ANALYSIS OF GAP BETWEEN INVESTOR

EXPECTATIONS AND REAL EXPERIENCES IN MUTUAL

FUND INDUSTRY

A Project Submitted to

University of Mumbai for partial completion of the degree

of Bachelor in Commerce (Accounting & Finance)

Under the Faculty of Commerce

By
Name VANSHIKA SUNIL PATIL

Roll No. __________

Under the Guidance of

NISHMITA RANA

B. K. Birla College of Arts, Science and Commerce, Kalyan

(Empowered Autonomous Status)

Nov 2024-2025
 B. K. Birla College of Arts, Science and Commerce, Kalyan
(Empowered Autonomous Status)

Department of Management Studies

CERTIFICATE

This is to certify that _Vanshika Patil_ of Bachelor in Commerce (Accounting & Finance)

Semester - V (2024-2025) has successfully completed the project on “Analysis Of Gap

Between Investor Expectations And Real Experiences In Mutual Fund Industry” under the

guidance of_Nishmita Rana_.

PROJECT SUPERVISOR:

HEAD, DEPARTMENT OF MANAGEMENT STUDIES:

INTERNAL EXAMINER:

EXTERNAL EXAMINER:

PRINCIPAL

Seal of the
College

Date of submission:
 Declaration by Student

I, the undersigned Miss. / Mr. Vanshika Patil hereby, declare that the work

embodied in this project work titled “ Analysis Of Gap Between Investor

Expectations And Real Experiences In Mutual Fund Industry ”, forms my own

contribution to the research work carried out under the guidance of Nishmita Rana

is a result of my own research work and has not been previously submitted to any other

University for any other Degree/ Diploma to this or any other University.

Wherever reference has been made to previous works of others, it has been clearly

indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained and

presented in accordance with academic rules and ethical conduct.

Name and Signature of the learner

Certified by

Name and signature of the Guiding Teacher

 Acknowledgment

To list who all have helped me is difficult because they are so numerous
and the depth is so enormous.

I would like to acknowledge the following as being idealistic channels and

fresh dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me

a chance to do this project.

I would like to thank our Director (Education) and Principal for

providing the necessary facilities required for the completion of this
project.

I take this opportunity to thank our Coordinator, for his moral support
and guidance.

I would also like to express my sincere gratitude towards my project guide

Nishmita Rana whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various

reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project especially my
Parents and Peers who supported me throughout my project.

4
 Index-I
Chapter No Content Page No

1 Introduction 8

 Topic

 Statement of problem and Need of the study

 Rational of study

2 Research Methodology 22

 Objective

 Hypothesis

 Scope of the study

 Limitations

 Research Methodology

3 Review of Literature 32

4 Data Analysis, Interpretation and Presentation 36

5 Conclusion and Suggestions 46

 References

 Appendices

5
  Questions

 Abbreviations

6
 EXECUTIVE SUMMARY

The study looks at the gap between investor expectations and

actual experiences in the mutual fund industry. It looks into the
elements that contribute to this disparity, such as performance,
fees, and communication. The study emphasises the importance
of better transparency, investor education, and realistic
performance predictions in order to bridge the gap and increase
investor satisfaction.

7
 1. Introduction
What is mutual fund
SEBI (Mutual Fund) Regulations 1993 defines
Mutual Fund as “a fund Established in the form
of a trust by a sponsor to raise money by the
trustees Through the sale of units to the public
under one or more schemes for investing
Securities in accordance with these regulations”.
A mutual fund is a pool of money managed by a
professional Fund Manager. It is a trust that
invests funds in stocks, bonds, money market
instruments, and/or other securities after
collecting money from a number of investors
who have similar investing goals. And, after

8
deducting appropriate fees, the income / gains
generated by this collective investment are
distributed equally among the investors.

Mutual funds are suitable for people who do not

have substantial amounts to invest or do not
have the interest or time to research the market
but want to develop their money. Professional
fund managers invest the money collected in
mutual funds in accordance with the scheme’s
stated aim. In exchange, the fund company
deducts a minimal fee from the investment.
Mutual fund fees are regulated and subject to
certain limits established by the Securities and
Exchange Board of India (SEBI).
Mutual funds are an effective way for regular
investors to participate in and benefit from
capital market uptrends. While investing in
mutual funds can be beneficial, choosing the
proper fund can be difficult. As a result,
investors should conduct thorough due diligence
on the fund, taking into account the risk-return
trade-off and time horizon, or consult an
9
experienced investment adviser.

History of mutual fund

The Mutual Fund Industry has grown
tremendously in recent years. Mutual funds in
India can be broadly classified into five main
phases, which are as follows:
FIRST PHASE – 1964-1987
The Mutual Fund industry in India began in
1963 with the establishment of UTI, which was
controlled by RBI. In 1978, IDBI took over
control from RBI. The first scheme, Unit
Scheme 1964 (US ’64), was launched by UTI.
By 1988, UTI managed assets worth ₹6,700
crores.
SECOND PHASE – 1987-1993 – ENTRY OF
PUBLIC SECTOR MUTUAL FUNDS
In 1987, public sector banks and LIC started
mutual funds. SBI Mutual Fund was the first
independent one in June 1987, followed by
others like Canbank, PNB, and more. LIC and
GIC also joined later. By 1993, the industry had
₹47,004 crores in assets under management.
10
THIRD PHASE – 1993-2003 – ENTRY OF
PRIVATE SECTOR MUTUAL FUNDS
The Indian securities market got more important
with SEBI’s establishment in April 1992, which
protects investors and regulates the market. In
1993, SEBI created rules for mutual funds
(except UTI). Kothari Pioneer was the first
private MF in 1993, starting a new era. The
rules were updated in 1996. Many foreign
sponsors entered the industry, leading to more
funds and mergers. By January 2003, there were
33 MFs with ₹1,21,805 crores AUM, including
UTI’s ₹44,541 crores.
FOURTH PHASE – SINCE FEBRUARY
2003 – APRIL 2014
In February 2003, UTI split into two parts:
SUUTI and UTI Mutual Fund, which follows
SEBI’s rules. This led to merging private funds
and starting a new consolidation phase. After
the 2009 global crisis, Indian markets went
down, affecting investors and MF trust. SEBI
removed entry fees, adding to the struggle.
From 2010 to 2013, MF growth was slow due to
11
these issues.

FIFTH (CURRENT) PHASE – SINCE MAY

2014
SEBI made changes in 2012 to make Mutual
Funds (MFs) more popular in smaller cities.
After 2014, the industry improved with more
investments and new accounts. By August 2017,
the investments grew to ₹20 trillion from ₹10
trillion in 2014. In November 2020, it crossed
₹30 trillion. From 2013 to 2023, the industry
grew over 5 times to ₹44.39 trillion. Investor
accounts also doubled in 5 years. Distributors
played a big role, helping people invest and stay
invested, even in uncertain markets. They made
Systematic Investment Plans (SIPs) popular,
with 6.65 crore accounts by June 2023.

Role of Mutual Funds

▪ Assist investors in earning income or building

wealth
12
▪ Mobilization of savings

▪ Facilitating the infusion of capital in the

economy

▪ Market stabilizer

Advantages
1. Professional Management:
Mutual funds provide investors with the
opportunity to earn an income or build wealth
through professional management of their
investible funds. Investing in the securities
markets will necessitate a number of formalities.
Mutual fund investing simplifies the process of
investing and holding securities.

2. Affordable Portfolio Diversification

Investing in a scheme’s units gives investors
exposure to a variety of assets held in the plan’s
13
investment portfolio in proportion to their stake
in the scheme. As a result, even a little
investment of Rs.500 in a mutual fund scheme
can provide the advantages of a diversified
investment portfolio.
3. Economies of scale
The mutual fund can hire expert managers to
oversee investments because of the pooling of
significant sums of money from many investors.
Large investment portfolios result in a variety of
different economies of scale. Investment
research, office space, brokerages, and other
bank services.
Thus, investing through a mutual fund has a
clear economic advantage over direct investing
in terms of cost savings.
4. Liquidity
Mutual fund investors can recover the market
value of their investments from the mutual fund
at any time (with the exception for funds having
a lock-in period). Schemes that can only be
recovered from the mutual fund if the scheme is
closed are required to be listed on a stock
14
exchange. In such schemes, the investor can sell
the units on the stock exchange platform to
recover the original investment value.
5. Systematic Approach to Investments
Mutual funds also provide services that allow
investors to invest money on a regular basis
through a Systematic Investment Plan (SIP),
withdraw money on a regular basis through a
Systematic Withdrawal Plan (SWP), or transfer
money between other types of schemes through
a Systematic Transfer Plan (STP).
Such systematic procedures encourage
investment discipline, which is more beneficial
to investors.
Disadvantages
1. Lack of portfolio customization
A mutual fund unitholder is one of
thousands of investors in a scheme. Once
a unit holder has purchased a unit in the
scheme, investment management is left to
the fund manager. As a result, the
unitholder has no involvement in which
securities or assets the scheme will be
15
 investing in.

2. Choice overload
There are multiple mutual fund schemes offered
by 42 mutual
Funds – multiple options within those schemes,
making it difficult for investors to make a
decision between them.
3. No control over costs
In a scheme, all of the investors’ money is
pooled together. The costs of running the
scheme are shared by all Unitholders in
proportion to their holdings of Units in the
plan. As a result, an individual investor has no
influence over the costs of a scheme.
4. No Guaranteed Returns
A mutual fund is not a product with a
guaranteed rate of return. The performance of
the investments has an effect on the mutual
fund scheme’s returns. The movement of the
specific market in which the money is
invested, the performance of individual
16
 securities held, and the competence of the
investment management team are the
determining variables.
Classification of Mutual Funds
By the structure of the fund
Open Ended Funds:
Investors can enter or exit these funds at any
time, even after the NFO. Although some
unitholders may leave the plan entirely or
partially, the scheme continues to operate with
the remaining investors. The scheme does not
have a set deadline for completion.
Close ended funds:
These funds have a set maturity date.
Only during the fund’s NFO can investors
purchase units of a closed-ended scheme. The
fund arranges for the units to be exchanged on
a stock exchange after the NFO.
Interval Funds:
The funds incorporate elements of both open-
ended and closed-ended strategies. They are
mostly closed-ended, but open up at
predetermined intervals. Transaction periods
17
 are the times when an interval system
becomes open-ended.

On basis of management style

Actively managed funds:
These are funds in which the fund
management has the freedom to choose the
investment portfolio within the broad
parameters of the scheme’s investment
objective. Because this expands the
responsibility of the fund manager, the
expenses for running the fund rise.
Investors anticipate that actively managed
funds will outperform the market.
Passive funds:
These funds make investments based on the
performance of a specific index. As a result,
the performance of a passive fund tends to
reflect that of the underlying index. They are
not intended to outperform the market.

 Statement of Problems and Need for the

Study
18
 1. Problem Statement
There is often a notable discrepancy between
investors’ expectations and their actual
experiences within the mutual fund industry.
This gap can impact investor satisfaction,
retention, and trust in mutual funds as an
investment vehicle. Despite various efforts by
fund managers and financial advisors to educate
and manage investor expectations, the problem
persists due to multiple factors, including
market volatility, differing risk tolerances, and
the investor’s limited understanding of fund
performance metrics.

By identifying the root causes of this gap and

understanding how it impacts investor behavior,
mutual fund companies can work to align their
offerings with investors’ expectations and
improve satisfaction, transparency, and trust in
their services.

2. Need for the Study

19
Understand Investor Behavior: Analyze how
investor expectations are formed and why they
may not align with actual performance. This
includes identifying the influence of marketing,
communication, and personal financial goals on
investor expectations.

Evaluate the Impact of the Expectation-

Experience Gap: Assess how the gap influences
investor decisions, such as early redemption,
switching funds, or even exiting the mutual fund
market altogether.

Enhance Communication and Transparency:

Help fund managers and advisors improve their
communication with clients to set realistic
expectations, which may increase investor
confidence and long-term satisfaction.

Promote Financial Literacy: Provide insights

into areas where investor education can be
enhanced to improve their understanding of risk,
performance metrics, and market dynamics,
20
ultimately empowering them to make informed
investment choice

 Rational study

Enhanced Customer Satisfaction: Understanding

discrepancies between expectations and reality
can help mutual fund companies improve client
satisfaction. By identifying specific areas where
expectations are not met, fund managers and
financial advisors can make adjustments in
communication, service quality, or performance
to align better with investor goals.

Improved Investment Outcomes: If investors

have unrealistic expectations about returns,
risks, or timelines, they may become dissatisfied
or make suboptimal decisions, like exiting
investments prematurely. This study can help
investors align expectations with actual market
performance, fostering patience and long-term
21
investing, which are critical for successful
outcomes in mutual funds.

Building Trust and Transparency: Addressing

expectation gaps can help enhance transparency
in the mutual fund industry. By openly
discussing potential gaps and bridging them,
companies can foster a culture of trust, as
investors feel their interests are being taken
seriously.

Regulatory and Ethical Compliance: Misleading

marketing materials or ambiguous financial
jargon can lead to misunderstandings. A study
like this can highlight whether mutual funds are
fulfilling their regulatory obligations in terms of
disclosures and risk communication, promoting
ethical practices within the industry.

Adapting to Market Dynamics: Investor

expectations often shift based on market
conditions. Analyzing these gaps periodically
can help mutual fund companies stay attuned to
22
evolving investor priorities, adapting their
strategies to maintain relevance and
competitiveness.

Personalized Financial Advisory: Understanding

expectation gaps can help financial advisors
tailor their guidance, providing more
personalized advice based on an investor’s risk
appetite, financial goals, and timelines. This can
foster stronger, more enduring client
relationships.

23
 Types of Mutual Funds:

1. Based on Asset Class

Equity Funds: Primarily invest in stocks,
aiming for capital appreciation. They carry
higher risk but also offer the potential for high
returns.
Debt Funds: Focus on fixed-income securities
such as bonds, government securities, and
corporate debt. They are generally lower-risk
investments.
Money Market Funds: Invest in short-term,
high-quality debt instruments like Treasury
bills and certificates of deposit, offering lower
risk and stable returns.
Hybrid or Balanced Funds: Combine equity
and debt investments, providing a balance of
24
 growth and income, suitable for moderate
risk-takers.

2. Based on Investment Objective

Growth Funds: Aim for capital appreciation
by investing in high-growth potential stocks.
They are riskier but suitable for long-term
investment goals.
Income Funds: Focus on generating regular
income by investing in bonds and dividend-
paying stocks, ideal for conservative investors
seeking stability.
Index Funds: Replicate a specific index (e.g.,
S&P 500), aiming to match the index’s
returns. They are passively managed and often
have lower fees.
Tax-Saving Funds (ELSS): Primarily in India,
these equity-linked savings schemes provide
tax benefits under Section 80C of the Income
Tax Act

3. Based on Structure
25
 Open-Ended Funds: Investors can buy or sell
units anytime, providing high liquidity. The
fund’s NAV (Net Asset Value) is updated
daily.
Closed-Ended Funds: Have a fixed maturity
period. Investors can buy units only at the
time of the New Fund Offer (NFO) and sell
them on stock exchanges before maturity.
Interval Funds: Operate as a hybrid of open-
and closed-ended funds, allowing purchase or
redemption at specific intervals.

4. Based on Risk Profile

Low-Risk Funds: Include debt funds and
money market funds that invest in secure,
low-return assets.
Medium-Risk Funds: Hybrid and balanced
26
 funds offer moderate returns with balanced
risk.
High-Risk Funds: Equity funds and
sectoral/thematic funds focus on high-growth
but volatile assets, suitable for risk-tolerant
investors.

5. Based on Specialization or Theme

Sectoral Funds: Invest in specific sectors like
technology, healthcare, or energy, suitable for
those who want targeted exposure.
Thematic Funds: Follow broader themes (e.g.,
environmental, social, and governance (ESG)
criteria or global trends).
International/Global Funds: Invest in foreign
markets, providing exposure to international
equities and bonds.
Commodity Funds: Invest in commodities like
gold, silver, or oil, helping investors hedge
against inflation.

27
 Risk of mutual fund

1. Market Risk
Equity Risk: Stock prices fluctuate due to
market sentiment, economic factors, and
company performance. If the market
declines, equity-based mutual funds may
see a drop in value.
Interest Rate Risk: Debt funds are
particularly sensitive to interest rate
changes. When rates rise, bond prices
typically fall, which can negatively impact
the returns of debt funds.
Currency Risk: International funds face
currency fluctuations, which can affect
28
 returns. For example, if the U.S. dollar
weakens against the Indian rupee, the
value of U.S.-based investments may
decrease in rupee terms.

2. Credit Risk
Also known as default risk, this is the risk
that an issuer of a bond may fail to make
timely interest payments or return the
principal amount, impacting debt and
income funds. Lower-rated bonds carry
higher credit risk but can yield higher
returns.

3. Liquidity Risk
Some mutual funds, particularly closed-
ended funds or funds investing in less
liquid assets, may be hard to sell quickly
without impacting their price. Liquidity
risk may also affect funds during market
downturns, where finding buyers becomes
challenging.

29
 4. Concentration Risk
Funds with concentrated portfolios or those
focused on specific sectors (like sectoral
or thematic funds) are vulnerable to
adverse events in that sector or theme. If a
particular sector underperforms, the entire
fund’s value may decline.

5. Reinvestment Risk
When mutual funds pay out dividends or
interest, there’s a risk that the returns on
reinvested earnings may be lower if
market conditions change unfavorably.
This risk affects income-focused funds,
especially in declining interest rate
environments.

6. Inflation Risk
Also known as purchasing power risk,
inflation risk refers to the erosion of
investment returns due to rising prices.
While equity funds have growth potential
that can outpace inflation, debt funds and
30
 other low-yield investments might
struggle to keep up with inflation.

7. Management Risk
Since mutual funds are actively managed,
they’re subject to management risk, which
is the potential for fund managers’
strategies or decisions to underperform or
not achieve the fund’s objectives. This
risk can vary with the experience and skill
of the fund manager.

8. Political and Economic Risk

Economic instability, political changes, and

regulatory shifts can impact the markets,
affecting mutual fund returns. Global
funds are particularly exposed to risks
from international events like trade wars,
sanctions, or changes in foreign policy.
31
 Despite these risks, mutual funds remain a
popular choice due to their professional
management, diversification, and relative
accessibility. Understanding these risks
helps investors align their investments
with their financial goals and risk
tolerance.

32
 2. Research methodology
 Objective:

Identify Expectations vs. Reality: Understand

the specific expectations investors have
regarding returns, risk, service quality, and
overall performance, and compare these with
their actual experiences.

Improve Investor Satisfaction: Identify factors

that contribute to dissatisfaction among
investors. This can lead to enhanced service
delivery, better communication, and more
realistic marketing strategies.

Enhance Product Offerings: Gain insights into

33
investor needs and preferences, allowing mutual
fund companies to tailor products and services
more effectively to meet those expectations.

Reduce Attrition Rates: By understanding gaps,

firms can implement strategies to retain clients
by addressing their concerns and improving
their overall investment experience.

Strengthen Trust and Transparency: Highlight

areas where miscommunication may occur,
fostering a culture of transparency that can build
greater trust between investors and fund
managers.

Guide Regulatory Compliance: Ensure that

mutual fund companies adhere to regulatory
requirements regarding disclosure and fair
practices, which can mitigate the risk of
misleading investors.

Educate Investors: Identify areas where investor

education is lacking, allowing firms to create
34
informative resources that set realistic
expectations and improve investor knowledge.

Benchmarking Performance: Establish

benchmarks for evaluating the performance of
mutual funds and the services provided, helping
firms to measure success and make data-driven
decisions.

Market Positioning: Understand the competitive

landscape and refine marketing strategies based
on investor perceptions and experiences, helping
firms to position themselves more effectively in
the market.

Feedback for Continuous Improvement: Create

a feedback loop that enables mutual fund
companies to continuously adapt and improve
their offerings based on evolving investor
expectations and experiences.

35
  Hypothesis
“Investors in the mutual fund industry often
have higher expectations regarding returns and
service quality than what is realistically
achieved, leading to dissatisfaction and a lack of
trust in financial institutions.”

Key Points for Analysis

Expectation Factors:

Return Expectations: Investors may expect high

returns based on historical performance or
marketing materials that highlight past
successes.
36
Risk Tolerance Misalignment: Many investors
might underestimate the risks associated with
certain funds, leading to unrealistic expectations
about safety and performance.
Experience Factors:

Actual Returns: Analyze historical

performance data to compare with investor
expectations.
Service Quality: Assess the quality of customer
service, accessibility of information, and
responsiveness of fund managers compared to
investor expectations.
Investor Behavior:

Decision-Making Process: Investigate how

marketing materials, peer influence, and
financial literacy affect investor expectations.

Response to Underperformance: Explore how

investors react when their expectations are not
met, including selling their funds or seeking
37
alternative investments.

Understanding of Fund Characteristics:

Examine whether investors understand the
nature of mutual funds, including fees, risks,
and objectives.

Impact of Communication: Assess how

effective communication from fund managers
influences investor expectations and
satisfaction.

Economic Conditions:
Consider how macroeconomic factors (e.g.,
inflation, interest rates) impact both
expectations and actual performance.
Industry Trends: Analyze how changes in the
mutual fund industry, such as fee structures and
regulatory changes, affect investor perceptions.

38
  Scope of the study
Client Decision-Making and Behaviour:
Examine the elements that influence investors’
decision-making process while selecting mutual
funds. Examine the information gap,
behavioural biases, risk perception, and the
impact of market conditions on investing
decisions.
Industry Dynamics: The mutual fund sector
functions within the framework of a larger
market. Understand the factors that influence
investor expectations and experiences requires
an in-depth understanding of market dynamics
39
such as economic conditions, regulatory
changes, and investor mood. Analysing market
trends and their impact on mutual fund
performance might aid in identifying the root
causes of the expectations-experiences gap.
Quality Evaluation: Examine the historical
performance of mutual funds to determine
whether they meet investor expectations.
Examine factors such as risk-adjusted returns,
consistency, benchmarking, and transparency.
Identify gaps in performance and understand the
reasons for them
Examine : The distribution methods that mutual
fund companies utilise to reach out to investors.
Examine the usability, efficiency, and
effectiveness of various distribution channels,
including as direct sales, intermediaries, internet
platforms. Determine any distribution gaps that
may impede investor access or convenience.

Interaction and Disclosure: Effective

communication is critical in controlling investor
expectations. It is critical to investigate the
40
effectiveness of mutual fund businesses’
communication and transparency practises. This
includes assessing the clarity, correctness, and
timeliness of investor information.
Understanding how mutual funds communicate
their investment strategies, risks, and
prospective returns can give light on how
expectations and actual experiences correspond.

Client Perception and Faith: Understanding how

experiences impact people’s attitudes and
behaviour requires investigating consumer
views and trust in the mutual fund sector. This
includes looking at things like perceived risk,
faith in fund managers, and beliefs about
industry practises. Understanding how
experiences correspond with or differ from
investor expectations can be gained by studying
investor perception and trust.

41
  Limitations
Subjectivity of Expectations: Investors’
expectations can be influenced by personal
biases, previous experiences, and the marketing
messages they receive. These subjective views
may not align with actual performance metrics,
making it challenging to quantify the gap
42
accurately.

Varied Investor Profiles: The mutual fund

investor base is diverse, with varying risk
tolerances, investment goals, and levels of
financial literacy. This heterogeneity
complicates the analysis, as different segments
may have distinct expectations and experiences.

Market Volatility: The mutual fund industry is

influenced by market conditions, which can lead
to fluctuations in performance. These external
factors can skew investors’ perceptions and
experiences, especially during periods of high
volatility.

Limited Time Frame: Analyzing expectations

and experiences over a short period may not
capture long-term investment performance.
Investors’ expectations may evolve, and short-
term performance might not reflect long-term
investment strategies.

43
Data Availability: Access to reliable data on
both investor expectations and actual
performance can be limited. Surveys may not
capture all relevant factors, and self-reported
data can suffer from inaccuracies.

Complexity of Financial Products: Mutual

funds can be complex, with various fee
structures, investment strategies, and risks. This
complexity can lead to misunderstandings,
making it difficult to measure expectations
accurately.

Behavioral Factors: Psychological factors,

such as overconfidence, loss aversion, or herd
behavior, can affect investors’ experiences and
expectations, adding another layer of
complexity to the analysis.

Changing Regulatory Environment:

Regulatory changes can impact fund
44
performance and investor sentiment, introducing
variables that may not be accounted for in the
analysis.

Survey Response Bias: If using surveys to

gauge expectations and experiences, response
bias can skew results. For example, dissatisfied
investors may be more inclined to respond,
while satisfied investors may not participate as
much.

Investors may misattribute performance to

specific funds or managers, leading to
discrepancies between their expectations and
actual outcomes. This can complicate the
analysis of the gap

45
 3. REVIEW OF LITERATURE
According to Bobade et al. (2020), the majority
of investors are aware of mutual funds.
Investors with a high level of liquidity invest in
mutual funds. Investors are putting their money
into mutual funds in order to get a consistent
return in the future, save taxes, and reduce
financial risk. In India, the mutual fund business
is rapidly expanding.
According to KCN Rao (2020), the majority of
investors are aware of numerous mutual fund
plans. Mutual Fund investors are primarily
between the ages of 19 and 55, with incomes
ranging from Rs 30,000 to Rs 70,000 and
higher. The key feature that attracts investors to
mutual funds is portfolio diversification and tax
benefits.
According to Tripathi and Japee (2020), the
majority of mutual funds are performing well.
The study chose 15 distinct mutual fund
schemes and classified them as large-cap, mid-
cap, or small-cap. They conducted the research
46
using financial ratios.
According to Saxena and Sheikh (2019), gender
has no effect on mutual fund investment
intention, however middle-aged, high-income,
and investors with finance-related education are
quite favourable about mutual fund investments.
The data was analysed using one-way ANOVA
and the independent sample T-test.
Bihari have identified the most critical problem
as one of ignorance. Investors should be made
aware of the advantages. Nobody will invest
until he is completely convinced. Investors
should be made aware that ignorance is no
longer bliss and that they are losing money by
not investing. Mutual funds provide many
benefits that no other single alternative can
provide, yet most individuals are unaware of
what a mutual fund is. They merely perceive it
as another investing possibility. As a result, the
counsellors should endeavour to adjust their
thinking. Advisors should seek out more and
more youthful investors. Young investors as
well as professionals at the top of their study
47
1. Mutual Fund Investors’ Expectation and
Experience Gap :
- This study addresses the mismatch in
investors’ expectations, primarily around
product convenience and returns. It reveals a
gap between perceived performance and real
returns, indicating that better transparency in
marketing might help meet investor needs

2.An Assessment of Gap between Expectations

and Experiences of Mutual Funds
- Using surveys with retail investors, this
paper explores investment frequency,
satisfaction levels, and the impact of financial
advisories on investor experience. The study
finds a significant disparity in investor
satisfaction due to unrealistic return
expectations, particularly among newer
investors

3. ”Customer Communication Dimension of

Marketing Mix in Mutual Funds:
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 - This paper highlights how marketing
communication can mislead investors, often
resulting in unmet expectations. The authors
suggest that clearer communication around risk
and returns could help align investor
expectations with reality

4. Investors’ Experience-Expectation Gap &

Mental Accounting in Mutual Funds
- Focusing on behavioral finance, this paper
examines how cognitive biases and mental
accounting influence investor expectations. It
argues that biases like over-optimism contribute
to the expectation-experience gap, especially in
high-risk funds

5. Investor Behavior and Mutual Fund Returns:

- This study uses a behavioral perspective to
understand why many investors have inflated
return expectations, often set by marketing
claims. The paper calls for financial literacy to
help investors set realistic expectations

49
6. ”Analysis of Investment Goals and Realized
Returns:
- Examines how investment goals, like wealth
accumulation or retirement planning, can lead to
unrealistic expectations of high returns,
revealing a need for personalized advisory
services to bridge the experience gap

7. Risk Perception and Return Expectations:

- This paper assesses the mismatch between
perceived and actual risk, showing that risk
mismanagement often leads to disappointment
in returns. The study recommends risk
assessment training for better expectation
management

8. Overreaction to Short-Term Performance in

Mutual Fund Industry:
- Investigates how short-term performance
overreaction creates a skewed perception among
investors, where recent gains amplify
expectations. The study finds that overreaction
is common in volatile markets and suggests
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better investor education to manage this

9. Expectations vs. Reality in Emerging Market

Mutual Funds:
- Focuses on the challenge of emerging market
funds, where volatility and economic factors
exacerbate the expectation gap. The author
recommends conservative estimates and clearer
risk disclosure as ways to align expectations

10. Gaps in Investor Knowledge and Realized

Returns in Mutual Funds:
- Highlights the role of limited financial
literacy in creating a gap between expected and
actual returns, particularly among first-time
investors. Financial advisors are seen as key in
guiding realistic investment decisions.

The mutual fund sector is an essential

component of modern finance, enticing millions
of investors with promises of financial
prosperity and security. Investors join this sector
with preconceived notions of profitable returns,
51
minimised risks, and dependable
communication. However, real experiences in
the mutual fund sector can occasionally deviate
significantly from these optimistic expectations.

Gap analysis
A gap analysis is the process by which a
company compares its present performance to
its intended, expected performance. This
research is used to examine whether a company
is meeting expectations and successfully
utilising its resources.
 Information Gap: Due to incomplete or
incorrect information concerning mutual
funds, investors may have irrational
expectations. By raising financial literacy
52
 and ensuring that investors have access to
clear and thorough data, this gap can be
addressed.
 Performance Gap: Investors frequently
anticipate mutual funds to consistently
deliver strong returns, but actual results may
differ. Realistic performance expectations
and improved communication from fund
managers about the underlying risks assist in
reducing this gap.
 Risk Tolerance Gap: Investors might not
fully understand their own risk tolerance,
leading to dissatisfaction when their
investments fluctuate. Investors should be
assisted by fund providers in determining
their risk appetite and making appropriate
investment selections.
 Market Timing Gap: Many investors try to
time the market, but they few are successful.
The reality is that accurate market timing is

53
 very challenging, which clashes with their
expectations of successful market timing.
 Behavioural Gap: Biases brought on by
emotions like fear and greed frequently lead
to poor financial decisions. One method to
close this gap is to encourage rational and
structured investment strategies.
 Product Complexity Gap: Some mutual fund
products are complicated and might not
meet investor expectations or risk
tolerances. It’s crucial to make product
offerings simple and ensure that investors
comprehend them.
 Communication Gap: The expectations of
investors and fund managers about the
quantity and quality of communication may
differ. Expectations can be matched through
improved and reliable communication.
This project’s topic, which examines the gap
between investor expectations and actual
experiences in the mutual fund industry, was
54
 selected owing to its enormous relevance to
the financial industry. Mutual funds are a
common choice for investors, but frequently,
investors have high expectations for returns
and experiences that might not line up with
reality. This initiative intends to investigate
the causes of these differences, which may
include problems like communication issues,
volatile markets, or inflated investor
expectations. By identifying this gap, the
initiative can offer insightful information to
both investors and the mutual fund industry,
enhancing transparency and better managing
investor expectations, ultimately resulting in
more informed investment choices and a more
healthy financial ecosystem.
The topic of analysing the gap between
investor expectations and real experiences in
the mutual fund industry was chosen for this
project due to its significant relevance in the
financial world. Mutual funds are a popular
investment choice, but investors often have
high expectations for returns and experiences
55
 that might not align with reality. This project
aims to explore the reasons behind these
discrepancies, which could include issues like
miscommunication, market volatility, or
unrealistic investor expectations. By shedding
light on this gap, the project can provide
valuable insights for both investors and the
mutual fund industry, helping to improve
transparency and better manage investor
expectations, ultimately contributing to
informed investment decisions and a healthier
financial ecosystem.

56
 4. Data analysis and Representation
The information was gathered through the
distribution of a questionnaire among
students, and their responses were
subsequently gathered. Sample size was of
63 Individuals. Subsequently analysis was
conducted to derive meaningful insights
from the collected data.

1. Age:

57
 The pie chart represents the age distribution of respondents
who filled out a Google Form questionnaire. The chart
illustrates the following:

18-30 years: This age group constitutes the majority of

respondents, with 74.3% of the total

58
 2. Are you currently employed?
The pie chart represents the responses to a Google Form
question about employment status. It shows that 68.6%
of the respondents are currently employed, while the

remaining percentage is not employed.

3. How familiar are you with investment concepts and

59
 strategies
4. How familiar are you with investment concepts and
strategies?

According to pie chart - 54.2% are beginners, meaning they

have basic knowledge.36% are at an intermediate level, so they
know more. Only 11% are advanced, meaning they have a deep
understanding of investment concepts and strategies.

60
 5. Type of investment:

According to pie chart majority of respondents are interested to

do investments in fixed deposit that is 51.4%

61
 6. Purpose of investment:

According to pie chart more concentration is on wealth

accumulation that is 48.6%. And then preference is given to

saving for specific goal – 31.4%.

62
 7. How long have you been investing?

According to Pie chart many respondents have Just started their

journey of investment.42.9% of respondents have been investing
less than 1 year.

63
7. How would you describe your risk tolerance level?
According to pie chart risk tolerance level of most of the
investors is medium that is 57.1%. High Risk takers are of less
percentage that is 20%.

64
8. How often do you review and adjust your investment
portfolio?
According to pie chart majority of respondents review their

portfolio once in a month that is 40%.

65
9. Do you have a target rate of return or benchmark for your
investments?

According to pie chart 40% of respondents have specific target

rate of return and 60% of respondents don’t have specific target
rate of return.

66
10. What is your preferred investment horizon?
According to pie chart most of respondents have preferred
investment horizon is 3-5 years. And after that preference is
given to 1-3 years.

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  Findings
 Resident’s in urban and semi urban prefer to save their
money in bank rather than investing in mutual funds.
 The basic objective behind investments are mainly long
term capital appreciation .
 Market and economic conditions have a considerable
impact on mutual fund performance, which frequently
deviates from investor expectations.
 It is observed that driving aspect of Investments in mutual
fund are safety, fund performance, Liquidity & Tax
Benefit.
 The type of investment plan that most of the investors
prefer is to get principal safety at all time with low returns
rather than High returns with no safety.

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  Recommendation
 Mutual fund companies should provide extensive training
to the financial advisors about the Mutual fund schemes
and its objectives as they are the main source to influence
the investors.
 Customers in their younger years can invest a large portion
of their assets in equities. If consumers are of an older age,
high-risk assets should be avoided.
 If a customer is willing to face risks, investing in equities
may be the greatest alternative, as they can provide high
returns on investment.
 Encourage diversification of investing techniques to reduce
the impact of market changes on investor experiences.
 Encourage long-term investing horizons to overcome short-
term bias and develop realistic expectations.
 Make it simple for investors to get performance data and
previous fund information so they can make informed
decisions.

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 5 CONCLUSION
Finally, our examination of the gap between investor
expectations and actual experiences in the mutual fund
business has thrown light on the varied nature of this
problem. Several significant reasons, including market
volatility, economic fluctuations, behavioural biases, and
the intricacies of fund management, have been
recognised as contributing to this differences. Investors
frequently enter the mutual fund market with high
expectations of regular and risk-free returns, but the
reality is far more complex.
Furthermore, financial counsellors and fund managers play
an important role in narrowing this gap. They should
prioritise aligning their advice and recommendations to
investors’ individual goals and risk tolerance.
Furthermore, they must resist the temptation to follow
market trends, emphasising the necessity of long-term,
diversified investing plans.
Finally, bridging the gap between investor expectations

70
 and real-world experiences in the mutual fund industry
will benefit both investors and the industry. It will result
in better informed investment decisions, less
disappointment, and a healthier, more sustainable
investment environment. To achieve this alignment, all
stakeholders must work together, with an emphasis on
education, communication, and transparency. By
addressing these issues, the mutual fund sector can
advance towards a future in which investor experiences
more closely match their expectations, boosting trust and
confidence in financial markets.

The gap between investor expectations and their actual

experience in the mutual fund industry reveals a
significant need for better alignment between what
investors anticipate and what they ultimately experience.
This discrepancy can often be attributed to factors like
unrealistic return expectations, inadequate understanding
of market volatility, lack of transparent communication
from fund managers, and differences in risk perception.
Addressing these gaps is crucial to maintaining trust in
the industry, fostering long-term client relationships, and
ensuring that investors have a more satisfying
investment journey.
Suggestions:

Enhanced Investor Education: Financial literacy programs

can help investors understand the nature of mutual fund
investments, including potential risks, realistic return
expectations, and the impact of market fluctuations.

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 Clear Communication of Risks and Returns: Fund
managers and advisors should regularly communicate
both the potential upsides and risks associated with
investments, setting realistic expectations early in the
process.

Personalized Risk Assessment: Implement tools that help

identify each investor’s risk tolerance, allowing fund
managers to recommend products that better match
individual risk appetites.

Transparency in Performance Reporting: Offering easy-to-

understand, transparent performance reports that show
gains, losses, and how market events impact returns can
bridge gaps between expectation and reality.

Regular Check-Ins and Reviews: Scheduling regular

meetings or touchpoints between clients and advisors
can recalibrate expectations and realign investment
goals, particularly during market downturns or times of
high volatility.

Improved Digital Tools: Advanced digital platforms with

interactive dashboards and predictive analytics can give
investors better insight into potential outcomes, helping
them visualize expected vs. actual returns and make
informed decisions.

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 6.Refrences

A study of mutual fund awareness in gandhinagar city –

GAP GYAN https://www.gapgyan.org/res/articles/(44-
54)%20A%20STUDY%20OF%20MUTUAL%20FUND
%20AWARENESS%20IN%20GANDHINAGAR
%20CITY.pdf

A Study on Factor Influencing Satisfaction of Investors

Towards … http://www.ijmbs.com/24/manoj.pdf

What Is a Gap Analysis? – Investopedia

https://www.investopedia.com/terms/g/gap-analysis.asp

Mutual fund https://g.co/kgs/6ezARL

AMFI https://www.amfiindia.com/

Study Material of NISM VA

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74