior of investors. With the reforms of industrial policy, public sector and financial sector and the many developments in the Indian money market and capital market, mutual funds, which has become an important portal for the small investors, is also influenced by their financial behavior. Hence this study is an attempt to examine the related aspects of the fund selection behavior of individual investors towards mutual funds, in the city of Bangalore.
CHAPTER 1 Introduction
The Indian capital market has been growing tremendously with the reforms in industrial policy, reforms in public and financial sector, and new economic policies of liberalization, deregulation and restructuring. The Indian economy has opened up and many developments have been taking place in the Indian capital market and money market with the help of financial system and financial institutions or intermediaries which foster savings and channel them to their most efficient use. One such financial intermediary who has played a significant role in the development and growth of capital markets is Mutual Fund (MF). The concept of MFs has been on the financial landscape for long, though in a primitive form. The story of mutual fund industry in India started in 1963 with the formation of the Unit Trust of India, an initiative of the Government of India and Reserve Bank. The launching of innovative schemes in India has been rather slow due to the prevailing investment psychology and infrastructural inadequacies; risk-averse investors are interested in schemes which involve tolerable capital risk and return over bank deposit. This fact has restricted the launching of more risky products in the Indian capital market. But this objective of the MF industry has changed over the decades. For many years, funds were more of a service than a product, the service being professional money management. However, in the last 15 years, MFs have evolved to be a product. The term product is used because MF is not merely to park investors savings but its schemes are tailor-made to cater to investors needs, whatever their age, financial position, risk tolerance and return expectations might be. This issue of combing service and product will be important one for the next decade. There are more than 30 mutual funds in India offering 550 schemes, managed by various types of institutions like banks, the Unit Trust of India and international investment
banking firms. More than 10 million mutual fund investors are there in India. However, there is a very limited knowledge of investment decision-making processes and consumer behavior, as applied to financial assets and service. There is an obvious link between financial investment choices and consumer behavior, suggesting that research on consumer behavior types may prove useful in increasing our understanding of what is an extremely complex financial marketplace in which significant purchase decisions are made. An investment is a significant purchase decision in a market where choice is expanding. Despite this, there has been very little application of both consumer behavior theory and research techniques in the finance area. Presently more and more funds are entering the industry and their survival depends on strategic marketing choices of mutual funds companies, to survive and thrive in this highly promising industry, in the face of such cut throat competition. In addition, the availability of more savings instruments with varied risk-return combination would make the investors more alert and choosy. Running a successful MF requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the small investor. Under such a situation, the present exploratory study is an attempt to understand the financial behavior of investors in connection with scheme preference and selection. India has a large untapped market in urban areas besides the virgin markets in semiurban and rural areas. This market potential can be trapped by scrutinizing investor behavior to identify their expectations and articulate investors own situation and risk preference and then apply to an investment strategy that combines the usual four: cash and equivalents, Government-backed bonds, debt, and equity. The present study adds to this area of study by an investigation using techniques from
consumer behavior research. However, in the financial literature there is no clear model, this explains the influence of perception and beliefs on expectations and decision making. Though the MF industry has been in existence since 1964, the aspect of investor behavior with specific reference to MFs has not been given much importance. The expectations of investor play a vital role in the financial markets. They influence the price of the securities, the volume traded and various other financial operations in actual practice. The study was conducted among the investing public in the city of Bangalore to identify the factors considered in the choice of mutual funds. While there are so many factors that can drive an investors choice of a specific scheme, some major factors like brand name, liquidity, past performance etc, were taken into consideration for the purpose of the study.
CHAPTER 2 Research Design
The Indian economy has opened up and many developments have taken place in the Indian capital market and money market. Mutual Funds have played a significant role in the development and growth of capital markets. The story of Mutual Funds started in India in 1963. For many years, funds were more of a service, however, in the last 15 years; Mutual Funds have evolved to be a product. Mutual Funds have opened up new vistas to millions of small investors by taking investment to their doorsteps. Mutual Funds are looked upon by individual investors as financial intermediaries wherein portfolio managers process information, identify investment opportunities, invest funds and monitor progress at a very low cost.
Statement of the problem

In India, though the Mutual Fund industry has been in existence for a long time, no major study has been done regarding the aspect of investor behavior with respect to Mutual Funds. The expectations of investors are influenced by their perception and humans generally relate perception to action. While there are so many factors that can drive an investors choice of a specific scheme, some major factors like brand name, liquidity, past performance etc, were taken into consideration for the purpose of the study. Much of economic and financial theory is based on the notion that individuals act rationally and consider all available information in the decision making process. Since the competition in the market is very high, it is the responsibility of the fund manager to analyze investor behavior and
understand their needs and expectations to gear up the performance to meet investor requirements and also to fight competition. Therefore, this study helps to find out the different aspects of investor behavior.
Need for the study

The study has the following objectives: 1. To identify the preferred savings avenue among the investors 2. To assess Mutual Fund selection behavior among the investors. 3. To assess the fund / scheme preference of the investors. 4. To perceive the preferred communication mode of the investors. 5. To identify the sources influencing the selection decision of the investors. 6. To understand the fund qualities that influences the selection of Mutual Funds.
Review of literature
The following studies were conducted earlier: Foreign Studies: Ippolito (1992) and Bogle (1992) reported that fund selection by investors is based on past performance of the funds, and money flows into winning funds more rapidly than they flow out of losing funds. Goetzman (1993) and Grubber (1996) studied the ability of the investors to select funds and found evidence to support selection ability among active fund investors. Malhotra and Robert (1997) reported that the preoccupation of MF investors using performance evaluation as selection criteria is misguided because of volatility of returns.
This may be due to superior management or just good luck; it is difficult to determine. The findings of Ferris and Chance (1987 and 1991) are consistent with the findings of Malhotra and Robert (1997). Lu Zheng (1998) examined the fund selection ability of MF investors and found that the investors decisions are based on short-term future performance and investors use fundspecific information in their selection decision. Source:www.google.com/researchstudies/behavioral financeforeignstudies Indian studies Vidyashankar (1990), Agrawal GD (1992), Gupta LC (1993) Atmaramani (1996), Madhusudan (1996) and others have conducted extensive research regarding investor expectations, protection awareness and fund selection behavior. Gupta LC (19193) conducted a household investor survey with the objective to provide data on investor preferences of MFs and other financial assets. Madhusudhan V Jambodekar (`1996) conducted a study to assess the awareness of MFs among investors, to identify the information sources influencing the buyer decision and the factors influencing the choice of a particular fund. Sujit Sikdar and Amrit Pal Singh (1996) carried out a survey with a objective to understand the behavioral aspects of the investors of the North Eastern region towards equity and MFs investment portfolio. The survey revealed that the salaried and self-employed formed the major investors in MFs primarily due to tax concessions.. UTI and SBI schemes were popular in that part of the country then and other funds had not proved to be a big hit during the time when the survey was done.
Raja Rajan (1997, 1998) high lightened segmentation of investors on the basis of their characteristics, investment size, and the relationship between stage in life cycle of the investors and their investment pattern. Syama Sunder (1998) conducted a survey to get an insight into the MF operations of private institutions with special reference to Khothari Pioneer. The survey revealed that the awareness about MF concept was poor during that time in small cities like Vishakapatnam. Agents play a vital role in spreading the MF culture: open-end schemes were much preferred then; age and income are the two important determinants in the selection of fund/scheme; brand image and return are their prime considerations. Source: ICFAI Journal of Behavioral Finance, Vol III
Research Methodology
The study mainly deals with the financial behavior of investors towards Mutual Funds in Bangalore. The required data would be collected through a questionnaire administered on a simple random and judgment sample of 100 educated investors in mutual funds.
Limitations of the study

1. The sample size of 100 may not adequately represent the national market. 2. Simple random and judgment sampling is due to time and financial constraints.
Scope of the study

1. To understand the perception of the investors towards Mutual Funds. 2. To study the selection behavior of investors with respect to Mutual Funds.
Chapter Scheme
Chapter 1: Introduction Chapter 2: Research Design Chapter 3: Profile of the Company/Organisation/System Chapter 4: Analysis and Interpretation of data Chapter 5: Summary of Findings, Conclusions and Recommendations.
10
CHAPTER 3 Profile of the Company/ Organization/ System

What is a Mutual Fund? Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders. The working of MF is illustrated in the form of a diagram Investors
Passed back to Returns Generate
Pool their money with Fund Manger Invests in
Securities Source: www.amfiindia.com
11
Evolution and Growth of Mutual Funds The Mutual Funds (MF) originated in UK and thereafter they crossed the border to reach other destinations.. The concept of MF was indianized only in the later part of the twentieth century in the year 1964 with its roots embedded into Unit Trust of India. The UTI was the lone concern in the field of mutual fund till 1987, when two financial behemoths like SBI and Canara Bank came with a big bang with an intention to nurture the concept. The present status of the MF industry is mainly due to the major effort by these three progenitor musketeers. In April 1992 the Government announced the setting of Money Market Mutual Funds (MMMF) with the purpose of bringing money market instruments within the reach of individuals. Scheduled commercial banks and public financial institutions are permitted to set up MMMFs. The units of MMMF are specifically meant for individuals. With the ushering in of financial sector reforms and Narasimham Committee recommendations, the private banks were allowed to enter MF business in the year 1993. Narasimham Committee in their report on financial sector reforms made the following recommendations: Creation of an appropriate regulatory framework to promote sound, orderly and competitive growth of MF business. Creation of proper legal framework to govern the establishment and operation of mutual funds. Equality treatment between various mutual funds including UTI in the area of tax concessions. Securities and Exchange Board of India (SEBI), which was formed after security scam in 1992 was given regulatory powers to lay down guidelines, supervise, and regulate the working of MF. The MFs are formed by way of trusts I India. Since inception, they have shown significant progress. MFs function with the basic theory of trust. They have been transparent in their financial statements and almost all funds are technology driven.
12
Association of Mutual Funds of India (AMFI) plays a pivotal role with much proactive ness in promoting the MF sector. AMFI keeping in view the unethical practices and cut-throat competition among the existing funds framed a code of ethics in 1997 which are to be followed by the industry. AMFI has been instrumental in rendering investor education and highlighting pros and cons o~ the investment decisions. Very often the MFs influence the volatile movements in stock market. They outperform the FIls and lead the market. In recent days their record collection through new fund offers has entered the stock market, which has been one of the major factors for the sky rocketing northward movement of major indices.
Industry Profile
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank the. The history of mutual funds in India can be broadly divided into four distinct phases First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management.
13
Second Phase 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.
Third Phase 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many
14
foreign mutual funds setting up funds in India and also the industry have witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other mutual funds. Fourth Phase since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of assets under management and with the setting mutual fund industry has entered its current phase of consolidation and growth. As at the end of October 31, 2003, there were 31 funds, which manage assets of Rs.126726 crores under 386 schemes. There has been a tremendous growth in the mutual fund industry in India, attracting huge investments from investors within the country and abroad, however, there is still a long way to go.
15
Graph 3.1 Growth in assets under management
The graph indicates the growth of assets over the years.

Source: www.amfiindia.com
Note:Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of India effective from February 2003. The Assets under management of the Specified Undertaking of the Unit Trust of India has therefore been excluded from the total assets of the industry as a whole from February 2003 onwards.
16
Mutual Fund Set up A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset Management Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund. SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme. Net Asset Value (NAV) of a scheme The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV). Mutual funds invest the money collected from the investors in securities markets. In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis - daily or weekly - depending on the type of scheme.
17
Different types of mutual fund schemes Schemes according to Maturity Period A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period. Open-ended Fund/ Scheme An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity. Close-ended Fund/ Scheme A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis. Interval Fund/Scheme These funds combine the features of both open ended and close-ended funds wherein the fund is close-ended for the first couple of years and open-ended thereafter. Some funds allow fresh subscriptions and redemption at fixed times every year (say every six months) in
18
order to reduce the administrative aspects of daily entry or exit, yet providing reasonable liquidity. Schemes according to Investment Objective A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open-ended or closeended schemes as described earlier. Such schemes may be classified mainly as follows: Growth / Equity Oriented Scheme The aim of growth funds is to provide capital appreciation over the medium to longterm. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time. Income / Debt Oriented Scheme The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.
19
Balanced Fund The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds. Money Market or Liquid Fund These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods.
Tax saving schemes These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. E.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any equity-oriented scheme
20
Index Funds Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc these schemes invest in the securities in the same weight age comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme.
Performance evaluation of MF The performance evaluation of MF can be done through various parameters such as: 1. Portfolio Quality 2. Portfolio Concentration 3. Expenses Ratio 4. Portfolio Turnover Ratio 5. Size of the Fund 6. Cash Holding and Management 7. Investor Servicing.
Strengths of MF Mutual Funds provide several benefits to investors. Some of them are: 1. Benefits retail investors as a source of saving with higher return. 2. The concept is based on Drops make an Ocean. So, it is a mutual act for common benefit.
21
3. It is Professionally Managed. 4. There is flexibility of portfolio diversification. 5. There is diversification of risk as it contains small investors in one hand and investment in basket of blue chip companies, gilt-edged securities, bonds, debt instruments or indices. 6. There is a relative liquidity. 7. It is a small investor savvy, so it attracts investors in large numbers. 8. The entry and exit load is nominal. The administration expenses are also economical. 9. The MF is tax efficient, as in the year 19999 the government has fully exempted the dividends of MF units in the hands of investors from tax obligations. 10. Various investment options are available in the hands of investors which may cater to their specific needs, reinvestment option, dividend option, investment pattern such as equity, debt, or balanced funds etc.
Weaknesses of MF As it is the case with other investment vehicles, MFs too are not free from certain shortcomings. Some of them are: 1. It has no tailor-made schemes to suit to each individual retail investor. 2. No guarantee of returns. 3. No control over costs. 4. It has the drawback of the problem of managing large corpus. 5. Volatility of return depends on market conditions, which is subject to frequent market volatility. 6. Most investment period is medium-term to long-term where expected return is more. Money Market Mutual Funds scheme is for short period where return is not lucrative and the instruments are less in number.
22
CHAPTER 4 Analysis and Interpretation of data
Profile of the respondents The study was conducted by distributing questionnaires to 100 investors in Bangalore city.
Table 4.1 The gender of the respondents Gender Male Female Total Source: Primary Data Frequency 63 37 100
Analysis This table shows that 63% of the respondents are males and only 37% are females. Inference Men are more interested in investing in the financial markets than women.
23
Table 4.2 The age in completed years of the respondents Age Below 30 31-40 41-50 Above 50 Total Source: Primary Data Frequency 44 32 8 16 100
Analysis This table shows that 44% of the respondents are below the age of 35, 32% are between 31 and 40, 16% are above 50 and only 8% are between the age group of 41-50.
Inference The analysis gives a clear picture that the younger generations are keener in investing in the recent upcoming debt instruments than the older ones. The respondents below the age of 30 are more aware of the financial markets and are more interested in following the recent trends in the financial markets.
Table 4.3
24
Fund Selection Behavior The academic Qualification of the respondents Qualification School Final Graduate Post Graduate Professional Degree Total Source: Primary Data Frequency 6 37 41 16 100
Analysis This table shows that 37% of the respondents are graduates, 41% are post-graduates, 16% are professional degree holders and only 6% are school finals.
Inference The analysis explains that most of the respondents are post-graduates followed by graduates. This is so because the graduates and post-graduates are more aware of the financial markets than the school final or professional degree holders as they are from the commerce background. They keep in touch with the financial markets and are more aware of the changing trends than those from the science background.
Table 4.4 The table showing the annual income of the respondents
25
Fund Selection Behavior Annual Income in Rs Below 1,00,000 1,00,000-3,00,000 3,00,000-5,00,000 Above 5,00,000 Total Source: Primary Data Frequency 10 59 27 4 100
Analysis The above table shows that 59% of the respondents have an annual income of 1,00,000-3,00,000, 27% have income between 3,00,000-5,00,000, 10% are below 1,00,000 and only 4% have income above 5,00,000.
Inference The analysis shows that the maximum percent of respondents who invests have an income of 1, 00,000-3, 00,000. This is because they are cautious investors and they want to invest in such a way that they are able to get maximum returns from their investments.
Table 4.5 The media through which the respondents know about the MFs Media Reference Groups Newspapers
Frequency 8 36 26
Fund Selection Behavior TV Brokers Total Source: Primary Data 45 11 100
Analysis This table shows that 45% of the respondents know about the mutual funds through TV, 36% through newspapers and the rest through reference groups and brokers.
Inference It can be observed from the analysis that most of the respondents know about the mutual funds through TV as it is the most attractive media of spreading information. The rest of the respondents are aware of MFs through newspapers because it is a media which reaches out to every common man.
Table 4.6 The reason for selecting a specific type of scheme by investors. Schemes Growth schemes Income schemes Money market schemes Tax Savings schemes Total Source: Primary Data Frequency 49 37 8 6 100 Percentage 49 37 8 6 100
27
Analysis From the above table 49% of the investors like to go for growth schemes, 37% for income schemes and the rest 14% for money market and tax-savings schemes. Inference The analysis indicates that most of the investors prefer growth schemes as it gives them capital appreciation over a long period of time. Income schemes are preferred as they give steady and regular income to the investors.
Graph 4.1 Graph showing the reason for selecting a specific type of scheme by investors
28
60 50 40 No.of Respondents 30 20 10 0 1 T h e sc h e m e s i n M F 's G ro w t h s c h e m e s In c o m e s c h e m e s M o n e y m a rk e t s c h e m e s T a x S a vin g s s c h e m e s
Table 4.7 The type of schemes generally preferred by investors. Schemes Open ended schemes Close ended schemes Interval schemes
Frequency 42 16 42 29
Percentage 42 16 42
Fund Selection Behavior Total Source: Primary Data 100 100
Analysis This table shows that 42% of the respondents prefer open-ended as well as interval schemes and only 16% prefer close ended schemes.
Inference The analysis explains that most of the investors prefer open ended schemes as they have no maturity period and gives liquidity. Interval schemes are equally preferred as it is a combination of both open ended and close ended schemes.
Graph 4.2 Chart showing the type of schemes generally preferred by the investors
30
O pen ended s c hem es C los e ended s c hem es Interval s c hem es
Table 4.8 The reason for investing in mutual funds.
31
Fund Selection Behavior Reasons Safety Liquidity Good return Capital appreciation Professional Management Total Source: Primary Data Frequency 17 6 65 10 2 100 Percentage 17 6 65 10 2 100
Analysis and Inference The above table shows that 65% of the respondents invest in Mutual Funds in order to earn good returns. 17% prefer MFs as they ensure the safety of the investors, 10% prefer to invest so that it helps them to earn capital appreciation over a period of time and the rest 8% invests in MFs in order to ensure liquidity and also for professional management.
Graph 4.3 Graph showing the reason for investing in Mutual Funds
32
70 60 No.of Respondents 50 40 30 20 10 0 1 Re a son for inve sting in M F Capital appreciation P rofessional M anagem ent S afety Liquidity Good return
Table 4.9 The importance of fund related qualities in selection behavior. Fund related qualities Fund performance record Fund brand name HI 12 61 I 57 36 SWI 28 1 NVI 3 2 NAAI 0 0 Total 100 100
33
Fund Selection Behavior Fund withdrawal facilities Favorable ratings Scheme innovativeness Minimum initial investment Source: Primary Data NAAI- Not at all Important) Analysis and Inference Fund Performance record The above table shows that 57% of the investors consider that the fund performance record is important, 28% feel it is some what important and only 12% consider it highly important. This is because the fund performance record helps the investor to have a clear idea about the performance of the record and helps him to decide whether to invest in it or not. Fund Brand name 61% of the investors which forms a majority feel fund brand name is highly important in selecting the mutual funds because funds with brand name can always be trusted and returns can be fully assured. 10 31 55 39 59 54 45 30 29 15 0 25 2 0 0 4 0 0 0 2 100 100 100 100
(HI- Highly Important, I- Important, SWI- Some what Important, NVI- Not very Important,
Fund Withdrawal facilities 59% of the investors feel that withdrawal facilities are important because it helps them to switch on to a better option when the chosen fund is not performing well. In case the withdrawal facilities are not in favor of the investors they refrain from selecting that particular fund.
34
Fund Selection Behavior Favorable ratings 54% of the investors feel favorable ratings is important whereas 31% feel it is highly important and only 15% feel it is some what important. This is because ratings help the investors in identifying the performance and the rankings given to the funds. Scheme Innovativeness 55% feel it is highly important as innovativeness in the schemes helps in bringing out more attractive schemes for the investors and helps them to switch on to different options at different times. Minimum Initial Investment 39% feel initial investment is highly important, 30% feel it is important and the others feel it is not very important. Initial investment is a matter of concern for investors who was a lesser amount of income whereas for those who have high income do not consider it important. Since Bangalore city consists of middle class income groups, initial investment should be considered as well.
Graph 4.4 Chart showing the importance of fund performance record.
35
0% 3% 28% 12%
HI I SWI NVI NAAI 57%
Graph 4.5 Chart showing the importance of fund brand name.
2% 1% 0%
HI 36% I SWI 61% NVI NAAI
Graph 4.6 Chart showing the importance of fund withdrawal facilities.
36
0% 2% 29% 10%
HI I SWI NVI NAAI 59%
Graph 4.7 Chart showing the importance of favorable ratings.
0% 15% 0% 31% HI I SWI NVI NAAI
54%
Graph 4.8 Chart showing the importance of scheme innovativeness.
37
0%
HI 45% 55% I SWI NVI NAAI
Graph 4.9 Chart showing the importance of minimum initial investment.
4% 2%
25%
39%
HI I SWI NVI NAAI
30%
Table 4.10 The importance of fund sponsor qualities in selection behavior.
38
Fund sponsor qualities Reputation of sponsoring firm Recognized brand name Agency and network Expertise Research and infrastructure Past performance Source: Primary Data NAAI- Not at all Important)
HI 18 66 4 18 13 14
I 56 22 23 24 15 52
SWI 20 6 65 50 34 30
NVI 4 4 16 8 32 4
NAAI 2 2 2 0 6 0
Total 100 100 100 100 100 100
Analysis and Inference Reputation of the sponsoring firm The table shows that 56% of the investors consider it important, 20% consider it some what important and 18% feel it is highly important. This is due to the fact that a good reputation and fame helps the investors to trust in the sponsor. Recognized brand name The table shows that 66% of the investors consider brand name as highly important and 22% consider it important. A branded sponsor can be blindly trusted and they always remain faithful to their customers to keep up the name.
Agency and network
39
Fund Selection Behavior 65% of the investors feel a well developed agency and network is some what important because it does not matter much if the sponsor has a big agency or not. The performance matters more so this criteria is of lesser importance.\ Expertise in managing money 50% feel this criterion is some what important whereas the rest feel it is important. This is due to the fact that the sponsor should be an expert in placing the investors money in the right place at the right time. Research and infrastructure 34% of the investors feel it is some what important , 13% feel it is highly important, 15% feel it is important, 32% feel it is not very important and 6% feel it is not at all important. There is a diverse opinion in this matter as research and development criteria depend on the type of investors investing in the mutual finds. Past performance The table shows 52% consider it important, 30% some what important, 14% highly important and the rest not important. The majority feel it is important due to the fact that it guarantees the future performance of the sponsor to a certain extend.
Graph 4.9 Chart showing the importance of the reputation of the sponsoring firm.
40
60 50 Frequency 40 30 20 10 0 HI I SWI Satifaction level NVI NAAI
Graph 4.10 Chart showing the importance of a recognized brand name.
70 60 No.of Respondents 50 40 30 20 10 0 HI I SWI Sactisfaction Level NVI NAAI
Graph 4.11 Chart showing the importance of a well developed agency and network.
41
70 60 No.of Respondents 50 40 30 20 10 0 HI I SWI Satisfaction Level NVI NAAI
Graph 4.12 Chart showing the importance of sponsors expertise in managing money.
60 50 No.of Respondents 40 30 20 10 0 HI I SWI Satisfaction Level NVI NAAI
Graph 4.13 Chart showing the importance of a well developed research infrastructure.
42
40 35 No.of Respondents 30 25 20 15 10 5 0 HI I SWI Satisfaction Level NVI NAAI
Graph 4.14 Chart showing the importance of sponsors past performance.
60 50 No.of Respondents 40 30 20 10 0 HI I SWI Satisfaction Level NVI NAAI
Table 4.7
43
Fund Selection Behavior The importance of investor related services in selection behavior. Investor related services Disclosure in advertisement Periodicity of valuation Disclosure of NAV Grievance redressal machinery Fringe benefits Preferred MF Source: Primary Data NAAI- Not at all Important) HI 2 2 2 8 6 5 I 15 17 23 10 84 73 SWI 23 33 59 16 8 20 NVI 32 38 16 50 2 2 NAAI 28 10 0 16 0 0 Total 100 100 100 100 100 100
Analysis and Inference Disclosure of investment objective 32% feel it is not very important, 28% feel it is not at all important, and a very few percent of investors feel it is important. This is due to the fact the investors would not like their information and objectives being made public through advertisements. Periodicity of valuation The table shows 38% feel it is not very important, and an equal proportion of 33% feel it is some what important. The disclosure of periodicity of valuation also depends on the investors whether they like it to be disclosed or not. Therefore, it is difficult to reach at a definite conclusion.
Disclosure of NAV
44
Fund Selection Behavior The table shows that a majority of 59% of investors feel that it is some what important to disclose NAV whereas a few feel it is important. This is necessary as it helps the investors to keep in track the performance of the funds. Grievance redressal machinery The table shows 50% of the investors feel it is not important. The other opinions vary among investors because a grievance redressal machinery is not of much importance because the funds do not have much issues related to them that has to be addressed through a channel. Fringe Benefits Majority of the investors about 84% of them feel fringe benefits is very important because fringe benefits help the investors to earn extra benefits with the scheme. The benefits earn additional income for the investors and so it is of due importance. Preferred MF to avoid problems 73% of the investors feel already preferred mutual funds help in avoiding problems and 20% feel it is some what important. They feel it is better so that by investing in already preferred MFs , the investors can avoid a lot of problems that may arise if he invests in a new mutual fund.
Graph 4.14 Chart showing the importance disclosure of investment objective in ads.
45
2% 15% 28% HI I SWI 23% NVI NAAI
32%
Graph 4.15 Chart showing the importance of disclosure of periodicity of valuation.
10%
2% 17% HI I SWI NVI NAAI 33%
38%
Graph 4.16 Chart showing the importance of disclosure of NAV.
46
0% 16% 2% 23% HI I SWI NVI NAAI
59%
Graph 4.17 Chart showing the importance of MFs investor Grievance Redressal machinery.
16%
8% 10% HI I 16% SWI NVI NAAI
50%
Graph 4.18 Chart showing the importance of fringe benefits.
47
2% 8%
0% 6%
HI I SWI NVI NAAI
84%
Graph 4.14 Chart showing the importance of preferred MFs to avoid problems.
0% 2% 20% HI I SWI NVI NAAI 5%
73%
Table 4.8
48
Fund Selection Behavior The annual income of the respondent v/s the current preference of Savings Avenue. Annual income of the respondents
Currency Below 1,00,000 1,00,000-3,00,000 Bank deposits Life insurance Gold Shares Pension & PF Postal savings Real estate Total
The current preference of savings avenue
2 (20) 2 (3.4) 0 (0) 0 (0) 4 (4.0)
0 (0) 6 (10.2) 4 (14.8) 0 (0) 10 (10)
4 (40) 33 (55.9) 6 (22.2) 0 (0) 43 (43)
0 (0) 12 (20.3) 7 (25.9) 0 (0) 19 (19)
0 (0) 0 (0) 2 (7.4) 0 (0) 2 (2)
2 (20) 2 (3.4) 0 (0) 0 (0) 4 (4)
0 (0) 0 (0) 2 (7.4) 0 (0) 2 (2)
2 (20) 4 (6.8) 6 (22.2) 4 (100) 16 (16)
10 (100) 59 (100) 27 (100) 4 (100) 100 (100)
3,00,000-5,00,000 Above 5,00,000 Total
Source: Primary Data
Analysis and Inference The current preference of Savings Avenue is maximum among investors with an annual income of Rs. 1, 00,000-3, 00,000. They feel it is essential to invest in life insurance than any other savings avenue. 55.9% of the investors with an income of 1, 00,000-3, 00,000 have invested in life insurance.
Table 4.9 The academic qualification of the respondent v/s the current preference of Savings Avenue.
49
Qualification
Currency School final Graduate Bank deposits
The current preference of savings avenue

Life insurance Gold Shares Pension & PF Postal savings Real estate Total
0 (0) 4 (10.8) 0 (0) 0 (0) 4 (4)
4 (66.7) 0 (0) 4 (9.8) 2 (12.5) 10 (10)
0 (0) 17 (45.9) 20 (48.8) 6 (37.5) 43 (43)
0 (0) 6 (16.2) 11 (26.8) 2 (12.5) 19 (19)
0 (0) 2 (5.4) 0 (0) 0 (0) 2 (2)
0 (0) 0 (0) 4 (9.8) 0 (0) 4 (4)
0 (0) 2 (5.4) 0 (0) 0 (0) 2 (2)
2 (33.3) 6 (16.2) 6 (4.9) 6 (37.5) 16 (16)
6 (100) 37 (100) 41 (100) 16 (100) 100 (100)
Post graduate
Professional Degree Total
Source: Primary Data
Analysis and Inference From the above cross tabulation it is clear that the post graduates have invested in life insurance as a current preference of Savings Avenue. Most of the investors feel it is essential to invest in life insurance first than before exercising any other option.
Table 4.10 The age of the respondent v/s the media to know about MF. Age of the respondent The media to know about MF Reference Newspapers TV Brokers 50 Total
Fund Selection Behavior Groups Below 30 1 (2.3) 31 40 0 (0) 41 50 0 (0) Above 50 6 (37.5) Total 7 (7) Source: Primary Data
8 (18.2) 12 (37.5) 2 (25) 4 (25) 26 (26)
29 (65.9) 8 (25) 2 (25) 2 (12.5) 41 (41)
6 (13.6) 12 (37.5) 4 (50) 4 (25) 26 (26)
44 (100) 32 (100) 8 (100) 16 (100) 100 (100)
Analysis and Inference The above cross tabulation table shows that 65.9% of the respondents below the age of 30 have the awareness of mutual funds through television. This age group is more fascinated in watching television and it is an attractive media which the youngsters are more fond of.
Table 4.11 The academic qualification of the respondent v/s the media to know about MF
Qualification
The media to know about MF Reference Newspapers TV Brokers Groups 0 (0) 2 (5.4) 0 (0) 6 (16.2) 4 (66.7) 19 (51.4) 2 (33.3) 10 (27)
Total 6 (100) 37 (100)
School final Graduate
51
Fund Selection Behavior Post graduate Professional 3 (7.3) 2 (12.7) 10 (22.4) 10 (62.50) 26 (26) 16 (39) 2 (12.5) 41 (41) 12 (29.3) 2 (12.5) 26 (26) 41(100) 16 (100) 100 (100)
Degree Total 7(7) Source: Primary Data
Analysis and Inference The table shows that 62.50% of the respondents with professional degree are aware of mutual funds through newspapers. This is due to the fact that the professionals do not have much time to spend watching television or keeping in touch with other sources. The only media that they are opened to are newspapers.
CHAPTER 5 Summary of Findings, Conclusions and Recommendations

This study was conducted to find out the investor perception and selection behavior towards Mutual Funds. The respondents were from the city of Bangalore. A questionnaire was designed and distributed to 100 respondents. The findings, conclusions and recommendations of the study are as follows: Findings
52
Fund Selection Behavior 1. The media through which the respondents became aware about the MFs is television and newspapers. 2. Most of the investors prefer open-ended and interval schemes in order to earn more returns and foe liquidity. 3. The main reason behind investing in MFs is to earn good returns and for safety and liquidity. 4. The fund related qualities like fund performance record, brand name, withdrawal facilities, ratings, etc are generally considered to be important by the investors. 5. Among the sponsor related qualities, the reputation, brand name and expertise of the sponsors were considered important. 6. Among the investor related qualities, the disclosure of NAV and fringe benefits are considered important.
Conclusions The emergence of an array of savings and investment options and the dramatic increase in the secondary market for financial assets in the recent years in India has opened up an entirely new area of value creation and management. . MF industry in India has a large untapped market in urban areas besides the virgin markets in the semi-urban and rural areas. This market potential can be tapped by scrutinizing investor behavior to identify their expectations and articulate investors own situation and risk preference.
53
Fund Selection Behavior Presently more and more funds are entering the industry and their survival depends on strategic marketing choices of mutual funds companies, to survive and thrive in this highly promising industry, in the face of such cut throat competition. In addition, the availability of more savings instruments with varied risk-return combination would make the investors more alert and choosy. Running a successful MF requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the small investor. Under such a situation, the present exploratory study is an attempt to understand the financial behavior of investors in connection with scheme preference and selection. Investors choice of a MF scheme is influenced by the offer ors brand popularity, which reduces the perceived risk of an investor. Indian investors trend to rate good returns and liquidity factor very high in their choice of schemes. Hence, we find more of open-ended schemes. The past performance or the track record of a fund, as publicized and discussed by various MF trackers, certainly is an important driver for choosing MF scheme. The results suggested that there were distinct investor segments that value different attributes. The results have implications for the marketing of financial products and for the providers of financial advice. Those providing advice to the growing market of individual
investors need to have an accurate understanding of clients attitudes to investment. If they do not; it will be extremely difficult for them to provide appropriate advice that will satisfy a client in the long-term. The present study was an attempt to determine which mutual fund attributes are valued by individual investors. Given our limited knowledge of investment decision-making processes and consumer behavior as it applies to financial assets and services, the possibilities for future research in this area are extensive. As has already been noted, the
54
Fund Selection Behavior range of attributes used in this study was not exhaustive. There is a scope for further investigation into attributes that were not included in the present study, including the influence that a companys environmental and social credentials might have on investors choices. Additionally, a larger sample size covering more centers can improve the reliability and validity of the results.
Recommendations Since the investors need for liquidity and returns is found to be high, more of the new schemes opening for subscription be open-ended. AMCs should continuously design suitable schemes to meet the triple needs of adequate returns, safety and liquidity in a balanced proportion and develop infrastructure to reach to the investors.
55
Fund Selection Behavior The MF operational environment is becoming more competitive. Hence, the impact of emerging competition on investor behavior/behavioral changes needs to be studies further. Developments in technology influence the behavior of investors. Hence, the impact of technology on financial behavior is another potential area for close study. Since the industry is still struggling to win the investors confidence, an in-depth analysis into investor expectations from MF products, its performance, management, service and other related areas could be done. This study reveals that MF investors feel that currently the two major benefits, which MFs purport to offer, namely, diversification benefits and professional management are not satisfactorily delivered. In spite of this, MF industry is growing and we attribute this to investor behaviour and other macroeconomic factors. confidence on the other side. By proper segmentation and by targeting the right product to the right customer, MF companies can cope to win the confidence of their customers and own them for a life time. Further research can be done to understand the reasons for growing popularity on one side and the struggle to win investors
Questionnaire to Investors in Mutual Funds

Dear Sir / Madam, Mutual Funds have opened new vistas to millions of small investors by virtually taking investment to their very doorstep. I am currently engaged in a study on Investment perception and selection behavior towards Mutual Funds. In connection to this, I request you to read the following questions carefully and answer them. The answers will be held confidential and used purely for academic purpose. Please put a tick mark in the square corresponding to your choice.
I.
Personal Data
56
Fund Selection Behavior 1.1 Name (Optional) 1.2 Sex Below 30 School Final 1.5 Occupation : Professional 1.6 Annual Income in Rs : Below Rs.1, 00,000 Rs.3, 00,000 5, 00,000 1.7 Annual Savings : Less than Rs.50, 000 To provide for retirement To meet contingencies Currency Shares Bank Deposits Pension & PF Life Insurance MF Rs.50, 001 to 1, 00,000 Above Rs.1, 00,000 1.8 Objectives of your savings : For tax reduction For childrens education Gold Chits Real Estate Brokers Rs.1, 00,000 3, 00,000 Above Rs.5, 00,000 Business Salaried Retired : : 31 40 Graduate Male 41-50 Post-Graduate Female Above 50 Professional Degree
1.3 Age in completed years : 1.4 Academic Qualifications:
1.9 What is your current preference of Savings Avenue? Postal Savings TV
1.10 How do you know about Mutual Fund Investment Schemes? Reference groups II. General Data 2.1 Do you prefer investment in Mutual Funds to other savings avenue in future? Yes 2.3 Generally you prefer Growth Schemes Balanced Schemes Tax Savings Schemes 2.4 You prefer: Open Ended Schemes Close Ended Schemes Interval Schemes Income Schemes Money Market Schemes Index Schemes No Not Sure Newspapers
57
Fund Selection Behavior 2.5 You prefer investment in Mutual Funds due to Safety Flexibility Capital appreciation Tax Benefit Liquidity Good Return Professional Management Diversification Benefit
III. Selection Criteria

Highly Importan t Importan t Some What Important Not Very Importan t Not at all Important
3.1. Fund Related Qualities a) Fund performance record b) Fund Brand name c) Withdrawal facilities d) Favorable ratings e) Scheme Innovativeness f) Minimum initial investment
3.2. Fund Sponsor Qualities a) Reputation of sponsoring firm b) Sponsor has a recognized brand name c) Sponsor has a well developed agency and network d) Sponsors expertise in managing money e) Sponsor has a well developed research and infrastructure f) Sponsors past performance in terms of risk and return
58
3.3. Investor Related Services a) Disclosure of investment objective in advertisement b) Disclosure of periodicity of valuation c) Disclosure of NAV d) MFs Investor grievance redressal machinery e) Fringe benefits f) Preferred MF to avoid problems
Thank you very much for your kind co-operation and for taking time to complete this Questionnaire.
59

Executive Summary: Fund Selection Behavior

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Executive Summary: Fund Selection Behavior

Uploaded by

Copyright:

Available Formats

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

CHAPTER 2 Research Design

Statement of the problem

Kristu Jayanti College

Fund Selection Behavior

Need for the study

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

Limitations of the study

Scope of the study

Kristu Jayanti College

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

CHAPTER 3 Profile of the Company/ Organization/ System

Passed back to Returns Generate

Pool their money with Fund Manger Invests in

Securities Source: www.amfiindia.com

Kristu Jayanti College

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

Graph 3.1 Growth in assets under management

The graph indicates the growth of assets over the years.

Kristu Jayanti College

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

Kristu Jayanti College

Fund Selection Behavior

CHAPTER 4 Analysis and Interpretation of data

Kristu Jayanti College

Fund Selection Behavior

Kristu Jayanti College

Kristu Jayanti College

Fund Selection Behavior TV Brokers Total Source: Primary Data 45 11 100

Kristu Jayanti College

Fund Selection Behavior