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Abstract
The studyis conducted in western pa rts of Uttar P radesh consider ing var ious categories of population cha racter istics
& income characteristics to know the trends of investments and the influence of var ious profile characteristics of
investors on their investment decisions. The study is ofvital importa nce because of the fact tha t nothing much has been
done to explore the impact of profile chara cteristics of investors on their purchase behaviour towards various
instruments of investment. The analysis of collected information was done with the help of SPSS 16 software a nd
significant findings were obtained. The analysis of the studyclearly reflects relationship of investor’s income profile,
work exposure a nd qualification with their preference ofvar ious investment options.
Key Words:
Investment Decisions, Investor Char acter istics, Investment Options.
** Mr. Dharmendra Kumar
*** Ms. Shalini Goyal
Impact of Investor's Prifile on Investment Decisions - A Critical study
** Mr. Dharmendra Kumar
*** Ms. Shalini Goyal
* Associate Professor, Rukmini Devi Institute of Advanced Studies, Rohini, Delhi, India
** Asstt. Professor, College: Delhi College of Technology & Management, Palwal, Haryana, India
*** Lecturer, College: Delhi College of Technology & Management, Palwal, Haryana, India
* Associate Professor, Rukmini Devi Institute of Advanced Studies, Rohini, Delhi, India
** Asstt. Professor, College: Delhi College of Technology & Management, Palwal, Haryana, India
*** Lecturer, College: Delhi College of Technology & Management, Palwal, Haryana, India
and behaviors of the investors towards the different
INTRODUCTION alternatives of investment. The purpose of the analysis is
to determine the investment behavior of investors and
avings forms an important Part of economy of any investment preferences, and to know if there exists some
Snation. With the savings invested, in various options relationship between them. Investors’ perception will
available to the people, the money acts as the driver for provide a way to accurately measure how the investors
growth of the country. Indian financial scene also think about the investment products provided by the
presents an excessive amount of avenues to the investors. companies. There are various investment avenues such as
The purpose of the present study is to offer an Post Office savings, Bank Deposit Equity, Bonds and
understanding about the behavior of the investors Insurance etc. A Portfolio is a combination of different
towards investment, their psychology and their investment assets mixed and matched for the purpose of
investing style. One needs to invest and earn return on achieving an investor’s goal. In some investments (like
their idle resources and generate a specified sum of stock options) risk element is dominant attribute and in
money for a specific goal in life and make a provision for some investment (like Govt. Bonds) time is dominant
an uncertain future. One of the important reasons why attribute. There are various factors which affects
one needs to invest wisely is to meet the cost of investor’s portfolio such as annual income, government
inflation. Inflation is the rate at which the cost of living policy, natural calamities, economical changes etc. In
increases. The investment process is influenced by a this paper the researchers have tried to analyse the
number of interdependent variables and driven by dual investment behavior of Individual investor towards
mental systems, the interplay of which contributes to different investment alternatives.
bounded rational behavior where investors use various
heuristics and may exhibit behavioral biases. The three LITERATURE REVIEW
golden rules for investors are: Invest Early, Invest
regularly, and invest for long term and not for short term. Literature suggests that major research in the area of
So this paper focuses on the different investment pattern investors’ behavior has been done by behavioral scientist
Effulgence
Vol. 11 No. 1
January - June, 2013
Rukmini Devi Institute of Advanced Studies
E-mail : effulgence@rdias.ac.in, Website : www.rdias.ac.in
http://effulgence.rdias.ac.in/user/default.aspX
https://dx.doi.org/10.33601/effulgence.rdias/v11/i1/2013/56-64
*Dr. Anil Kumar Goyal
such as Weber (1999), Shiller (2000) and Shefrin (2002). place in the past. In the present study the findings of
Shiller strongly believes that market information affects many of these studies are verified and updated.
the investors’ preference and decision. Kabra G., Mishra, INVESTMENT BEHAVIOR AND WAYS OF
P.K. and Dash M.K. (2010), studied the factors affecting INVESTMENT
investment behavior and concluded that investors age
and gender are the main factors which decide the risk There are several parameters that an investor thinks
taking capacity of investors. Ajmi Jy.A. (2008) used a before investing like return, liquidity and risk associated
questionnaire to know determinants of risk tolerance of etc while the markets face a question mark in knowing
individual investors and collected responses from 1500 the pulse of an investor. Investor behavior analysis deals
respondents. He concluded that the men are less risk with analyzing the behavior of an investor based on his
averse than women, less educated investors are less likely demographic and psychographic factors like age, gender
to take risk and age factor is also important in risk and income groups. This states what would be a
tolerance. preferred portfolio of an investor at a particular age
group. This analysis will show the mentality of an
Tamimi, (2005) indentified the factors influencing the investor and his preferences clearly and concisely. In
UAE investors behavior. He found six factors which Indian context, there are various investment alternatives
were the most influencing factors on the UAE investors available in the market. These are also classified on the
behavior namely; expected corporate earnings, get rich basis of low risk, moderate risk and high risk. Some are
quickly, stock marketability past performance of the traditional avenues or some are modern avenues. In
firm’s stock , government holdings and the creation of India various investment avenues are available such as:
the organized financial markets. Kaneko H. (2006) safe/low risk avenues include saving account, fixed
focused on investment trusts and debated the behavior deposits, public provident fund, national savings
of individual investors and found that investment trusts certificates, post office savings and government
are only the means of managing assets. Preethi Singh securities. Moderate risk avenues include mutual funds,
(1986) disclosed the basic rules for selecting the company life insurance, debentures and bonds. High risk avenues
for investment and expressed opinion that understanding include equity share capital, commodity market and
and measuring return and risk is fundamental to the FOREX market. Traditional avenues include real estate,
investment process. Author further stated that most gold/silver, chit funds. Emerging avenues include virtual
investors are ‘risk averse’. To have a higher return the real estate, hedge funds/private equity investment, art &
investor has to face greater risks. Several studies also passion. Now there is a need to explain all these modes
explain the relationship of demographics and risk of investment.
tolerance levels of individual investor.
Low Risk Investment Options
Aggarwal, Klapper and Wysocki (2005) observed that
foreign investors preferred the companies with better Saving Account: It is a deposit account held at a bank,
corporate governance. Investor protection is poor in case post office and other financial institution which provide
of firms with controlling shareholders who have ability security for principal amount and a modest rate of
to appropriate assets. Malkiel suggested that an interest. Depending on the specific type of savings
individual’s risk tolerance is related to his or her account, the account holder may not be able to write
household situation, lifecycle stage and subjective unlimited cheques from the account (without incurring
factors. Zhu, N. (2005) on their research work on extra fees or expenses) and the account is likely to have a
investment in trading mentioned in their research limited number of free transfers/transactions. Savings
findings that future studies in finance and economics account investment is considered one of the most liquid
have to take individual investors more seriously and investments besides demand accounts and cash. In
devote more attention to individual investors’ trading contrast to savings account, current account allows one
activities. The above discussion presents a detailed view to write unlimited cheques and use electronic debit to
about the various facts of risk studies that have then
57 Effulgence, Vol. 11, No. 1, January – June 2013
access his funds. Savings account is generally meant for that pools money from many investors to purchase
money that one save after meeting daily expenses. To securities. While there is no legal definition of mutual
open a savings account, simply go to your local bank fund, the term is most commonly applied only to those
with proper identification and ask to open an account. collective investment vehicles that are regulated by a
team of experts, available to the general public and open-
Fixed Deposits: Account which is opened for a ended in nature.
particular time period by depositing particular amount
(money) is known as Fixed (Term) Deposit Account. Life Insurance: Life insurance is a contract between an
The term ‘fixed deposit’ means that the deposit is fixed insurance policy holder and an insurer, where the
and is repayable only after a specific period. Under fixed insurer promises to pay a designated beneficiary a sum of
deposit account, money is deposited for a fixed period money (the “benefits”) upon the death of the insured
say six months, one year, five years or even ten years. person. Depending on the contract, other events such as
The money deposited in this account normally cannot terminal illness or critical illness may also trigger
be withdrawn before the expiry of period. The rate of payment. The policy holder typically pays a premium,
interest paid for fixed deposit vary (changes) according either regularly or as a lump sum. Other expenses (such
to amount, period and from bank to bank. as funeral expenses) are also sometimes included in the
benefits. The advantage for the policy owner is “peace of
Public Provident Fund: Public Provident Fund (PPF) mind”, in knowing that the death of the insured person
is a saving cum tax saving instrument in India. It also will not result in financial hardship for loved ones and
serves as a retirement planning tool for many of those lenders. Life policies are legal contracts and the terms of
who do not have any structured pension plan covering the contract describe the limitations of the insured
them. The account can be opened in designated post events. Specific exclusions are often written into the
offices, State Bank of India branches and branches of contract to limit the liability of the insurer; common
some other nationalized banks. ICICI Bank was the first examples are claims relating to suicide, fraud, war, riot
private sector bank which was authorized to open public and civil commotion. Life-based contracts tend to fall
provident fund accounts. into two major categories: Protection policies which are
designed to provide a benefit in the event of specified
National Saving Certificates: This certificate shows event, typically a lump sum payment and Investment
that someone has invested in National Savings and policies with the main objective to facilitate the growth
Investments. These certificates are issued with stated of capital by regular or single premiums.
interest rates and maturity dates, usually five to ten
years. Post office Savings refers to a savings with Debentures: It is a type of debt instrument may or may
government through the local post offices. not be secured by physical asset or collateral. These are
backed by the general creditworthiness and reputation
Government Securities: These include government of the issuer. Both corporations and governments
debt obligation (local or national) backed by the credit frequently issue this type of bond in order to secure
and taxing power of a country with very little risk of capital. Like other types of bonds, debentures are
default. This includes short-term, medium-term and documented in an indenture.
long-term Treasury bonds.
Bonds: Bond is debt investment in which an investor
So these are some investment alternatives which are loans money to an entity (corporate or government) that
containing low risk and the investor belief is that these borrows the funds for a defined period of time at a fixed
alternatives are safer than others. interest rate. Bonds are used by companies,
municipalities, and states to finance a variety of projects
Moderate Risk Investment Options and activities. Bonds are commonly referred to as fixed-
Mutual Funds: A mutual fund is a type of income securities and are one of the three main asset
professionally managed collective investment vehicle classes, along with stocks and cash equivalents.
Effulgence, Vol. 11, No. 1, January – June 2013 58
High Risk Investment Options installments over a definite period and that each such
subscriber shall, in his turn, as determined by lot or by
Equity: Equity is the term commonly used to describe auction or by tender or in such other manner as may be
the ordinary share capital of a business. In Indian specified in the chit agreement, be entitled to the prize
context it is defined by section 85 (2) of the companies amount”.
act 1956. They are the real risk-takers and care-takers of
the company and they enjoy the right of voting. RESEARCH METHODOLOGY
Ordinary shares in the equity capital of a business entitle The study was conducted by developing and using a
the holders to all distributed profits after the holders of questionnaire with consideration of certain instruments
debentures and preference shares have been paid. of investment avenues like Banks, LIC, Post office, PPF,
Commodity Markets: Commodity markets involve Bonds, Mutual funds, Real state, Stock market and
markets where raw or primary products are traded. Commodity market etc which are commonly preferred
These raw commodities are traded on regulated by Indian investors. The collected primary data was then
commodities exchanges, in which they are bought and entered in excel sheet and analysed with the help of SPSS
sold in standardized contracts.It covers physicalproduct 16.0 for windows. As per the nature of variables, that is,
(food, metals, and electricity) markets. Articles on independent and dependent; t-test, frequencies,
reinsurance markets, stock markets, bond markets and correlations, chi-square, and ANOVAs test were
currency markets cover those concerns separately and in conducted to draw out inferences on where there exist
more depth. One focus of this article is the relationship some relationship between profile of an investor and
between simple commodity money and the more investors’ preference of a particular kind of investment.
complex instruments offered in the commodity markets. Also, if there is some relationship then to know what is
the intensity of relationship, through correlations.
Miscellaneous This research study is based on both primary and
Some traditional & some modern avenues of investment secondary data. Primary data are collected with the help
alternatives are- real estate consisting of land and the of a well structured questionnaire containing all
buildings on it, along with its natural resources such as variables under this study. Non – probability sampling
crops, minerals, or water; immovable property of this in particular convenience sampling was used to collect
nature; an interest vested in this; (also) an item of real the data. The respondents chosen are investors in the
property; buildings or housing in general. Gold above said instruments of investment. The Western
investment worldwide has grown dramatically in the last Uttar Pradesh comprising Mathura, Agra and Aligarh
five years, but compared with the total stock of financial Districts is the sample base of this study.
assets, gold bullion investment is still just a tiny
proportion. Several factors are now stimulating gold Hypothesis were formulated to check the existence of
investment by new pension fund money, as well as by relationships between the variables. The hypotheses
private investors. A Chit fund is a kind of savings formulated are:
scheme practiced in India. A Chit fund company means Ho : There is no significant relationship in income of
a
a company managing, conducting or supervising, as investors and their preferred mode of investment.
foremen, agent or in any other capacity, chits as defined Ho : There is no significant relationship between income of
b
in Section 2 of the Chit Funds Act, 1982. According to investors and preferred mode of maximum investment.
Section 2(b) of the Chit Fund Act, 1982, “Chit means a Ho : There is no significant relationship between income
c
transaction whether called chit, chit fund, chitty, kuri or and preferred nature of investment .
by any other name by or under which a person enters Ho : There is no significant relationship between work
d
into an agreement with a specified of persons that every experience of investors and preferred nature of
one of them shall subscribe a certain sum of money (or a investment.
certain quantity of grain instead) by way of periodical Ho : There is no significant relationship between work
e
59 Effulgence, Vol. 11, No. 1, January – June 2013
experience of investors and preferred mode of possessing income more than 10L and less than 2L are
investment. moreover preferred to be long term investors than the
Ho : There is no significant relationship between work
fshort termed ones. Again, it can be concluded from the
experience of investors and preferred mode of descriptive statistics that as the income level increases the
maximum investment. tendency of investors to be long term investor increases.
Ho : There is no significant relationship in qualification of
gFrom Table 3, Descriptive shows that almost equal
investors and their preferred mode of investment.
Ho : There is no significant relationship between percentage of graduate & post graduate investors
hpreferred long term investment & short-term investment
qualification of investors and their preferred mode of as well. Although, it also appears that post-graduate
maximum investment.
Ho : There is no significant relationship between investors somehow prefers more short term investment
iqualification of investors and preferred nature of than long term investment. On the other hand, Table 5
investment. shows well considerable relationship between
qualification of investors and their preferred mode of
ANALYSIS & FINDINGS investment (Ho ).
g
From Table 1, since t ³2(i.e. 10.994), p< 0.05 (i.e. (INSERT TABLE 3 HERE)
.000), hence null hypothesis (Ho ) is rejected and hence
aAs both the independent and dependent variables are
the income of investors affects their preferred mode of nominal in nature so chi-square test can be conducted to
investment. Now we can determine the degree of study the null hypothesis feasibility. Therefore from
relationship between the income and preferred mode of Table 2, chi-square value=11.820 and p-value = .066
investment by calculating the coefficient of correlation. which is greater than 0.05, hence null hypothesis (Ho ) is
From Table 5, it is evident that very high degree of d
correlation is not observed and thus it can be deduced rejected and it can be deduced that there is significant
that the income somehow affects the investment relationship between experience of investment and
decisions of this investor segment. preferred nature of investment. Also it can be concluded
from the descriptive from Table 3, which as the
(INSERT TABLE 1 HERE) experience of investment increases, the tendency of
investors towards long term investment increases.
From Table 1, since t ³2 (i.e, 10.994), p< 0.05 (.000),
hence null hypothesis (Ho ) is rejected and hence the
b(INSERT TABLE 4 HERE)
income of investors affects their preferred mode of
maximum investment. To determine the degree of From Table 4, the value of F<10 (F=1.417), for one
relationship between their income and preferred mode way ANOVA conducted for qualification of investors
of maximum investment, we can determine the and preferred mode of maximum investment which
coefficient of correlation. So from Table 5, Considerable shows that null hypothesis (Ho ) is accepted and
h
degree of correlation is observed and thus it can be therefore there is no significant relationship between
deduced that the income somehow affects the qualification of investors and their preferred mode of
investment decisions of this investor segment. maximum investment.
(INSERT TABLE 2 HERE) From Table 1, since t ³2 (i.e., 9.688), p< 0.05 (.000),
null hypothesis (Ho) is rejected and hence the
e
From Table 2, chi-square value = 7.791 and p-value = investment experience of investors affects their preferred
0.254 > 0.05 and therefore null hypothesis (Ho) is
cmode of investment. To determine the degree of
rejected and it can be deduced that there is significant relationship between their investment experience length
relationship between average income and preferred and preferred mode of investment, we can determine the
nature of investment. Also from Table 3, the descriptive coefficient of correlation. From Table 5, considerable
statistics, it can be determined that the respondents
Effulgence, Vol. 11, No. 1, January – June 2013 60
degree of correlation is observed which proves the investment increases with their work experience. It is
acceptable relationship between experience of also revealed from the study that investors’ qualification
investment and preferred mode of investment. is surely related to their preferred mode and nature of
investment, like whether they are graduate or post
(INSERT TABLE 5 HERE) graduate, they are more inclined towards long term
investment rather than investing in short term. The
From Table 1, As t>2, p< 0.05, hence null hypothesis analysis clearly reflects relationship between investors’
(Ho) is rejected and therefore experience of investment
fprofile and their preference of various investment
influences investors decision towards preferred mode for options.
maximum investment. Table 6 on descriptive & means
shows that investor having less than three years of REFERENCES
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Table 1: One-Sample t Test
Test Value = 0
T Df Sig. Mean 95% Confidence
(2-tailed) Difference Interval of the
Difference
Lower Upper
Average income 10.944 31 0 1.719 1.4 2.04
preferred mode of investment 12.703 31 0 1.156 0.97 1.34
preferred mode for maximum investment 5.696 31 0 1.875 1.2 2.55
experience of investment 9.688 31 0 1.969 1.55 2.38
Table 2: Chi-Square Tests
Monte Carlo Sig. (2-sided) Monte Carlo Sig. (1-sided)
99% Confidence 99% Confidence Sig.
Interval Interval
Value Df Asymp. Sig. Sig. Lower Upper Lower Upper
(2-sided) Bound Bound Bound Bound
Average Income & Preferred nature of Investment
ab
Pearson Chi-Square 7.791 6 0.254 .250 0.239 0.261
b
Likelihood Ratio 9.558 6 0.145 .227 0.216 0.238
b
Fisher’s Exact Test 6.104 .383 0.37 0.395
Linear-by-Linear
cb b
Association .034 1 0.854 .910 0.903 0.917 0.458 0.484 .471
N of Valid Cases 32 Exp of Investment & Preferred nature of Investment
Effulgence, Vol. 11, No. 1, January – June 2013 62
ab
Pearson Chi-Square 11.820 6 0.066 .000 0 0.089
b
Likelihood Ratio 12.924 6 0.044 .094 0 0.195
b
Fisher’s Exact Test 9.85 .062 0 0.146
Linear-by-Linear
cb b
Association 6.293 1 0.012 .000 0 0.089 0 0.089 .000
N of Valid Cases 32 Qualification of inv & Preferred Nature of Investment
ab
Pearson Chi-Square 1.748 2 0.417 .594 0.424 0.764
b
Likelihood Ratio 1.869 2 0.393 .594 0.424 0.764
b
Fisher’s Exact Test 1.66 .594 0.424 0.764
Linear-by-Linear
cb b
Association .051 1 0.821 .844 0.718 0.97 0.492 0.821 .656
N of Valid Cases 32
Table 3: Cross tabulation
Preferred nature of investment
Long term Short term Both Total
Average income Less than 2 Lac 7 3 6 16
2L-5L 3 2 6 11
5L-10L 0 0 3 3
Above 10L 2 0 0 2
Experience of Investment 0-3 years 3 4 9 16
3-6 years 1 1 4 6
6-9 years 4 0 1 5
Above 9 years 4 0 1 5
Qualification of Investors Graduate 6 1 8 15
Post Graduate 6 4 7 17
Total 12 5 15 32
Table 4: ANOVA Table
Sum of Squares Df Mean Square F Sig.
Preferred mode for maximum Between Groups
investment & experience of (Combined) 2.104 3 0.701 1.538 0.227
Investment Within Groups 12.771 28 0.456
Total 14.875 31
Preferred mode for maximum Between Groups
investment & qualification (Combined) 0.671 1 0.671 1.417 0.243
of investors
Effulgence, Vol. 11, No. 1, January – June 2013
63
Within Groups 14.204 30 0.473
Total 14.875 31
Preferred mode of investment Between Groups
& qualification of investors (Combined) 0.015 1 0.015 0.054 0.817
Within Groups 8.204 30 0.273
Total 8.219 31
Table 5: Correlations Analysis
Variables Pearson Correlation Coefficient N Sig. (2-tailed)
Experience of investment & preferred
mode of investment 0.335 32 0.06
Preferred mode of investment &
Average income 0.24 32 0.185
Experience of investment & preferred
mode for maximum investment -0.352 32 0.048
Qualification of investors & preferred
mode of investment 0.042 32 0.817
Table 6: Descriptive statistics-Preferred Mode for Maximum Investment & Experience of Investment
Experience Mean N Minimum Std. % of Variance Maximum Range Median % of
of investment Deviation Total N Total Sum
0-3 years 1.56 16 Safe .892 50.0% .796 High Return 2 1.00 59.5%
3-6 years 1.17 6 Safe .408 18.8% .167 Risk Return 1 1.00 16.7%
6-9 years 1.00 5 Safe .000 15.6% .000 safe 0 1.00 11.9%
above 9 years 1.00 5 Safe .000 15.6% .000 safe 0 1.00 11.9%
Total 1.31 32 Safe .693 100.0% .480 High Return 2 1.00 100.0%
Effulgence, Vol. 11, No. 1, January – June 2013 64
