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Conversion Gate01
2013-2015
SUBMITTED TO
DR. V. N. BEDEKAR INSTITUTE OF MANAGEMENT STUDIES, THANE
STATEMENT BY THE CANDIDATE
I wish to state that the work embodied in this Project titled “INVESTOR’S
BEHAVIOR TOWARDS INVESTMENT AVENUES” forms my own
contribution to management. Wherever references have been made to intellectual
properties of any individual / Institution / Government / Private / Public Bodies /
Universities, research paper, text books, reference books, research
monographs, archives of newspapers, corporate, individuals, business /
Government and any other source of intellectual properties viz., speeches,
quotations, conference proceedings, extracts from the website, working paper,
seminal work et al, they have been clearly indicated, duly acknowledged and
included in the Bibliography.
EXECUTIVE SUMMARY
OBJECTIVE OF THE PROJECT
CHAPTER 1: INDUSTRY PROFILE..........................................................................................5
1.1 Safe/Low Risk Avenues:...............................................................................................6
1.2 Moderate Risk Avenues:...............................................................................................6
1.4 Traditional Avenues:.....................................................................................................7
1.5 Emerging Avenues:.......................................................................................................7
CHAPTER 2: LITERATURE REVIEW.......................................................................................8
3.1 Sample Technique:.....................................................................................................10
3.2 Sample Unit:...............................................................................................................10
3.3 Sample Size:...............................................................................................................10
3.4 Primary Data:.............................................................................................................11
3.5 Secondary Data:.........................................................................................................11
CHAPTER 4: DATA ANALYSIS & INTERPRETATION.............................................................12
4.1 Analysis in this report:................................................................................................12
4.2 Analysis of the Survey:................................................................................................13
CHAPTER 5: FINDINGS & SUGGESTIONS...........................................................................30
5.1 Findings:....................................................................................................................30
CHAPTER 6: SUMMARY & CONCLUSION............................................................................32
6.1 Summary:...................................................................................................................32
6.2 Conclusion:................................................................................................................32
ANNEXURE 1 QUESTIONNAIRE..........................................................................................33
BIBILIOGRAPHY......................................................................................................................................................36
“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
EXECUTIVE SUMMARY
Each investment alternative has its own strengths and weaknesses. Some
options seek to achieve superior returns but with corresponding higher risk. Other
provide safety but at the expense of liquidity and growth. Other options such as FDs
offer safety and liquidity, but at the cost of return. Mutual funds seek to combine the
advantages of investing in arch of these alternatives while dispensing with the
shortcomings. Indian stock market is semi-efficient by nature and, is considered as
one of the most respected stock markets, where information is quickly and widely
disseminated, thereby allowing each security's price to adjust rapidly in an unbiased
manner to new information so that, it reflects the nearest investment value.
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 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.
One needs to invest and earn return on their idle resources and generate a
specified Sum of money for a specific goal in life and make a provision for an
uncertain future. One of the important reasons why one needs to invest wisely is to
meet the cost of inflation. Inflation is the rate at which the cost of living increases.
The cost of living is simply what it cost to buy the goods and services you need
to live. Inflation causes money to lose value because it will not buy the same amount
of a good or service in the future as it does now or did in the past. The sooner one
starts investing the better. By investing early you allow your investments more time
to grow, whereby the concept of compounding increases your income, by
accumulating the principal and the interest or dividend earned on it, year after year.
• Invest early • Invest regularly • Invest for long term and not for short term
“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
The main objective of the project is to find out the needs of the current and
future investors. For this analysis, customer perception and awareness level will be
measured in important areas such as:
2. To find out how investors get information about the various financial instruments.
4. The duration for which they would prefer to keep their money invested.
7. To know the risk tolerance level of the individual investor and suggest a suitable
portfolio.
Stock market has been subjected to speculations and inefficiencies, which are
beached to the rationality of the investor. Traditional finance theory is based on the
two assumptions. Firstly, investors make rational decisions; and secondly investors
are unbiased in their predictions about future returns of the stock. However financial
economist have now realized that the long held assumptions of traditional finance
theory are wrong and found that investors can be irrational and make predictable
errors about the return on investment on their investments.
1. RBI - Reserve Bank of India is the supreme authority and regulatory body
for all the monetary transactions in India. RBI is the regulatory body for various
Banking and Non Banking financial institutions in India.
4. AMFI Association of mutual funds in India regulates all the mutual fund
companies in India.
5. FIPB Foreign investments promotion board regulates all the foreign direct
investments made in India.
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
Apart from these, there are traditional investment avenues and emerging investment
avenues.
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
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Sudalaimuthu and senthil kumar (2008) Mutual fund is the one of investment
avenues the researcher research in this area about investors perception towards
mutual fund investments has been analyzed effectively taking into account the
investors reference towards the mutual fund sector, scheme type, purchase of mutual
fund units, level of risks undertaken by investors, source of information about the
market value of the units, investors opinion on factors influenced to invest in mutual
funds, the investors satisfaction level towards various motivating factors, source of
awareness of mutual fund schemes, types of plan held by the investors, awareness of
risk category by investors, problems faced by mutual fund investors. Running a
successful mutual fund requires complete understanding of the peculiarities of the
Indian Stock Market and also the awareness of the small investor. The study has
made an attempt to understand the financial behavior of mutual fund investors in
connection with the scheme preference and selection. An important element in the
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
success of a marketing strategy is the ability to fulfill investor expectation. The result
of these studies through satisfactory on the investor’s perception about the mutual
funds and the factors determining their investment decisions and preferences. The
study will be useful to the mutual fund industry to understand the investor’s
perception towards mutual funds investments and the study would also be
informative to the investors.
Sunil Gupta (2008) the investment pattern among different groups in city had
revealed a clear as well as a complex picture. The complex picture means that the
people are not aware about the different investment avenues and they did not
respond positively, probably it was difficult for them to understand the different
avenues. The study showed that the more investors in the city prefer to deposit their
surplus in banks, post offices, fixed deposits, saving accounts and different UTI
schemes, etc. The attitude of the investors towards the securities in general was
bleak, though service and professional class is going in for investment in shares,
debentures and in different mutual fund schemes. As far as the investments are
concerned, people put their surplus in banks, past offices and other government
agencies. Most of the cities though being rich have a tendency of investing then
surpluses in fixed deposits of banks, provident funds, Post Office savings, real
estates, etc. for want of safety and suitability of returns.
Manish Mittal and Vyas (2008) Investors have certain cognitive and emotional
weaknesses which come in the way of their investment decisions. Over the past few
years, behavioral finance researchers have scientifically shown that investors do not
always act rationally. They have behavioral biases that lead to systematic errors in
the way they process information for investment decision. Many researchers have
tried to classify the investors on the basis of their relative risk taking capacity and
the type of investment they make. Empirical evidence also suggests that factors such
as age, income, education and marital status affect an individual's investment
decision. This paper classifies Indian investors into different personality types and
explores the relationship between various demographic factors and the investment
personality exhibited by the investors.
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
Initially, a rough draft was prepared by keeping in mind the objective of the
research. A pilot study was undertaken in order to know the accuracy of the
questionnaire. The final questionnaire was arrived at only after certain important
changes are incorporated. Convenience sampling technique has used for collecting
the data from different investors. The investors are selected by the convenience
sampling method. The selection of units from the population based on their easy
availability and accessibility to the researcher is known as convenience sampling.
Convenience sampling is at its best in surveys dealing with an exploratory purpose
for generating ideas and hypothesis.
The respondents who asked to fill out the questionnaires are the sampling
units. These comprise of employees of MNC s, government employees, housewives,
self employed, professionals and other investors.
The sample size was around more than 100, which comprised of people from
different regions. But around 102 respondents (Investors) filled up the form.
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
An analysis is made on the responses received from 102 sample investors. The
objective of the report is to find out the investor’s behavior on various investment
avenues, to find out the needs of the current and future investors.
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
Male 60 59%
Female 42 41%
TOTAL 102 100%
AGE GROUP
Below 20 0 0
Between 20-30 37 36%
Between 31-40 35 34%
Above 41 30 30%
TOTAL 102 100%
QUALIFICATION
Under Graduate 9 9%
Graduate 46 45%
Post Graduate 39 38%
Others 8 8%
TOTAL 102 100%
OCCUPATION
Salaried 54 53%
Business 22 21%
Professional 14 14%
House Wife 11 11%
Retired 1 1%
ANNUAL INCOME
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
Interpretation:
Table 1 above shows, that 60 (59%) of the investors are men and the rest
42(41%) are females. Generally males bear the financial responsibility in Indian
society, and therefore they have to make investment (and other) decisions to fulfill the
financial obligations.
When it comes to age, it was found that 36% are young and significant number
under the age group of 20-30. 34% of them are in the age group of 31-40. 30% of
them are above 40 years of age. There are no investors below 20 years of age.
Nearly 53% of the investors belong to the salaried class, 21% were business
class, 14% were professionals, 11% were housewives and the rest were retired.
It was found that irrespective of annual income they earn all the investors
interested in investments since today’s inflated cost of living is forcing everyone to
save for their future needs, and invest those saved resources efficiently.
37(36%) of the investors are earning less than 2 lakhs per annum, 33(32%)
investors are earning between 2 lakhs and 4 lakhs, 18(18%) investors are earning
between 4 lakhs and 6 lakhs, 14(14%) investors are earning more than 6 Lakhs P.a.
Since most of investors are below 4 lakhs annual earnings, many of them are non
risk takers.
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
NO OF INVESTORS
7%
YES
No
93%
Interpretation:
Since many of the investors annual earnings are below 2 lakhs and 4 lakhs,
many of them do not take the risk of losing their principal investment amount. 93%
of the sample investors are not ready to lose their principal investment amount. 7%
are ready to take risk of losing their principal up to certain extent.
No of Investors
12%
29% SHORT TERM
MEDIUM
LONG TERM
59%
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
Interpretation:
It is interesting to know that many investors prefer to invest their money for
medium term i.e. from 1 - 5 years, instead of short term and long term.12%
preferred short term, 59% preferred medium term and 29% preferred long term.
Sales
9%
17% DAILY
MONTHLY
40% OCCATIONALLY
34%
OTHER
Interpretation:
Due to the busy life schedule, many of the investors are not able to spend time
in monitoring their investments, only 17% of the investors are monitoring their
investments daily,34% are monitoring on a monthly basis, 40% , the majority
investors are monitoring their Investments occasionally. Many of them who have
invested in safe investment avenues do not bother about their investments, some of
them forget about the investments for many years.
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
Interpretation:
Out of the total sample investors only 31% of the investors invest in equity share
market through their DEMAT A/C, 69% of the investors never invested in equity
shares. The investors who invest in equity share market are asked another question,
what would they do if the stock market falls immediately after their investment, many
of them replied that they would wait till the market increases instead of selling them
at a loss, very few answered that they would average the investment by buying some
more shares.
Sales
28%
YES
NO
72%
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
Interpretation:
72% of the sample investors had a monthly family budget for their daily
expenditure.28% of the investors replied they never thought of having a budget
calculation, and few think of having a budget but never implemented so far. Many
people with excess money never cared to make any family budgets.
Interpretation:
Its interesting to know that almost same proportion of investors have different
thoughts, 47% of the investors have an investment target every year, and 53% of the
investors do not go for any targets for investment. On personal questioning many of
the investors who had an investment target every year are not able to reach their
targets due to contingent expenses. Few investors invest regularly but never thought
of having a target every year.
No of Investors
80%
60%
40% No of Investors
20%
0%
YES NO
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Interpretation:
75% of the investors never had a financial advisor, they never approached an
advisor for their financial needs, the reason may be inadequate income and excess
expenditure, and there wouldn’t be surplus money to worry about. 25% of the
investors have financial advisors, who manage their investments.
Votes
OTHERS
HEALTHCARE
CHILDREN’S MARRIAGE
HOME PURCHASE Votes
RETIREMENT
CHILDREN’S EDUCATION
0 20 40 60 80
Interpretation:
Table 3.1 shows the savings objectives of the sample investors, investors are
given option to select one or more savings objectives, since there may be one or more
answers, weights are given for each parameter bases on the votes given by the
investors, the maximum weightage represents many investors have that as main
objective. Based on the weights calculated ranks are given in the order of maximum
weightage given by investors. First rank is given to children’s education, many
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
investors feel that, investing money for the future of the Child’s education is very
important than any other need. Many of the investors are in the age group of 20-30
and 31- 40 as of now they are thinking of saving for their children’s marriage. So
children s marriage is given last rank. After children s education investors are saving
for their own health care. There is a greater need for Indians to save for their health
care who are living a mechanical life. Retirement and home purchase are given
subsequent ranks after health care.
Votes
50
40
30
20
Votes
10
0
WEALTH TAX SAVING EARN FUTURE
CREATION RETURNS
Interpretation:
All the investors have very common purposes for investing; they have more than
one purpose for investing their money. Salaried people invest for tax savings, and for
future expenditure, business people invest for the purpose of earning returns. Almost
all the investors have all the 4 purposes behind investing their money.
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Votes
80
60
40
20 Votes
0
SAFETY OF LOW RISK HIGH RETURNS MATURITY
PRINCIPAL PERIOD
Interpretation:
When the investors are asked about the factors considering before investment
many of them have voted for safety of principal and low risk. First rank is given to
safety of principal and 2nd to low risk. Here there are some contradicting results,
some investors expect high returns at a very low risk, and this is not possible in
practical Indian investment avenues. Investment believes in a proved principle,
higher the risk higher the returns, lower the risk lowers the returns. Investors need
to know about this principle before investing.
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
Below are the demographics of the sample investors based on the category
occupation.
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Assumption:
Since the investor has an option to invest in more than one Investment Avenue,
weights are given on the basis of preference to investment avenues. The avenue
which is given maximum weightage by the investors is ranked first. First Ten ranks
are given to the first ten preferred investment avenues. First preference is given to life
insurance, second to investing in gold, third to bank fixed deposits. Tenth preference
is given to bank savings account.
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
Thinking of the business people is almost same to that of salaried people, both
is similar in preferring insurance and bank fixed deposits, but given third preference
to real estate. Gold is given 5th place here. Last place is given to national savings
certificates.
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Table 6: Finding Relationship between Age Group and Level of Risk Tolerance
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
Observations:
Observations from table 6.1, 6.2, 6.3
From the table 6.1 we find that 51% of Investors between the age group of 20-
30 came under medium risk category, where as the percentage of investors who
came under medium risk in the age group of 30-40 has decreased to 32%. It still
came down in the case of investors in the age group of 40 above, which is only 20%.
We can see a decreasing trend in the behavior of investors towards medium risk
when their age increased.
35% of the investors in the age group of 20-30 are in the low risk category,
where as Investors under the age group 30-40, 57% came under the low risk
category, there is a large increase in the investors who came under low risk category
in this age group. It has further increased, 70% of the investors in the age group
above 40 came under the low risk category. We can see an increasing trend with
respect to low risk category as the age increases.
Same observations are arrived at, when comparing the high risk category with
respect to the age groups. As the age increases the level of risk tolerance is coming
down. 14% came under the high risk category under the age group 20 - 30, when it
came to age group above 40 above only 10% came under the high risk category.
From the above observations we can conclude that there is a strong inverse or
negative relationship between risk tolerance and age group.
Attributes Risk Tolerance Level
Age -0.74
When Karl Pearson’s correlation coefficient is calculated, it is found to be -0.74
by which we can conclude that there is a strong negative correlation between Age
and Risk tolerance. Age accounts for the major differences in risk taking decisions by
the investors. The older an investor, the better seemed his/her performance in
comparison to the younger ones. Over-confidence in their own investment ability
among the youngsters largely accounts for the excessive trading among younger
investors leading to lower returns and this direct to decline in the risk tolerance
level.
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
5.1 Findings:
1. The study reveals that male investors dominate the investment market in
India.
2. Most of the investor’s possess higher education like graduation and above.
5. Most of the investors discuss with their family and friends before making an
investment decision.
6. Percentage of income that they invest depend on their annual income, more
the income more percentage of income they invest.
8. The investment habit was noted in a majority of the people who participated
in the study.
9. Most Investors prefer to park their funds in avenues like Life insurance, FD,
Gold and Real Estate.
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“INVESTOR’S BEHAVIOR TOWARDS INVESTMENT AVENUES”
10. Most of the investors get their information related to investment through
electronic media (TV) next to print media (News paper/ Business news paper/
Magazines)
13. Women are attracted towards investing gold than any other investment
avenue.
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6.1 Summary:
6.2 Conclusion:
This study confirms the earlier findings with regard to the relationship between
Age and risk tolerance level of individual investors. The Present study has important
implications for investment managers as it has come out with certain interesting
facts of an individual investor.
The individual investor still prefers to invest in financial products which give
risk free returns. This confirms that Indian investors even if they are of high income,
well educated, salaried, independent are conservative investors prefer to play safe.
The investment product designers can design products which can cater to the
investors who are low risk tolerant and use TV as a marketing media as they seem to
spend long time watching TVs.
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ANNEXURE 1 QUESTIONNAIRE
1. Are you aware of the following investment avenues? (Tick which ever applicable in
the boxes).
2. What do you think are the best options for investing your money? (Choose from above list,
Rank in the order of preference)
1. 3.
2. 4.
1.
2.
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6. What are the important factors guiding your investment decisions?(Return, safety of
principal, Diversification, progressive values, etc.)?
10. Have you set aside funds specifically for the education and marriage of
your children? If yes, please give amounts and how the funds are held
Yes No
12. Do you have a savings and investment target amount you aim for each year?
15. Do you invest your money in share market? (Through a DEMAT A/C)
Yes No
If yes: Imagine that stock market drops after you invest in it then what will you do?
Withdraw your money Wait to increase Invest more in it
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19. Can you take the risk of losing your principal investment amount?
Personal Details:
Name:
Gender:
Designation:
Organization:
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BIBILIOGRAPHY
Books:
Investment Analysis and Portfolio Management, by Prasanna Chandra.
Research Paper
An Empirical study on Indian individual investor’s behavior, by Syed Tabassum
Sultana.
Web Sites
www.economictimes.Indiatimes.com
www.business-standard.com
www.Indiamoney.com
www.moneymanagementideas.com
http://www.ijbarr.com/downloads/3001201511.pdf
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