CHAPTER 1: INRODUCTION

1.0 Introduction
A mutual fund is a recognized principle of reducing the risk of investments by diversifying them.
Mutual funds are professionally managed and pool money from many investors in order to
purchase securities. Although there is no legal definition of the term mutual fund, it is most
commonly applied only to those collective investment vehicles that are regulated and sold to the
general public. Mutual funds are sometimes referred to as Unit Fund or Collective Fund.
There is a famous quote about investments by Warren Buffett don't put all your eggs in one
basket. This indicates the risk of investing all the money only in one place. An investor can
reduce his risk by holding a portfolio of assets instead of only one asset. By creating a portfolio
of a variety of assets, this risk is substantially reduced. No Mutual fund investments are totally
risk free. In fact, investing in mutual funds bears the same risk as investing in the equities, the
only difference is that due to professional management of funds the controllable risks are
substantially reduced.
The following picture will clarify how the mutual funds work:

Given Back to the

Pool Their Money In

That Generates

Which is Invested In

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Mutual funds are gaining popularity in Bangladesh. Currently there are two types of mutual fund
in Bangladesh:
1. Open-Ended Mutual Fund:
Investors can buy and sell open-ended shares from the market at the end of every business day.
These shares are priced at net asset value. A professional investment manager oversees the
portfolio, buying and selling securities as appropriate. The total investment in the fund will vary
based on share purchases, share redemptions and fluctuation in market valuation. The number of
shares that can be traded every day is not determined by the law of Bangladesh.
2. Close-Ended Mutual Fund:
This is the mostly available type of mutual fund in Bangladesh. Close-ended mutual fund is a
collective investment scheme that has a fixed number of shares. This type of funds are not
redeemable and the shares can be purchased and sold only in the market. In general a closeended fund takes 5 to 10 years to reach maturity. The shares are issued only once at the time of
Initial Public Offering (IPO). The shares can be traded through DSE (Dhaka stock exchange). In
the open ended funds, investors has the opportunity to sell their shares back to the fund. But
reselling is not possible in case of closed-ended funds. However, they can sell those shares to the
other investors. The price received after selling the shares may differ significantly from net asset
value. When the price is higher than the net asset value, it is called premium. But when the
price is lower than the net asset value it is called a discount. Discount is more existent than
premium. Mutual funds are more likely to be profitable and efficient because a professional
investment manager is on the task of overseeing the portfolio, buying and selling securities as
appropriate

1.1. Origin of the Study

Being the students of BBA, BUP, we understand the fact that we must think beyond our course
syllabus and thrive through personal study and research. So when we were assigned with the
term paper topic of Investors Attitude towards Mutual Funds in Bangladesh we became very

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glad. Because it is not only an extremely interesting topic but also a very important part of
financial management.
During the whole process of the preparation of this report, we came across different information
regarding the past, present and the future possibilities of mutual funds as a way of investment.
The information gathering process and brainstorming during the preparation of this term paper
was very helpful for our deeper understanding of many other types of investment also.
We expect that this report will provide a clear idea about the general peoples thought on mutual
funds and will also draw a partial image of many other major types of investments.
Thus, we are confident that this report will fulfill the requirements and purpose of the task we
were assigned with for our Financial Management course.

1.2 Purpose of the Study

In this report a comprehensive image of peoples attitude regarding mutual funds, its risks and
possibilities has been depicted. The purpose of this report is to develop a deeper understanding
about the mutual funds so that we can implement the gathered knowledge in practical. For the
sake of developing a comprehensive report that does not defy the reality, we had to collect
information from various sources. This research helped us to clarify our confusions and
misperceptions about the investment scenario of Bangladesh.

1.3 Scope of the Study

This research involves only a general study related to the investment attitude of investors
towards mutual funds instead of diving too deep. The research will reveal results regarding the
investment attitude of various investors of Bangladesh and thus in turn, will help the readers to
understand the very basics about the mutual funds of Bangladesh. It will also help the fund
issuing organizations to identify the attitude of various investors and to improve the marketing of
mutual funds.
This study will help the readers to understand the basics of mutual funds.
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 This study will help the readers to understand and compare among the other types of
investments and choose the most suitable one for them.
This study will help the readers to understand the investment scenario of Bangladesh.
It will be helpful to change the attitude of the retail investors. It will be helpful for investors to
get more knowledge in further investment.
If the reader is an organization, this study will help to determine and apply people oriented
measures in mutual funds to attract more investors.

1.4 Limitations of the Study

Although we tried our level best to prepare this research the most sincere way, we are still aware
of its limitations and shortcomings.
First of all, although we admit that we were given enough time to complete the task of preparing
this term paper at the same time we think that one or two months is not a very long time to
research on such a topic like Investors Attitude towards Mutual Funds in Bangladesh. Because
this study is solely dependent on the peoples views. But peoples choices and attitudes dont not
remain the same in all the time of the year. Their choices and attitudes are contingent to many
external situations. So to depict the true and comprehensive image of the peoples attitudes
regarding mutual funds, we will have to run a research for at least a couple of years.
Secondly, the midterms and the festive atmosphere of the Holy Eid-ul-Adha caused
communication gap among the group members. This resulted in procrastination. And when the
class started again after the Eid vacation, we were burdened with many assignments,
presentations, term papers and the business competitions. So the actual time we got to complete
this term paper was very short.
Thirdly, we already mentioned that this study solely depends on the reviews of the general
people who claimed that they have idea about the mutual funds of Bangladesh. But unfortunately
we could not meet many people. Moreover none of the group members are even acquainted with
the term mutual fund. So the information provided here might not represent the opinion of the
majority of the investors.
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Finally, although we have come a long way of our BBA course, we still consider ourselves
immature to write quality reports like the professionals. So we might overlook some important
aspects of mutual funds in Bangladesh that might be very crucial in the eyes of the professionals.
CHAPTER 2: METHODOLOGY
2.0 Research Method
This research study is descriptive in nature. We had the opportunity to work with more than 50
people who are investors or just family members, relatives or friends of any investors who
claimed that they had enough knowledge about the mutual funds of Bangladesh to help us out
with this term paper. We were provided with structured questionnaires to run the interviews.
Convenient Sample method was used to collect the primary data. The secondary data was
collected from various magazines, Journals, published and unpublished reports, records and
websites like DSEBD (Dhaka Stock Exchange), CSE (Chittagong Stock Exchange) etc. Different
statistical tools can be used to interpret the data but keeping in mind the nature of data collected,
chi-square has been used.

2.1 Gathering of Information

To ensure the dependability and authenticity of this research, we had to collect data from many
reliable sources. Primary data were collected through various samples and interviews. And the
secondary data were collected from various magazines, Journals, published and unpublished
reports, records and many dependable websites.

Primary Sources:
Sample term papers and assignments on the same topic.
Discussions with the retail investors of the mutual funds, seniors, friends and relatives
who are somehow acquainted with mutual funds of Bangladesh.
Secondary Sources:
Various types of websites and blogs.
Different Newspapers, Articles, Journals and Publication.
Different research reports that were already done by the others.
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2.2 Organizing the Information

In the course of gathering data, we collected both necessary and unnecessary information. So we
had to organize the information in such a way that let us present only the most useful and
dependable information and expel the unnecessary ones. This enabled us to minimize the size of
this report to the lowest yet serving the purpose of this report perfectly. As we already mentioned
that we had to collect information from a very limited firsthand sources and we did not have this
topic on our course syllabus, so most of the information are derived from the third parties like
websites, articles, and magazines. But we accepted only those information that came from a very
reliable source. So the authenticity of this report is ensured.

2.3 Analyzing of Information

After collecting and organizing data by the questionnaires and considering the purpose and
objectives of the study, only the most important and valuable data were decided to be included.
We used the raw data to discuss rationally and draw conclusions on the final reports.

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