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A Comparative Study On Investment Pattern of Investor Towards Banking and Share Market With Special Reference To Mumbai Region
A Comparative Study On Investment Pattern of Investor Towards Banking and Share Market With Special Reference To Mumbai Region
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CHAPTER 1: INTRODUCTION
1) INTRODUCTION
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Investment is the employment of funds on assets with the aim of earning income
or capital appreciation. Investment means putting your money to work to earn
more money or simply speaking it is sacrificing of money today for future return.
Investment! One of the most successful way to make financial provisions for the
future, where most of the conditions are uncertain and unpredictable. With well
planned investment one can get the satisfaction of safety and surety in life. We
are familiar with investment from very early days of civilization. Initially the term
saving was more popular, and was considered as safest way of making money
stable.
Investment may be said as keeping a sum of money aside from the present savings with
the view of earning returns on it. It is done on the cost of sacrifice of present consumption
of that part of money.
The dictionary meaning of investment is to commit money in order to earn financial
return or to make use of the money for future benefits or advantages. People commit
money to investments with an expectation to increase their future wealth by investing
money to spend in future years.
All investments have some risk, whether in stock, capital market, banking, financial
sector, real estate, bullion, gold etc. The degree of risk however varies on the basis of the
features of the assets, investments instrument, the mode of investment, time frame or the
issuer of the security etc.
Investment benefits both economy and the society. It is an outgrowth of economic
development and the maturation of modern capitalism. For the economy as a whole,
aggregate investment sanctioned in the current period is a major factor in determining
aggregate demand and, hence, the level of employment.
Savings form an important part of the economy of any nation. With the savings invested in
various options available to the people, the money acts as the driver for growth of the
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country. Indian financial scene too presents a plethora of avenues to the investors. Though
certainly not the best or deepest of markets in the world, it has reasonable options for an
ordinary man to invest his savings. Banks are considered as the safest of all options, banks
have been the roots of the financial systems in India. Promoted as the means to social
development, banks in India have indeed played an important role in the rural upliftment.
For an ordinary person though, they have acted as the safest investment avenue wherein a
person deposits money and earns interest on it. The two main modes of investment in
banks, savings accounts and fixed deposits have been effectively used by one and all.
Elements of Investment
Reward
Risk and Return
Time
Why Should we Investment?
Financial reasons
1.
2.
3.
4.
5.
Other Reasons
Investing is not a game but a serious subject that can have a major impact on investor's
future wellbeing. Virtually everyone makes investments. Even if the individual does not
select specific assets such as stock, investments are still made through participation in
pension plan, and employee saving programme or through purchase of life insurance or a
home or by some other mode of investment like investing in Real Estate (Property) or in
Banks or in saving schemes of post offices. Each of this investment has common
characteristics such as potential return and the risk you must bear. The future is uncertain,
and you must determine how much risk you are willing to bear since higher return is
associated with accepting more risk. (Lopes, 1987) The individual should start by
specifying investment goals. Once these goals are established, the individual should be
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aware of the mechanics of investing and the environment in which investment decisions
are made.
TYPES OF INVESTORS:
Individual investors: (including trusts on behalf of individuals, and umbrella
companies formed for two or more to pool investment funds)
Collectors of art, antiques, and other things of value
Angel investors, either individually or in groups
Venture capital funds which serve as investment collectives on behalf
of individuals, companies, pension plans, insurance reserves, or other funds.
Investment bank
Investment trusts and
Real estate investment trusts
Where one can invest?
Securities Market:
Money Market
Bond Market
Mortgage Market
Stock Market
Foreign Exchange Market
Derivatives Securities Market
Depository Institutions:
Commercial Banks
Other Financial Institutions:
Insurance Companies
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The main objective of the study is to find out the investment pattern of the
investors towards banking and Stock market.
To determine what factors influence them while they choose a particular
investment, a particular sector and in which particular scheme they prefer to invest
and to find out whether they are satisfied with their investment decision or not.
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VARIABLE TO BE USED
Independent Variable
Dependant Variable
Age
Investment in Banking
& Share Market
Education
Dependant Variable
Gender
Independent Variable
Economical
Environment
Moderate Variable
Sampling Design:
Sampling unit The target population must be defined that has to be sampled. The
sampling unit of research included students and professionals residing in Mumbai city.
.Sample size This refers to number of respondents to be selected from the Mumbai city
to constitute a sample. The sample size of 30 Investors will be taken.
Sampling Technique In this project, Questionnaire Method will be used for the
collecting the data.
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Investment Alternatives
Non marketable financial assets: These are such financial assets which
gives moderately high return but can not be traded in market.
* Bank Deposits
* Post Office Schemes
* Company FDs
* PPF
Equity shares: These are shares of company and can be traded in
secondary market. Investors get benefit by change in price of share and
dividend given by companies. Equity shares represent ownership capital. As
an equity shareholder, a person has an ownership stake in the company. This
essentially means that the person has a residual interest in income and wealth
of the company. These can be classified into following broad categories as
per stock market:
* Blue chip shares
* Growth shares
* Income shares
* Cyclic shares
* Speculative shares
* T-Bills
* Certificate of Deposit
* Commercial Paper
Mutual Funds- A mutual fund is a trust that pools together the savings of
a number of investors who share a common financial goal. The fund
manager invests this pool of money in securities, ranging from shares,
debentures to money market instruments or in a mixture of equity and debt,
depending upon the objective of the scheme. The different types of schemes
are
* Balanced Funds
* Index Funds
* Sector Fund
* Equity Oriented Funds
Life insurance: Now-a-days life insurance is also being considered as an
investment avenue. Insurance premiums represent the sacrifice and the
assured sum the benefit. Under it different schemes are:
* Endowment assurance policy
* Money back policy
* Whole life policy
* Term assurance policy
Real estate: One of the most important assets in portfolio of investors is a
residential house. In addition to a residential house, the more affluent
investors are likely to be interested in the following types of real estate:
* Agricultural land
* Semi urban land
* Farm House
Precious objects: Investors can also invest in the objects which have
value. These comprises of:
* Gold
* Silver
* Precious stones
* Art objects
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Advantages:
Safest Mode of Investment
Easy liquidity.
Fixed Return
Less Risky
No expertise is needed to investment in banks
Disadvantages:
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Advantages:
High rate of returns.
Wide range of options available to the Investors.
Easy liquidity.
Help of brokers is easily available.
Speculations can be fruitful sometimes.
Disadvantages:
Lack of expertise can cause huge losses.
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FEATURES OF INVESTMENT
Safety of Principal :
The safety sought in investment is not absolute or complete; it rather
implies protection against loss under reasonably likely conditions or
variations. It calls for careful review of economic and industry trends
before deciding types and/or timing of investments. Thus, it recognizes
that errors are unavoidable for which extensive diversification is
suggested as an antidote.
Adequate diversification means assortment of investment commitments
in different ways. Those who are not familiar with the aggressivedefensive approach nevertheless often carry out the theory of hedging
against
inflation-deflation.
Diversification
may
be
geographical,
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difference
between
reversibility
and
marketability
is
that
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Capital Growth:
Capital appreciation has today become an important principle.
Recognizing the connection between corporation and industry growth
and very large capital appreciation, investors and their advisers
constantly are seeking growth stocks. It is exceedingly difficult to
make a successful choice. The ideal growth stock is the right issue in
the right industry, bought at the right time.
Tax Benefits:
To plan an investment programme without regard to ones tax status
may be costly to the investor. There are really two problems involved
here, one concerned with the amount of income paid by the investment
and the other with the burden of income taxes upon that income.
When investors incomes are small, they are anxious to have maximum
cash returns on their investments, and are prone to take excessive risks.
On the other hand, investors who are not pressed for cash income often
find that income taxes deplete certain types of investment incomes less
than others, thus affecting their choices.
Purchasing Power Stability:
Since an investment nearly always involves the commitment of current
funds with the objective of receiving greater amounts of future funds,
the purchasing power of the future fund should be considered by the
investor.
For maintaining purchasing power stability, investors should carefully
study (1) the degree of price level inflation they expect, (2) the
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possibilities of gain and loss in the investment available to them, and (3)
the limitations imposed by personal and family considerations.
Concealability:
To be safe from social disorders, government confiscation, or
unacceptable levels of taxation, property must be concealable and leave
no record of income received from its use or sale. Gold and precious
stones have long been esteemed for these purposes because they
combine high value with small bulk and are readily transferable.
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Knowledge decision
No. of Respondents
Percentage of
Respondents (%)
Yes
30
100
No
Total
30
100
Yes
Yes
Yes
no
From the survey it was found that 100% respondents know about the stock market and
0% who were unknown. Because share market consists of good instruments of money
investment.
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No. of Respondents
Yes
No
Total
Percentage of
Respondents(%)
40
60
100
12
18
30
No. of Respondents
Yes; 40%
No; 60%
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Q. 3 Result: The percentage of income that respondent invest annually in share market
Annual Income Invested
No. of Respondents
Percentage of
Respondents(%)
0 to 10%
20
14
10-20%
22
20-40%
40
24
Total
30
100
Chart Title
0 to 10%; 40%
Total; 50%
20-40%; 4%
10-20%; 6%
No. of Respondents
Percentage of
Respondents(%)
0 to 10%
14
10-20%
12
20-40%
18
60
14
Total
30
100
Chart Title
0 to 10%
10-20%
Total
7%
50%
20-40%
6%
30%
7%
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Q. 5 Result: while investing in share market respondent are mostly concerned about
Investment Factors
No. of Respondents
Percentage of
Respondents
Safety of Principal
28
Risk
22
Return on investment
12
40
Tax benefits
10
Total
30
100
Chart Title
Safety of Principal
Risk
Tax benefits
Total
Return on investment
14%
11%
50%
20%
5%
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No. of Respondents
Percentage of
Respondents
Liquidity
Safety of Principal
15
50
Return on investment
28
Tax benefits
14
Total
30
100
Chart Title
Liquidity
Safety of Principal
Return on investment
Tax benefits
14% 8%
28%
50%
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Q. 7 Result: why respondent prefer bank for investment over share market
Investment Factors
No. of Respondents
5
9
13
3
30
Percentage of
Respondents
16
32
42
10
100
Chart Title
Convenient; 32%
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No. of Respondents
Percentage of
Respondents
High Risk
12
40
Not convenient
22
20
Lack of awareness
18
Total
30
100
Chart Title
High Risk
Not convenient
Lack of awareness
18%
40%
20%
22%
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Q.9 Result: To know whether respondents know the procedure to invest in share market
Investment Decision
No. of Respondents
Yes
No
Total
Percentage of
Respondents (%)
40
60
100
12
18
30
No. of Respondents
Yes; 40%
No; 60%
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FINDINGS
1. Most of the respondents have given the highest summited score to investment in
bank.
2. There is significant difference between the amount of investment in bank and share
market.
3. The awareness level about investment in share market is quite low in the Mumbai
City among.
4. Approximately 40% of respondent are aware that how to investment in share
market.
5. Approximately 40% of respondent are invest in share market.
6.
7.
8.
9.
Majority of respondent 60% dont invest in share market due to the risk factor.
40% respondents invest 0-10% of their annual income in share market.
30% respondents invest 20-40% of their income in banks.
Maximum respondents 50% considered Safety of principal was most important
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Conclusion
Financial Advisor should encourage to investor for investment in
share market.
Share Market has given a new direction to the flow of personal saving and enables
investors in urban areas to reap the benefits of the stock market investment.
Indian share market is playing a very important developmental role in allocation of
scares resources in the emerging economy.
The awareness level of investor is low in advisors are interested in dealing in share
market
Very less advisors know about services provided by their group.
The Regulator of share market SEBI should make some efficient policy so that
investor can encourage for investment.
Hence, the research study concludes that financial advisors play and paramour role
to encourage the investor to invest in share market so that Indian Economy can grow
rapidly.
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QUESTIONNAIRE
PERSONAL PROFILE
(A) Name of Respondent :...............................................................
(B) Age:
Less than 20 years
20 40 years
Greater than 40 years
(D) Occupation:
a) Service
b) Profession
c) Business
d) Student
(E) Income: (per annum)
Less than Rs 3,00,000/Rs 300000 Rs 5,00,000/Greater than Rs 5,00,000/-
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b) No
b) No
Q.3 What percentage of your annual income do you invest in share market?
a) 0 to 10%
b) 10% to 20%
c) 20% to 40
b) 10% to 20%
c) 20% to 40%
b) Risk
c) Return on investment
d) Tax benefits
b) Safety
c) Return on investment
d) Tax benefits
b) convenient
c) Safety of Principal
d) Tax benefits
Q8. Why you do not prefer share market for your investment
a) High Risk
b) not convenient
d) Lack of awareness
Q9. Did you know the procedure how to invest in stock market?
a) Yes
b) No
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BIBLIOGRAPHY
Newspaper The Economics Times
Websites http://www.scribd.com/doc/54705439/Investment-Pattern-of-Investors-2#
http://www.slideshare.net/hemanthcrpatna/a-study-on-nvestment-pattern-of-investors-ondifferent-products-conducted-at-asit-c-mehta-investment-intermediates-ltd
www.moneycotrol.com
CH
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