A STUDY ON INVESTORS PREFERENCES TOWARDS

VARIOUS INVESTMENTS
A PROJECT REPORT
Submitted to
UNIVERSITY OF MADRAS
In partial fulfillment of the requirements
for the award of the degree of
MASTER OF COMMERCE
By
SEETHA LAKSHMI.V
(Reg.No.K930356)

DEPARTMENT OF COMMERCE
ANNA ADARSH COLLEGE FOR WOMEN
ANNA NAGAR, CHENNAI 40
APRIL 2011

DEPARTMENT OF COMMERCE

ANNA ADARSH COLLEGE FOR WOMEN

ANNA NAGAR, CHENNAI 40

Dr .R.UMA
Guide and Supervisor

CERTIFICATE

This to certify that the project report entitled A STUDY ON INVESTORS

PREFERENCE TOWARDS VARIOUS INVESTMENTS submitted to the
University of Madras in partial fulfillment of the requirement for the award of the
degree MASTER OF COMMERCE is the Bonafide Record of the independent
work carried out by Ms. SEETHA LAKSHMI .V under my guidance and
Supervision.

Ms .R.UMA
(Guide and supervisor)

DEPARTMENT OF COMMERCE

ANNA ADARSH COLLEGE FOR WOMEN

ANNA NAGAR, CHENNAI 40

SEETHA LAKSHMI.V

DECLARATION

I hereby declare that this project work entitled A STUDY ON INVESTORS

PREFERENCE TOWARDS VARIOUS INVESTMENTS submitted in
partial fulfillment of the requirements of the award of Master of commerce,
University of Madras , is a record of original project work done by me.

SEETHA LAKSHMI.V
(Reg.No.k930356)

ACKNOWLEDGEMENT

I whole heartedly wish to thank Dr. JAYASHREE GHOSH, principal,

ANNA ADARSH COLLEGE FOR WOMEN for providing us this opportunity
and encouragement to work on this project.
My thanks are due To Dr. T. SOMASUNDARI, Lecturer and Head of
Department of Commerce, ANNA ADARSH COLLEGE FOR WOMEN, for her
guidance throughout the progress of the project work. I take a pleasure in thanking
my project guide and supervisor Dr. R. UMA, Lecturer, Department Of
Commerce, ANNA ADARSH COLLEGE FOR WOMEN for her involvement
and assistance in this project right from the inception to its final form.
I express my sincere thanks to all the Lecturer of DEPARTMENT OF
COMMERCE who have directly and indirectly extended their help completing
this project work.
It is also my great pleasure to thank my parents and friends, without whose
cooperation and encouragement it would have been difficult to complete the
project work on time.

CONTENTS
LIST OF TABLES

LIST OF CHARTS

CHAPTER .NO

TITLE

PAGE
No

INTRODUCTION

CONCEPTUAL FRAME WORK, REVIEW

OF LITERATURE

18

ANALYSIS AND INTERPRATION OF DATA

57

FINDINGS, SUGGESTION AND

CONCLUSION

91

BIBLIOGRAPHY

ANNEXURE

LIST OF TABLES
TABLE
NO

TITLE

PAGE
NO

3.1

AGE WISE CLASSIFICATION

58

3.2

GENDER PROFILE

60

3.3

MARITAL STATUS CLASSIFICATION

62

3.4

EDUCATIONAL QUALIFICATION OF THE INVESTORS

3.5

OCCUPATION CLASSIFICATION OF RESPONDENTS

66

3.6

INCOME PROFILE OF RESPONDENTS

68

3.7

INVESTMENTS OWNED BY INVESTORS

70

3.8

RANKING OF INVESTMENT OBJECTIVES

72

3.9

PREFERRED INVESTMENT TENURE

75

3.10

INVESTORS KNOWLEDGE OF INVESTMENTS OWNED

3.11

SOURCES OF INVESTMENT INFORMATION

79

3.12

CROSS TABULATION BETWEEN INCOME AND

INVESTORS INVESTMENT OBJECTIVES

81

3.13

CROSS TABULATON BETWEEN AGE AND PREFERRED

INVESTMENT ION TENURE

83

3.14

RELATIONSHIP BETWEEN INVESTMENTS OWNED BY

INVESTORS AND PREFERRED INVESTMENT TENURE

85

3.15

3.16
3.17

RELATIONSHIP BETWEEN INVESTMENTS OWNED BY

INVESTORS AND SOURCES OF INVESTMENT
INFORMATION
RELATIONSHIP BETWEEN OCCUPATION AND
INVESTORS PREFERRED INVESTMENT TENURE
RELATIONSHIP BETWEEN INVESTORS EDUCATIONAL
QUALIFICATION AND INVESTORS KNOWLEDGE OF
INVESTMENTS OWNED

64

77

87
88

89

LIST OF CHARTS
CHART NO

TITLE

PAGE NO.

3.1.1

AGE WISE CLASSIFICATION

3.2.2

GENDER PROFILE

3.3.3

MARITAL STATUS

3.4.4

EDUCATIONAL QUALIFICATION OF THE

INVESTORS

65

3.5.5

OCCUPATIO CLASSIFICATION OF
RESPONDENTS

67

3.6.6

INCOME PROFILE OF RESPONDENTS

3.7.7

INVESTMENTS OWNED BY INVESTORS

3.8.8

INVESTMENT OBJECTIVES

3.9.9

PREFERRED IINVESTMENT TENURE

3.10.10

INVESTORS KNOWLEDGE OF INVESTMENTS

OWNED

3.11.11

SOURCES OF INVESTMENT INFORMATION

59
61
63

69
71
74
76
78
80

CHAPTER 1
INTRODUCTION

The term investment refers to exchange of money wealth into some tangible wealth. The
money wealth here refers to the money (savings) which an investor has and the term tangible
wealth refers to the assets the investor acquires by sacrificing the money wealth. By investing, an
investor commits the present funds to one or more assets to be held for some time in expectation
of some future return in terms of interest (revenue) or capital gain.

Investment can be defined as commitment of funds that is expected to generate additional

money. It may also be described as a vehicle into which funds are placed with the expectation
that the funds would increase in value or would generate some return. Keeping idle cash in a
cupboard is not an investment as it does not generate any income rather its value may be eroded
by inflation. However, keeping money in a savings bank account is an investment as it generates
interest income. An investor buys shares of a particular company in expectation of getting a
dividend stream and / or getting a capital gain in terms of appreciation in the market price of his
holdings. So, an investment is commitment of current funds in anticipation of receiving larger
inflow of funds in future, the difference being the income. An investor hopes to be compensated
for forgoing present consumption for the effects of inflation, and for taking a risk. Investment
may take form of real estate, financial assets, or even antiques.
Income earned, is consumed, saved, invested, multiplied. The goal is to create wealth.
There has been a shift in attitudes. People believed that many luxuries will remain a luxury if
they did not take loans to acquire them and enjoyed them in the present. Home loans, educational
loans are no longer looked as debts but as preferred asset classes or strategic investments which
give security.
Economy comprises of investors who can be institutions or individuals. The strategies of
institutions are based on certain policies, where as individuals rely on past learning and their risk
and return perceptions. Global meltdown shook the fundamental policies, strategies and beliefs
of institutions and individuals alike. Their portfolios underwent certain strong changes based on
learning which would last forever.

The three golden rules for all investors are: Invest early; Invest regularly; Invest for long
term and not for short term. The Ideal Investment strategy should be a customized one for each
investor depending on his risk-return profile, his satisfaction level, his income, and his
expectations. Accurate planning gives accurate results. And for that there must be an efficient
and trustworthy roadmap to achieve the ultimate goal of wealth maximization. However there is
an extraordinary amount of ignorance and prejudice brought out of with regard to the nature of
various investments. Especially the household investors who are willing to invest on risk
investment avenues and want to earn high rate of interest that too in quick period of time. But
most of them dont know where to invest and how to invest. And ultimately go into the clutches
of chit funds and lose their hard earned money. So this study is unique in identifying the
investors purpose of investment, time factor and risk capacity related to them. This will help one
to know which investment is highly preferred by the investors.

SCOPE OF THE STUDY:

Investment is putting money into something with the expectation of profit. More
specifically, investment is the commitment of money or capital to the purchase of financial
instruments

or

other

assets

so

as

to

gain

profitable

returns

in

the

form

of interest, income (dividends), or appreciation (capital gains) of the value of the instrument.
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.
There are many investments options available to investors like fixed deposits, government bonds,
insurance, stock market, mutual fund, real estate etc., in fixed deposits it have lots of options to
invest like bank deposits, private banks fixed deposits, post office deposits .So investor has to

invest accordingly apart from their expenses. One needs to invest and earn return on the idle
resources and generate a specified sum of money for a specific goal in life and make a provision
for an uncertain future. . By investing early investors can allow the investments more time to
grow, whereby the concept of compounding increases the income, by accumulating the principal
and the interest or dividend earned on it, year after year. The choice of the best investment
options will depend on personal circumstances as well as general market conditions. For
example, a good investment for a long-term retirement plan may not be a good investment for
higher education expenses. In most cases, the right investment is a balance of three things:
Liquidity, Safety and Return.
Savings flow in to investments for returns, but savings kept as cash do not grow. A
certain portion of savings should be in cash to meet contingencies .Every rational investor knows
that money is losing its value by the extent of rising prices. Savings turn in to investment only
when returns are higher than inflation rate. Savings dont convert themselves in to investment
easily. Investors use information on markets and other relevant inputs to make a decision on what
asset classes to invest and the timing of investment. Investors, first set investment goals, assess
the amount of investible wealth, then analyse different asset classes to make investments and
finally make a portfolio of investments for wealth maximization. A periodic revision of the
portfolio on the basis of risk and returns is done to check wealth erosion.
Financial markets provide the basic function of mobilizing investments .They also act
as market places for investors who are attracted by returns .Investments is an activity that is
taken by those who save and so excess of income over expenditure decide the quantum of
investment. All savers need not be investors. Expectations differentiate a saver from an investor.
Investment activity can be identified ,when an asset is purchased with an intention of earning a

return or expecting an appreciation in value. Basically an investment is done with three

objectives- growth, security, or income. There can be long term or short term investments. All
savers need not invest in assets and all investments need not be out of savings too. They can be
partly or fully financed by borrowings. Only individuals save for a rainy day and many prefer to
have them for contingencies and not for returns.
The stock market is one of the most important sources for companies to raise money. This
allows businesses to be publicly traded, or raise additional capital for expansion by selling shares
of ownership of the company in a public market. The liquidity that an exchange provides affords
investors the ability to quickly and easily sell securities. This is an attractive feature of investing
in stocks, compared to other less liquid investments such as real estate.
A capital market is a market for securities (debt or equity), where business enterprises
and government can raise long-term funds. It is defined as a market in which money is provided
for periods longer than a year, as the raising of short-term funds takes place on other markets
(e.g., the money market). The capital market is characterized by a large variety of financial
instruments: equity and preference shares, fully convertible debentures (FCDs), non-convertible
debentures (NCDs) and partly convertible debentures (PCDs) currently dominate the capital
market, however new instruments are being introduced such as debentures bundled with
warrants, participating preference shares, zero-coupon bonds, secured premium notes, deep
discount bonds ,sweat equity shares, tracking stocks, disaster bonds , mortgage backed securities,
foreign currency convertible bonds, exchange traded funds, gold ETF etc.
OBJECTIVES OF THE STUDY:
1. To identify individual investors investment preferences.

2. To identify the investment objectives of investors.

3. To find out the preferred source of investment information.
METHODOLOGY:
Research is an art of scientific investigation. In other word research is a scientific and
systematic search for pertinent information on a specific topic. The logic behind taking research
methodology into consideration is that one can have knowledge about the method and procedure
adopted for achievement of objectives of the project. With the adoption of this others can
evaluate the results also. Its main aim is to keep the researchers on the right track.
METHODS OF DATA COLLECTION:
Data was collected by using main two methods namely:
1. primary data
2. Secondary data
1. PRIMARY DATA:
Primary data is the data which is used or collected for first time and it is not
used by anyone in the past. The sources through which the primary data is been collected is
questionnaire.
QUESTIONNAIRE:
The use of questionnaire has been the main instrument for data collection. The instrument
aimed to explore, the investors preferences towards various investments. This method of data

collection is quite popular. In this research study simple questions were asked and a request has
been made to the respondents to answer these questions with correct information.
2. SECONDARY DATA:
Secondary data is the data which is available in readymade form and which is already
used by people for some purposes. The various sources of secondary data such as-newspapers,
magazines , journals, books, reports, documents and other published information ; were also
been used for the study. Also internet facility has been made use of for the present study.
STATISTICAL TOOL:
The statistical tool used for the analysis of data collected through questionnaire is the simple
percentage method, chi-square test, and ranking method. The simple percentage method is useful
for comparing the service of data and relationship between variables.
SAMPLE SIZE:
Taking into consideration the limited period given for conducting the research, the area
chosen is Chennai city in Tamilnadu only. The sample size taken for this present study is
restricted to 100 respondents from professionals, workers, retired people, home maker have been
selected to fill the questionnaire.

LIMITATIONS OF THE STUDY:

Data collection has been restricted to Chennai city only.

Sample size is limited to 100 investors.

This study is purely based on the data collected through questionnaire which may
be inadequate to measure the true opinion of the investors preference towards

various investments.
This study has not been conducted over an extended period of time having both
ups and downs of various investment conditions which a significant influence on
investor s buying preferences. This study was done during the year November

2010-April 2011.
The suggestions are based on findings of the present study. So the outcome of the
study may not reflect the opinion of the population.

CHAPTERISATION

CHAPTER I

INTRODUCTION
-

SCOPE OF THE STUDY

CHAPTER II

OBJECTIVES OF THE STUDY

METHODOLOGY
LIMITATIONS OF THE STUDY
CHAPTERISATION

REVIEW OF LITERATURE
-

CHAPTER III

CONCEPTUAL FRAMEWORK
THEORITICAL FRAMEWORK
REVIEW OF VARIOUS AUTHORS
ANALYSIS AND INTERPRETATION OF DATA

A STUDY ON INVESTORS PREFERENCES

TOWARDS VARIOUS INVESTMENTS.

CHAPTER IV

FINDINGS AND SUGGESTIONS

-

FINDINGS
SUGGESSTIONS
CONCLUSION

CHAPTER 2
REVIEW OF LITERATURE

CONCEPTUAL FRAMEWORK:
DEFINITION OF INVESTMENT:
In finance, the purchase of a financial product or other item of value with an expectation
of favorable future returns. In general terms, investment means the use of money in the hope of
making more money.

In finance and business, an investment is an asset purchased for profit, whether via
income, or capital appreciation, or some combination. The entity making the investment is
an investor. The opposite of making an investment, or selling the asset, is divestment. Investment
has a connotation of a long-term holding period, in contrast to speculation, which is the purchase
of assets seeking profit from short-term price movements. In practice, no precise definition
distinguishes between investment and speculation. The expected return on investment, or
expected ROI, is a measure of the attractiveness of an investment, whether anticipated or
realized. In economics, investment represents capital expenditure by companies in an economy
or economic model. In this context, investment is distinct from consumer expenditure,
government expenditure, and net exports.
MEANING OF INVESTMENT:
The dictionary meaning of investment is to commit money in order to earn a 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.
Investment is related to saving or deferring consumption. Investment is involved in many
areas of the economy, such as business management and finance no matter for households, firms,
or governments. An investment involves the choice by an individual or an organization, such as a
pension fund, after some analysis or thought, to place or lend money in a vehicle, instrument or
asset, such as property, commodity, stock, bond, financial derivatives (e.g. futures or options), or
the foreign asset denominated in foreign currency, that has certain level of risk and provides the
possibility of generating returns over a period of time.

INVESTMENT AVENUES:
Investment is putting money into something with the expectation of profit. More
specifically, investment is the commitment of money or capital to the purchase of financial
instruments

or

other

assets

so

as

to

gain

profitable

returns

in

the

form

of interest, income (dividends), or appreciation (capital gains) of the value of the instrument.
Investments are classified into various avenues as follows:
1. Fixed Deposits They cover the fixed deposits of varied tenors offered by the
commercial banks and other non-banking financial institutions. These are generally a low
risk prepositions as the commercial banks are believed to return the amount due without
default. By and large these FDs are the preferred choice of risk-averse Indian investors
who rate safety of capital & ease of investment above all parameters. Largely, these
investments earn a marginal rate of return of 6-8% per annum.
2. Government Bonds The Central and State Governments raise money from the market
through a variety of Small Saving Schemes like national saving certificates, Kisan Vikas
Patra, Post Office Deposits, Provident Funds, etc. These schemes are risk free as the
government does not default in payments. But the interest rates offered by them are in the
range of 7% - 9%.
3. Money-back insurance - Insurance in India is mostly sold and bought as investment
products. They are preferred because of their add-on benefits like financial life-cover,
tax-savings and satisfactory returns. Even if one does not manage to save money and
invest regularly in financial instruments, with insurance, the policyholder has no choice.
If he does not pay his premiums on time, his insurance cover will lapse. Money-back

Insurance schemes are used as investment avenues as they offer partial cash-back at
certain intervals. This money can be utilized for childrens education, marriage, etc.
4. Endowment Insurance These policies are term policies. Investors have to pay the
premiums for a particular term, and at maturity the accrued bonus and other benefits are
returned to the policyholder if he survives at maturity
5. Bullion Market Precious metals like gold and silver had been a safe haven for Indian
investors since ages. Besides jewellery these metals are used for investment purposes
also. Since last 1 year, both Gold and Silver have highly appreciated in value both in the
domestic as well as the international markets. In addition to its attributes as a store of
value, the case for investing in gold revolves around the role it can play as a portfolio
diversifier.
6. Stock Market Indian stock markets particularly the BSE and the NSE, had been a
preferred destination not only for the Indian investors but also for the Foreign investors...
Although Indian Markets had been through tough times due to various scams, but history
shows that they recovered very fast. Many types of scrip had been value creators for the
investors. People have earned fortunes from the stock markets, but there are people who
have lost everything due to incorrect timings or selection of fundamentally weak
companies.
7. Real Estate- Returns are almost guaranteed because property values are always on the
rise due to a growing world population. Residential real estate is more than just an
investment. There are more ways than ever before to profit from real estate investment.
8. Mutual Funds - There is a collection of investors in Mutual funds that have professional
fund managers that invest in the stock market collectively on behalf of investors. Mutual
funds offer a better route to investing in equities for lay investors. A mutual fund acts like
a professional fund manager, investing the money and passing the returns to its investors.

All it deducts is a management fee and its expenses, which are declared in its offer
document.
9. Unit Linked Insurance Plans - ULIPs are remarkably alike to mutual funds in terms of
their structure and functioning; premium payments made are converted into units and a
net asset value (NAV) is declared for the same. In traditional insurance products, the sum
assured is the corner stone; in ULIPs premium payments is the key component.
10. Equity Shares- by investing in shares, investors basically buy the ownership right to that
company. When the company makes profit, shareholders receive their share of the profits
in the form of dividends. In addition, when a company performs well and the future
expectation from the company is very high, the price of the companys shares goes up in
the market. This allows shareholders to sell shares at profit, leading to capital gains.
Shares have a better track record for appreciating and beating inflation than any other
type of investment over time. Investors can invest in shares either through primary
market offerings or in the secondary market.
11. Provident fund scheme Provident fund schemes are deposits schemes, applicable to
employees in the public and private sectors. There are three kinds of provident funds
applicable to different sectors of employment, namely, statutory provident fund,
recognized provident fund and unrecognised provident fund. In addition to these, there is
a voluntary provident fund scheme that is open to any investor, employed or not. This is
known as public provident fund (PPF). Any member of the public can join the PPF which
is operated by State Bank of India. While investing in a PPF account investor has to keep
the following points in mind. Compounded interest rate is tax free, the one disadvantage
of PPF is lack of liquidity and partial withdrawals are allowed from the sixth year
onwards. Loan facility is available from the third year.
12. Equity Linked Savings Schemes (ELSSs) - investing in ELSSs gets investors tax rebate
of the amount invested. ELLSs are basically growth mutual funds with a lock-in period of

three years. ELSSs have a risk higher than PPF and NSCs, but have the potential of
giving higher returns.

INVESTMENT OPPORTUNITIES FOR FOREIGN CITIZENS OF INDIAN ORIGIN:

There are vast investment opportunities in India for foreign citizens of Indian origin.
However, different procedures have been laid down depending on whether they invest their
money in the form of foreign currency remitted from abroad through normal banking channels or
from funds withdrawn from the NRF/FCNR accounts, or from local funds in rupees.

1. Foreign Direct Investment

Foreign direct investment (FDI) is permitted in the following forms of investments.

Through financial collaborations.

Through joint ventures and technical collaborations.
Through capital markets via euro issues.
Through private placements or preferential allotments.

The inflow into India as foreign direct investment is not permitted in the following
industrial sectors.

Arms and ammunition.

Atomic energy.
Railway transport.
Coal and lignite.
Mining of iron, manganese, chrome, gypsum, sculpture, gold, diamonds, copper

and zinc.
2. Portfolio Investment
Another opportunity for investors is to make an investment in India through the
portfolio process, that is, through investment in the shares and securities that are traded in

the Indian market. This investment will come under to SEBI (Substantial Acquisition of
Shares and Takeover) Regulations, 1997.
A foreign investor has to consider several assets classes for making an investment
decision in Indian capital market. An asset class contains securities whose price
movements are highly correlated. But relatively uncorrelated with price movements of
other assets classes. The following list of assets classes can be used by a foreign investor
who considers the portfolio route.
Large capitalization growth stocks.
Large capitalization value stocks.
Small capitalization growth stocks.
Small capitalization value stocks.
Money market funds.
Highly credit rated bonds.
High-yeild bonds.
Real estate
Gold and other metals.
Each asset class has a given level of historical return and an associated risk. By selecting
a mix of the asset classes, an international investor can select a desired level of portfolio
risk and return.

INVESTOR:
An investor is a person or entity that purchases assets with the objective of receiving a
financial return. The assets an investor may buy stocks, bonds, real estate, commodities, and
collectibles (e.g. art). The portfolio of an investor commonly includes a variety of assets that
balance the rewards and risks of each investment. An investor is distinguished from a speculator,
who seeks to make quick, large gains from price increases on risky assets. Generally, an investor
has a longer time horizon for achieving a return, which may include regular cash payments from

the income the asset generates, capital appreciation from the rise in the asset price, or both. A
young investor tends to buy assets with price appreciation potential, because a 25-yearold
investor has many years for the asset to appreciate before the funds are needed for retirement. An
older, retired investor ordinarily seeks income and thus wants assets that offer regular cash
payments.

TYPES OF INVESTORS:
Investors are classified into six types they are as follows: There are some who have not
even started to invest, others who are new to the investing trade, and those who are well
advanced along the path of successful investor.
1. The Spender:
This first stage of investor is really not an investor at all. They are called as a negative
saver and investor. Rather than put aside some of money to invest every month, what he do
instead is spend everything that he have. In fact, this is not enough money to support ones life
style, so he borrow to help continue to shop, purchase expensive cars, buy gorgeous houses, and
enjoy nice dinners out. Spenders are not necessarily people who make low salaries or who have
too little income. Who are in this category simply do not have good habits to control, manage,
and spend their money. From such bad habits come bad choices and actions. These give negative
results every time.

2. The Saver:
The second stage of investor is the saver. They are also not truly an investor, but at least
they are on the right path to become an investor one day. If he is a saver, then he put aside some
money each month. one will likely put this money in a low interest savings account, a money
market account, a Certificate of Deposit, or a Fixed Deposit. Many savers put their money aside
for future purchases, not investments at all. When one is this kind of saver, he prefers to buy
things with cash instead of credit. Savers have to be ready to educate themselves to find high
yield and safe investments.
3. Intelligent Investor:
The next stage of investor can be called the intelligent investor. When one reach the point
to start to study about investments and finance, and then they have arrived at this stage. If one is
an intelligent investor then they have read the basic books that explain all of the concepts that the
need to invest. he will understand about the ways that he can manage his risk properly. he will
know all about the wisdom and benefits of diversifying his portfolio. He will also understand that
you can never know too much. Even while investing his money to build up his portfolio, he
continue to read books, magazine articles, and updates on the various factors that affect his
investments. one realize that when they constantly learn more about investing then this will only
serve to make a better investor. This is a good level to find one at, but there are higher and better
stages of investors that investor can become.

4. Advanced Investor:
Stage four investors are long term investors. Intelligent investor has learned that one can
become wealthy through continuous wise investment, and then they have reached this stage of
investing. One should realize that there is more that one can learn than when they read and
educate them self. One should go to seminars on particular investment products and techniques
so that they can better understand them. One has learned advanced concepts such as the power of
compound interest. In this category, investors are determinedly chasing their ultimate financial
goals towards not only retirement, but also to build up wealth. Investors keep close track of their
expenses. If investor are very familiar with their assets, liabilities, and debts. A long term,
advanced investor does not waste huge amounts of money on conspicuous consumption. Instead,
investor put his money to work in investments that will grow and build wealth with time.
5. Savvy Investor:
In the fifth stage of investing, investors are called as a savvy investor. One has arrived at
this level when they do more than simply learn about other peoples ideas for good investments.
Now one can arrange his own investments and deals. Returns on his investment have climbed to
twenty percent and better. One will likely pursue a wide range of investments that work well for
them. One manages risk expertly and stay focused. After he has an investment that is up and
running smoothly, he diversifies to another investment. He does not become discouraged in
economic crises and setbacks. In any type of market, positive or negative, investors look for and
find opportunities to make money. When one is able to make and forge his own deals, almost like
a banker or an investment banks, then he has attained the level of savvy investor.

6. Successful Capitalist:
The last stage of investor proves to be the successful capitalist. This is the ultimate level
that investor can hope to achieve. At this point, one creates organizations. One organizes other
individuals and their time, abilities, and money. When one create results, or form a successful
company, then they are well rewarded for their time and skill. His returns tend to be around a
hundred percent or better. If one reaches this level, then he come up with new product ideas and
move forward with them. He develops a company and brings on excellent people to market the
products. One becomes a multi millionaire along the way. His organization will also number
other millionaires who assist you in the process.

THEORITICAL FRAMEWORK:
Investment theory encompasses the body of knowledge used to support the decisionmaking process of choosing investments for various purposes. It includes portfolio theory,
the Capital Asset Pricing Model, Arbitrage Pricing Theory, and the Efficient market hypothesis.
Before making an investment what investor has to look into?
Capital markets provide lucrative investment opportunities since they help in earning a return
without actually indulging in any economic activities. Economic activities are, in fact, the base
without which the supporting functions of capital markets will not find an existence. Nobody
invests to lose money. However, investments (assets or securities) always entail some degree of
risk either in productive economic activity or in an intermediary role. There are certain specific
features that relate to investments in terms of securities in the capital market. They are as
follows:

1. The higher the expected rate of return, the greater the risk.
2. Some investments cannot easily be sold or converted to cash. Sometimes, investments
carry with them the characteristics of a penalty or charge if one disposes of an investment
too soon before its maturity date.
3. Investments in securities issued by a company with little or no operating history or
published information may involve greater risk.
4. Security investments, including mutual funds, cannot be legally insured against a loss in
market value.
5. Securities may be subject to tender offers, mergers, reorganizations, or third party actions
that can affect the value in terms of ownership interest. Hence, market anomalies might
exist to public announcements and information about such transactions. This
characteristic makes an investment decision process complex.
6. The past success of a particular investment is no guarantee of future performance.
The unique nature of capital market instruments forces investors to depend strongly on other
fundamental factors to help them in their investment decisions. It can be presumed that if not for
investment through capital markets, investors would have to invest in an economy directly.
Companies are a part of the industrial and business sector, which in turn is a part of the overall
economy. The performance of the securities that represent the company can be said to depend on
the performance of the company itself. The selection of an investment will hence start with

fundamental analysis. Fundamental analysis examines the economic environment, industry

performance, and company performance before making an investment decision.
A fundamental analyst believes that analyzing the economy, strategy, management, product,
financial status, and other related information will help choose shares that will outperform the
market and provide consistent gains to the investor.

ECONOMIC ANALYSIS:
The economic analysis aims at determining if the economic climate is conductive and is
capable of encouraging the growth of business sector, especially the capital market. When the
economy expands, most industry groups and companies are expected to benefit and grow. When
the economy declines, most sector and companies usually face survival problems. Hence, to
predict share prices, an investor has to spend time exploring the forces operating in the overall
economy. Exploring the global economy is essential in an international investment setting. The
selection of a country for investment has to focus itself to the examination of a national
economic scenario.
It is important to predict the direction of the national economy because economic activity
affects corporate profits, not necessarily through tax policies but also through foreign policies
and administrative procedures. A zero growth rate or a slow growth rate of the economy can lead
to lower business profits, a prospect that can endanger investor outlook and lower share prices.

Economic analysis implies the examination of GDP, government financing, government

borrowing, consumer durable goods market, non-durable goods and capital goods market,
savings and investment pattern, interest rates, inflation rates, tax structure, foreign direct
investment, and money supply.
A discussion of the macroeconomy usually has two components:
1. The national economy and
2. The effect of the international economy on the national economy.
The growth of the national economy is mainly determined by the domestic consumption
pattern. Economists point out that higher consumption leads to economic growth. This is based
on the arrangement that growth in consumption pattern fosters sales, which in turn induce
production of goods and services in the economy.
In addition, the interaction of other economies with domestic economy also has a large
influence on a nations economic growth. The international trade policies, global demand/supply
factors, and so on, hinder or foster relationship with other countries. A domestic economy, which
has freely let in international players into its economic environment, will be subject to global
trends more drastically than an economy that restricts the entry of foreign participants into its
economy.
The most of the tools for performing economic analysis are:
1. GROSS DOMESTIC PRODUCT (GDP):

GDP is defined as the market value of goods and services produced in an economy
during a period (generally one year). It may be calculated by adding the market values of
all the final goods and services produced over the period. GDP is an important measure
of economic activity. GDP is considered as an appropriate measure of economic growth
in a country. Change in GDP results on account of:
i.

Change in availability of resources.

ii.

Change in usage of these resources, and

iii.

Change in efficiency with which factors of production are used.

GDP indicates the performance of the economy during the period. An increasing trend

in GDP tells about an expanding economy which provides a lot of opportunities to the
firms to increase the level of activities and to increase the earnings. There are two other
measures, gross national product and net national product which are also indicators of
economic activity.
2. MONETARY POLICY AND LIQUIDITY:
The liquidity in the economy depends upon the money supply which is regulated
by the monetary policy of the government. Reserve bank of india has been adopting
several measures to regulate the money suppy and liquidity in the economy. Business
firma require funds for expansion projects. The capacity to raise funds from the market is
affected by the liquidity position in the economy. The monetary policy is designed with
an objective to maintain a balance of liquidity position. Neither the excess liquidity nor

the shortages are desirable. The shortage of liquidity will tend to increase the interest
rates while the excess will result in inflation.
Monetary supply and monetary environment affect share prices through affecting
the discount rate. An easy monetary policy is expected to result in decreasing discount
rate. Money supply also affects the real economy through change in growth in demand
level, and change in growth of supply position. A shift in money supply may be a leading
indicator of the beginning of a new phase in the economic and business environment.
3. INFLATION:
Inflation refers to general increasing trend in prices. Inflationary pressure in the
economy affects (decreases) the purchasing power of the consumers and thus has a
considerable impact on the performance and profitability of companies. High inflation
rate can be considered as an indication for slower growth rate and low inflation rate can
be taken as a positive sign for an expansionary phase. Inflation has a relationship with
capital market as well. During inflation, the nominal required rate of return of investors
goes up resulting in the decrease in bond and equity prices. Inflation can be measured in
terms of wholesale price index or consumer price index. An analysis of these indices will
indicate the economic conditions expected as well.
4. INTEREST RATES:
Interest rate is the price of credit. It is the percentage fee received or paid by
individuals or organizations when they lend or borrow money. There are many kinds of
interest rates-bank prime lending rate, Treasury bill rate, and so on.

In general, increases in interest rates, whether caused by inflation, government

policy, rising risk premiums, or other factors, will lead to reduced borrowing and an
economic slowdown. Rising interest rates lead to decline in bond prices and typically
lead to a fall in share prices. When interest rates rise, the investors required rate of return
on shares rise as well, causing the prices of securities to fall. Raising interest rates also
make bond yields look attractive to share dividend yields. One measure of interest rate
that influences business demand for loans is the bank prime lending rate.
Prime rate is the interest rate charged by banks to their most creditworthy
customers (usually the most prominent and stable business customers). The rate is almost
always the same amongst major banks. Adjustments to the prime rate are made by all
banks at the same time; although, the prime rate does not adjust on regular basis.
Movements in long-term interest rates such as the 10 years treasury rate provide
information about likely changes in the level of activity in the interest-sensitivity sectors
of the economy. For example, bond interest rates often move in tandem with the 10 year
treasury rate, and changes in bond rates often precede changes in the level of activity in
financial markets.
5. INTERNATIONAL INFLUENCES:
Rapid growth in the overseas market can create surges in demand for exports,
lending in export -sensitive industries and overall GDP. In contrast, the erection of trade
barriers, quotas, nationalistic fervor, and currency restrictions can hinder the free flow of
currency, goods, and services, and harm the export sector of an economy. Although some

attempts at policy coordination have been made by the G-7 nations, most coordination
has focused on strengthening or weakening the exchange rates of some of its members,
most notably those of the United States and Japan. The business cycles of the developed,
developing, and less-developed nations do not rise and fall together. Therefore, a strong
economy such as that of the US can, at times, assist economies experiencing a recession
by importing their products, and vice versa.
One important measure of influence of international economies is the exchange
rate-the rate at which one currency may be converted into another. It is also called rate of
exchange, or foreign exchange rate, or currency exchange rate. The purchasing power
parity (PPP) approach derives from the assumption that, identical goods should be sold at
identical prices globally. The existence of one price implies that exchange rates should
adjust to compensate for price differentials across countries. In other words, if we are in a
mango-world (where only mangos exist) , and a mango is sold in the US at $1, and same
in India for Rs 48, then the exchange rate has to be Rs 48 per dollar. Though it is unlikely
that one country will have a total influence on the share market, any major fluctuations in
the international scenario tends to affect the local market when it is open to international
players. A liberalization economy hence, will have a high impact of international
influences.
6. CONSUMER SENTIMENT:
Consumer sentiment may lead consumers to make a long-delayed purchase of
durable goods or to be more free with their money at gift diving or vacation time. Such
variations in consumer sentiment will lead to altering periods of sales growth and decline

for consumer-oriented industries, particularly manufacturers of consumer durables. It is

also known that risk premiums are influenced by customers and hence lead to change in
investors attitudes over the course of a business cycle. As a result, consumer sentiment
can be expected to affect both cash flow as well as the required risk premiums on
financial market investments.
Consumer sentiment is usually expressed in terms of the future expenditures
planned and the feeling about the future economy. A high interest rate and no tax savings
opportunities would induce a consumer sentiment of current purchases. This would lead
to a high current demand for products. A favorable savings environment with high
interest rates would induce the customers to postpone current purchases for future
spending.
7. FISCAL POLICY:
The fiscal policy of the government involves the collection and spending of
revenue. In particular, fiscal policy refers to efforts by the government to stimulate the
economy directly, through spending. Fiscal policy mostly affects short-run demand.
Government spending can directly affect economic sectors and geographic regions.
Assuming all other parameters as constant, some economists believe that a larger than
expected increase in government spending may increase short run demand while smaller
than expected increase may harm short-run demand. Tax changes strongly influence the
incentives to save, and invest and may, therefore, after both short term expectations as
well as long-term supply. Decisions by the government, usually relating to taxation and

government spending, with the goals of full employment, price stability, and economic
growth lead to a positive or negative outlook of the share market.
8. LONG-TERM GROWTH EXPECTATIONS:
The long-term growth path of the economy is determined by supply factors.
Growth will be constrained in the long run by limits in technology, size and training of
the labour force, and availability of adequate resources and incentives to expand.
The growth of output can be separated in to two distinct categories:

Growth from an increase in the factor inputs to production and

Growth in output relative to the growth of all factor inputs, or total factor
productivity (TFP).
The implementation of technology acts to increase TFP, as does increased

education and training of the workforce, reallocation of resources to their highest and
most valued use, and increasing economies of scale.
9. INFLUENCES ON SHORT-TERM EXPECTATIONS:
In contrast to long-term expectations, mainly driven by supply factors, short-term
expectations about the economy are mainly caused by demand factors. Fluctuations in
demand relative to long-term supply constraints create fluctuations in real GDP, which
are known as business cycles. When demand exceeds supply, the result is inflation. When
demand is less than supply, rising unemployment and recession may occur. Short-term

economic forecasting focuses on sources of demand as a means to predict future trends in

economic variables.
Increases and decreases in demand, relative to long-term constrained supply
growth result in business cycles and associated fluctuations in cash flows, interest rates
and risk premiums. As per of the top-down investment approach, analysts hence examine
their influence on different economic sectors, industries, and investments.
ECONOMIC ANALYSIS AND INTERNATIONAL INVESTMENT:
A scrutiny of the economist analysis by investors also helps them in the management of
international portfolios. Hamao, Masulis, and Ng (1990) studied the spillover effect of
information from one economy to another across countries in the investment market. Asset
pricing tests specify common factors which each country has sensitivity to (Ferson E and Harvey
C.R.,1993).
There are three important reasons for investors to prefer a global portfolio. The worlds
capital value is determined across nations and a single countrys contribution is very negligible.
If investors want to realize the economic gains irrespective of a single countrys performance,
they have to invest in a global setting. By limiting investments only to one market, majority
investment opportunities are lost. Second, international share markets and their underlying
economies often move independently from country to country. By using international markets,
investors increase the likelihood of participating in markets that are appreciating, especially
when the domestic market is undergoing a correction. Third and most importantly, international
portfolios can result in greater diversify and reduced investment exposure risk.

Global capital markets have enlarged investment opportunities and thus are the sources of
funds for companies which increasingly face global markets for their services and products.
Huge capital movements show that investors are constantly searching for ways to minimize risk
and maximize returns. In the light of the substantial growth of assets in institutional funds,
foreign institutions finance investors to have diversified portfolios internationally.
Deregulation, technological improvements, and overall economic interdependence among
domestic markets have also helped them in venturing into international share markets. Earlier,
when investment possibilities were regulated and domestic portfolios offered reasonable riskreturn portfolios, the demand for international investment was lower. However, the recent overall
globalization of products and integration of economies has led to increased interest in
international diversification which, in practice, has become a necessity to meet the objectives of
investors. Internationalization has happened in all domains of financial activity. Domestic
governments no longer control markets and the global financial market itself has assumed a
greater role in the global economy. The pressure caused by this is significant for both
governments and corporations, which increasingly raise funds directly from global capital
markets.
INVESTMENT THEORY:
Investment theory encompasses the body of knowledge used to support the decisionmaking process of choosing investments for various purposes. It includes portfolio theory,
the Capital Asset Pricing Model, Arbitrage Pricing Theory, and the Efficient market hypothesis.

1) CAPITAL ASSETS PRICING MODEL:

CAPM establishes that the required rate of return of a security must be related to its
contribution to the risk of the portfolio. It stresses that only the systematic risk, the
undiversifiable risk, is relevant for the expected return of a security. Since the
diversifiable risk, i.e., the unsystematic risk can be eliminated; there is no reward for it.
The CAPM attempts to explain and provide the mechanism whereby investors can assess
the impact of a proposed security on their portfolios risk and return. The total risk of a
portfolio can be bifurcated into systematic and unsystematic risk. The latter is eliminated
by more and more diversification. On the other hand, the systematic risk is one which
cannot be eliminated and is correlated with that of the market portfolio. A portfolio is
efficient if there is no unsystematic risk. Therefore, the only effect a security has on the
portfolio risk is through its systematic risk. The risk of a diversified portfolio depends
upon the systematic risks of the securities included in the portfolio. An investor,
therefore, will be interested to know the effect which each security will have on the risk
of his portfolio.
All the securities available to an investor do not have same level of systematic risk. The
factors contributing to systematic risk do not affect all the securities in the same way. The
magnitude of the influence of these factors varies from one security to another depending
upon the sensitivity of the security to the market fluctuations. The investor will receive
risk-premium only for the systematic risk as it is non-diversifiable.

The CAPM is based upon several assumptions as follows:

The investors are basically risk averse and diversification is needed to reduce the
risk.

All investors want to maximize the wealth and choose a portfolio solely on the
basis of risk and return assessment.

All investors can borrow or lend an unlimited amount of funds at risk free rate of
interest.

All investors have identical estimates of risk and return of all securities.

All investors are perfectly divisible and liquid and there is no transaction cost or
tax.

The security market is efficient, and purchases and sales by a single investor
cannot affect the prices. This also means that there is a perfect competition in the
market.

All investors are efficiently diversified and have eliminated the unsystematic risk.
Thus, only the systematic risk is relevant in determining the estimated return.

2) ARBITRAGE PRICING THEORY:

In the CAPM only one factor is assumed to influence the price. This factor
is the relative risk return position of the portfolio with respect to the market. Some

research studies of the CAPM indicate that the beta coefficients for individual
securities are not stable, but the beta of portfolios are generally stable, assuming
long enough sample periods and adequate trading volume. Some studies have also
supported a positive linear relationship between rates of return and systematic risk
for the portfolios of stock.
The Arbitrage Pricing Theory discussed by Ross S.A., (1976) advocates that
two identical securities will have the same risk return pattern. Given the risk
pattern of securities, the returns ought to be similar, otherwise there will be an
arbitrage opportunity in the market. The higher demand without matching supply
will automatically reduce the return from the security and the large supply not
matched by the demand will automatically increase the return from the other
security. This arbitrage will ensure that all securities having similar risk will
provide similar returns.

The assumptions of the APT model are:

Investors prefer more returns to fewer returns.

Investors are risk averse.

Investors have homogeneous risk expectations.

Capital market do not have any transactions cost and there are no taxes.

3) Modern portfolio theory (MPT) is a theory of investment which attempts to

maximize portfolio expected return for a given amount of portfolio risk, or
equivalently minimize risk for a given level of expected return, by carefully choosing
the proportions of various assets. Although MPT is widely used in practice in the
financial industry and several of its creators won a Nobel memorial prize. for the
theory, in recent years the basic assumptions of MPT have been widely challenged by
fields such as behavioral economics.MPT is a mathematical formulation of the
concept of diversification in investing, with the aim of selecting a collection of
investment assets that has collectively lower risk than any individual asset. That this
is possible can be seen intuitively because different types of assets often change in
value in opposite ways. For example, as prices in the stock market tend to move
independently from prices in the bond market, a collection of both types of assets can
therefore have lower overall risk than either individually. But diversification lowers
risk even if assets' returns are not negatively correlatedindeed, even if they are
positively correlated.More technically, MPT models an asset's return as a normally
distributed function (or more generally as an elliptically distributedrandom variable),
defines risk as the standard deviation of return, and models a portfolio as a weighted
combination of assets so that the return of a portfolio is the weighted combination of
the assets' returns. By combining different assets whose returns are not perfectly
positively correlated, MPT seeks to reduce the total variance of the portfolio return.
MPT also assumes that investors are rational and markets are efficient.MPT was
developed in the 1950s through the early 1970s and was considered an important
advance in the mathematical modeling of finance. Since then, many theoretical and

practical criticisms have been leveled against it. These include the fact that financial
returns do not follow a Gaussian distribution or indeed any symmetric distribution,
and that correlations between asset classes are not fixed but can vary depending on
external events (especially in crises). Further, there is growing evidence that investors
are not rational and markets are not efficient.

4) In finance, the capital asset pricing model (CAPM) is used to determine a

theoretically appropriate required rate of return of an asset, if that asset is to be added
to an already well-diversified portfolio, given that asset's non-diversifiable risk. The
model takes into account the asset's sensitivity to non-diversifiable risk (also known
as systematic risk or market risk), often represented by the quantity beta () in the
financial industry, as well as the expected return of the market and the expected return
of a theoretical risk-free asset.The model was introduced by Jack Treynor (1961,
1962),[1]William Sharpe (1964), John Lintner (1965a,b) and Jan Mossin (1966)
independently,

building

on

Markowitz on diversification and modern

the
portfolio

earlier
theory.

work
Sharpe,

of Harry
Markowitz

and Merton Miller jointly received the Nobel Memorial Prize in Economics for this
contribution to the field of financial economics.
REVIEW OF LITERATURE:
Gupta L. C 1(1995) conducted a retail investor survey with 150 participants with the objective to
provide data on investor preference on mutual funds and other financial assets. His findings and

conclusion states that high risks leads to high return but investors preferred post office schemes
like recurring deposits, term deposits, and investment in gold , silver.
A study conducted by Somasundaram2 (1998) has found that bank deposits and chit funds were
the best known modes of savings among investors and the least known modes were Unit Trust Of
India (UTI) schemes and plantation schemes. Attitudes of investors were highly positive and
showed their intention to save for better future. Nearly two-thirds of the investors were satisfied
with their savings. Both income and expenses of a family influenced the level of satisfaction over
savings. A large proportion of investors were concerned about their children's well-being. Among
the dissatisfied investors, majority were of the opinion that cost of living was too high. The most
common mode of investment was bank deposits. However, a shift was noticed from bank
deposits to other forms of investment. Almost all the investors had invested in gold and silver.
Among several parameters in investing, safety of money was considered to be the most
important element. Next, the investors expected regular return from their investments.
Gavini and Athma 3(1999) examined that investors preference towards various investments like
post office schemes , bank deposits, shares, bonds, gold, silver etc., and some benefits like social
considerations, tax benefits, and provision for old age were the reasons cited for saving in urban
areas, whereas to provide for old age was the main reason in rural areas. His findings and
suggestions shows investors preference among the post office schemes, like Indira Vikas Patra
(IVP), KVP and Post Office Recurring Deposit Account (PORD) were the most popular, in both
urban and rural areas.
MacGregor, Slovic, Berry and Evensky4 (1999) made a study on how the financial decisionmaking process is linked to various aspects of investments/asset classes, specifically experts

perceptions of returns, risk, and risk/return associations. A survey was conducted among 265
participants that responded were asked to provide their assessment of a series of 19 asset classes
like land and building ,plant and machinery , gold , silver, shares , mutual funds etc., . The main
findings revealed with the utilization of multiple regression analysis with perceived risk as the
dependent variable revealed that three significant factors (worry, volatility, and knowledge)
explained 98% r-square of the experts risk perception.
Securities and Exchange Board Of India 5 (SEBI) and NCAER (2000) 'Survey of Indian Investors'
has reported that safety and liquidity were the primary considerations which determined the
choice of an asset. Ranked by an ascending order of risk perception fixed deposit accounts in
bank were considered very safe, followed by gold, units of UTI-US64, fixed deposits of nongovernment companies, mutual funds, equity shares, and debentures. Households' preference for
instruments like gold, silver, bank deposits, post office schemes, bonds etc., in which they
commonly invested matched the risk perception. Bank deposits, which had an appeal across all
income classes and tax-saving schemes were preferred by middle-income and higher-income
groups.
Karthikeyan 6(2001) has conducted a research study on Small Investors' Perception on Post
Office Saving Schemes and found that there was significant difference among the four age
groups like 21-30, 31-40, 41-50 ,51 and above, in the level of awareness for Kisan Vikas Patra
(KVP), National Savings Schemes (NSS), and Deposit Scheme for Retired Employees (DSRE),
and the overall score confirmed that the level of awareness among investors in the old age group
was higher than in those of the young age group. No difference was observed between male and
female investors except for the NSS and KVP. Out of the factors analyzed, necessity of life and
tax benefits were the two major ones that influence the investors both in semi-urban and urban

areas. Majority (73.3 per cent) of investors of both semi-urban and urban areas were very much
willing to invest in small savings schemes in future provided they have more for savings.

In a study conducted by Rajarajan .V,7 (2003), he examines investors demographics like age,
marital status etc., and risk capacity like return, safety , etc., the objective of the study is to
develop a profile of sample individual investor in term of their demographics and to know their
risk tolerance level . He observed 150 sample. He found that irrespective of gender, 41% are
found low risk tolerance and 34%have high risk tolerance level. From his findings and solutions
investors prefers to invest in financial products which give low risk returns like PPF, FD, bonds
etc.
Gupta

(2004) studied about the retail investors investment pattern behavior and attitude that

they hold about stock investing and conducted a survey with 150 participants. The results shows
that only the young investors invest in stock market However, he holds moderately low belief
towards stock market institutions regulatory capabilities towards safety of small investors.
Kanagasabapathi and Gayathri, 9(2004) made a study on savings and preferences among different
categories of people like doctors, professionals, teachers etc., the study consists of 279 people,
with 51 percent of them being males and the remaining females. Care was taken to include
people belonging to different age groups, marital status and income levels. The educational
qualifications of the respondents were high with more than 77 percent of them having post
graduate and professional degrees. In their findings, Out of the ten different investment options
given, the first three priority items were investment in house, bank deposits and gold. The last
three items were shares and bonds, chit funds and mutual funds. Insurance, post office savings,
land and savings certificates were the other items in the order of priority.

Slovic

10

(2005)The mutual fund industry has grown tremendously and is now focusing more

attention on marketing to a broader segment of the population. The analysis reveals major
attributes of fund choice, and identifies investors with attributes most likely to make reasonable
choices and those who are less likely to do so. Data for the analysis were obtained from 50
current mutual fund investors based on 20 choice tasks like gold, silver, mutual fund , bank
deposits ,shares etc., The study includes investor demographics and their relationships to past
fund performance and fee structure in making fund choices.
In a study conducted by Navasiyam, 11 (2006), he analysed the socioeconomic factors that are
responsible for taking life insurance policies and examined the preferences of the policyholders
towards various types of policies of LIC. From the analysis, it was found that factors such as age.
Education level and sex of the policy holders are significant. However, income level, occupation
and family size are significant while deciding on an insurance policy. From the analysis, it is
inferred that despondence belonging to the age group of 31 to 40 are very much interested in
taking a life insurance policy.
In the study conducted by Vaidhyanathan 12 (2007), he stated that small savings schemes have a
psychological appeal and it provides an opportunity for ordinary men, women, and even children
to invest their savings. It reaches a large number of people and covers a wide range of areas. He
also suggested that efforts should be taken to simplify the procedure of small savings schemes to
suit the needs of illiterate and socially down trodden people. Further, he suggested an increase in
the rate of interest of small savings schemes to meet the challenges of commercial banks.
Dr.Vanitha tripathi ,13(2007) examined the perceptions, preferences and various investment
strategies in Indian stock market on the basis of a survey among 93 investment analysts, fund

managers and active equity investors during March-October 2007. Survey findings reveal that
investors use both fundamental as well as technical analysis while investing in Indian stock
market. Significantly influence stock prices and hence addition of these factors in asset pricing
model can better explain cross sectional variations in equity returns in India. The most widely
used investment strategies in Indian equity market are size based strategies, momentum
strategies. There has been a substantial change in investment strategies used by active investors.
The investment horizon of investors has also reduced due to higher volatility. These findings are
important in understanding the behavior of investors in Indian stock market and bring new
insights into issues such as asset pricing, market efficiency and investment strategies.
Sandipan14 (2007) conducted a study relating to Investors preference in commodities market in
Coimbatore with 150 respondents. The study was undertaken to know the preference of the
investors towards various Investment avenues in relation to commodity market.

The

expectations of the investors are quite high. Many expect high rate of return for further
investment through commodity market. The investment avenues of individual investors depend
mainly on annual income as well as risk taking capacity of the individuals. Regularity in
investing, percentage of savings also has a major impact in choosing the investments. The study
on investors preference in commodity market also gives an idea of the investors choice based
on returns, risk and their awareness.
According to sivaranjini15 (2007), made a study consisting of 260 persons belonging to three
major groups namely, bank officials, business persons and others consisting mainly of
professionals on investors preference . The sample covered in the study included engineers,
chartered accountants, administrators and sales persons. 53 percent of the sample consisted of

males and 47 percent females, with people from different age groups, marital status and
educational backgrounds. Her major findings of the study was among a list of ten popular
investment options indicated, the top three ranks go to bank deposits, insurance and ownership of
house, while the bottom three places are secured by chit funds, shares and bonds and mutual
funds. The other options are gold, post office savings, land and saving certificates.
Cronqvist, Henrik 16(2008) conducted a study on Investors with long planning horizons.Overall,
investor knowledge of popular finance concepts does little to improve choices of mutual funds.
The analysis also provides information for mutual funds with respect to pricing. Many investors
avoid buying funds withloads, and this is especially true for investors with greater knowledge of
basic finance.Highly educated consumers and those who demonstrated greater knowledge of
basic finance made poorer, not better, decisions than did their less financially savvy counterparts.
Sunaya khurana17(2008) analyzed the customer preference in life insurance industry in India .
She had analyzed the customer preference regarding plans and company, their purpose of buying
insurance policies, satisfaction level and their future plans for the new insurance policy. She
found that many married people has invested in life insurance for safety and for their future
plans.
Kumar, RohitVishal and Sarkar,Amitava18(2008) conducted a survey among 560 respondents in
the five metropolises. The objective was to segment the metropolitan consumers on behavioral
aspects and to understand their consumption pattern. The study, designed on the basis of VALS,
uses cluster analysis to segment the Indian metropolitan consumers into six behavioral
categories, namely Well Settled, Strugglers, Enjoyers, Conservatives, Self Concerned and
Realist. The segments have been profiled in terms of their product ownership, Activities and

Interests, Financial Investment avenues and Media habits. From his findings he says that
investors prefers to invest in financial products.
Meenu varma;(2008)19 This study was on knowing whether demographics and personality types had
effects on investment choices. Demographic profile and investor personality can be the two discriminates
for making perceptions about investor psychology. The study found that Real estate was the most
favoured investment followed by mutual funds, Gender, age, income, and occupation also had a strong
influence in investment preferences.
MAXNEWYORK AND NCAER STUDY FINDINGS ; 20( 2008) HOW INDIA EARNS, SAVES,AND
SPENDS?. The survey covered 342 towns 2000 villages, 250 districts, 2255 wards and 63,016
households. The findings of the study are,

78% of households were aware of life insurance but 24%own a life insurance policy.

India saves but does not invest.

It saves for emergencies and old age but not in long-term instruments

Income level was an important factor in influencing saving pattern but education levels and
occupation also had an impact.

81%of Indians save and Rupees 16,139 was the per capita savings per year.

High income earners saved 44% of income,

Graduate households saved 30% of income, and non graduate families an average of 16%.

Salaried earners save around 7.5% of income and labour class 4% of income

Indian households keep 65%of their savings in liquid assets like PO deposits, bank deposits, cash
at home, invest 23%in physical assets like real estate, gold and 12%in financial instruments.

36% of savings are kept as cash at home, 50%in banks, 5% in PO savings accounts and 3% in
cooperative societies.

20% of salary earners said that their first choice of depositing savings would be keeping at home.

96% of households cannot survive beyond a year with current savings in case of loss of source of
income.
Dmirity makarov, Astrid U. 21(2008) In their paper titled Explaining Households Investment behaviour,
the authors provided for unified theoretical explanation for several salient features of household stock
holding. The authors empirically tested whether, wealthier investors spend more money in stock markets
than poorer ones and also tested the absence of a wealth effect in portfolio choices.

According to N.Yesodha Devi and V.S.Kanchana and S.Sujatha 22(2009) studied the attitude of
200 respondents of Coimbatore city ,regarding their savings and investment patterns like bank
deposits , post office savings schemes, shares bonds, real estate, gold , silver etc.,. The relevant
data on the factors influencing the investors to invest in various investment opportunities were
collected with the help of structured questionnaires. Majority of respondents have given top rank
for bank deposits with the factor of first preference being safety. The Chi-Square analysis shows
that personal factors like marital status and occupation had significant influence on the factor of
first preference considered while investing. There is significant influence between the type of
investments and the reason for investing in these investments. The Weighted Average Ranking

Analysis shows that the respondents have given top rank for Bank deposits, 2 nd rank for post
office schemes, 3rd for gold, 4th for shares, 5th for mutual funds and so on .
Economic Times 23(2009) in the article A Crisis of confidence, reported that out of 900 companies data
on shareholdings breakup for the quarter ended 30 th September 2009, 600 of them had reported drop in
retail share, ie., retail share holders have shares worth less than 1 lakh in any listed company, IPOs are not
preferred. History shows that retail investment in stock markets have always been low, and various
studies show that only 5%of household savings is invested in stocks and major part of savings goes to
bank deposits, gold and real estate. They also found mutual funds and ELISS more lucrative as one third
of market capitalisation of mutual funds comes from retail investors.
SUSHANT NAGPAL AND B.S.BODLA24 (2009) The study on the impact of investors lifestyle on their
investment pattern was based on the belief that though individuals may be equal in all aspects, their
financial planning needs are very different. By using lifestyles or psychographics, along with
demographics, synergism between investors is believed to be generated. This study found that investors
lifestyle predominantly decides the risk taking capacity of investors.

Shanmugasundaram and Balakrishnan25 (2010), Investments are made with an avowed objective
of maximizing wealth. Investors need to make rational decisions for maximizing their returns
based on the information available by taking judgments free from emotions. Investors' behavior
is characterized by over excitement and overreaction in both rising and falling stock markets.
Most of the investments and financial theories are based on the idea that everyone takes careful
account of all available information before making investment decision. His study was analysed
the factors influencing the behavior of investors in capital market. He suggests that demographic
factors like age, gender income, and marital status influence the investors' investment decisions.

This study shows how investor interprets and acts on various capital market information to make
informed investment decisions.

END NOTE:
1. Gupta .L.C1 (1995)International research journal of finance and economicsvol 4pp-361.
2. Somasundaram, V.K2 (1998), 'A Study on Savings and Investment Pattern of investors ,
journal of finance ,vol 2pp44
3. Gavini, Augustine, L., and Prashanth Athma 3(1999), 'Small Saving Schemes of Post
Office Need to Be Known More', Southern Economist, 37(20), February 15, pp. 13-14.
4. MacGregor, D. G., Slovic, P., Berry, M., and Evensky, H. R 4(1999). Perception of
financial risk: A survey study of advisors and planners. Journal of Financial Planning, 12,
8: 68-86.
5. NCAER,'Savings in India', New Delhi. SEBI-NCAER 5(2000), 'Survey of Indian
Investor', Mumbai
6. Karthikeyan6(2001), 'Small Investors' Perception on Post Office Small Savings Schemes',
unpublished thesis, Madras University, Tamilnadu, India.
7. Rajarajan.V7(2003) Investors Demographics and Risk Bearing Capacity,Finance India,
Vol. XVII, No. 2, June 2003, pp.565-576.
8. Gupta8(2004) An empirical study of stock behavior-indian journal of finance and research
vol14, issue 1,2.

9. Kanagasabapathi. P and

Gayathri.M9(2004) A study on savings and

investment

preferences of working people in Coimbatore city, Unpublished report, P.S.G. College of

Technology, Coimbatore.
10. Slovic10(2005) Investors choice towards mutual fund, The Journal of Behavioral finance ,
vol2, no3,pp157.
11. Navasiyam11(2006),study of socioeconomic factors, the journal of finance and
economics , 2006, vol4, pp324.
12. Vaidhyanathan12 (2007), 'Small Savings Schemes in Tamil Nadu', unpublished thesis,
University of Madras, Tamilnadu.
13. Dr.Vanitha Tripathi13 (2009), Investment strategy in Indian stock exchange , Indian
Journal Of finance, nov 2009,vol 3 no11.pp223.
14. Sandipan14(2007) Investors preference towards stock investment, Journal of finance,
vol4, no4,pp145.
15. Sivaranjani.S15 (2007) A study on investors preferences, Unpublished report,
P.S.G.College of Technology, Coimbatore.
16. Cronqvist, Henrik16(2008) Advertising and Portfolio Choice. Working Paper Series,
SSRN, September 11, 2008 (http://ssrn.com/abstract=920693).
17. sunaya khurana17(2008) , journal of behavioural finance, issue 44.
18. Kumar, Rohit Vishal and Sarkar, Amitava18(2008), Psychographic Segmentation of Indian
Urban Consumers (May 10, 2008). Journal of the Asia Pacific Economy, Vol. 13, No. 2,
pp. 204-226. Available at SSRN: http://ssrn.com/abstract=1628050.

19. Meeu Varma,(2009) Wealth

Management and Behavioural finance: The effect of

demographics and personality on investment choice among Indian investors, Journal of

Behavioural finance, ICFAI, Dec. 2009.
20. MAXNEWYORK AND NCAER STUDY FINDINGS ;( 2008)20
21. Dmrity Makarov, Astrid U. Schoruick,21(2008) Explaining Households Investments
Behaviour SSRN.Com Abstract No. 949189.
22. N.Yeshodadevi, V.S.kanchana, and s.sujatha22(2009) , a study on investment behavior on
investors , The Journal of Business Management studies vol 4, no.1.
23. `A crisis of confidence,23 (2009)The Financial Express, October 24, 2009.
24. Sushant Nagpal, B.S Bodla,24(2009) Impact of Investors life style on their investment
pattern: an empirical study, The ICFAI Journal of Behavioural finance, Vol. VI, No. 22,
June 2009.
25. Shanmugasundaram and Balakrishnan25(2010), investment decision making, behavioral
approach , International Journal of Business Innovation and Research, Volume 4, Number
6, 3 October 2010 , pp. 584-597(14).
26. `Measuring the middle class NCAER study, The Economic times May 15, 2009.
27. www.ssrn.com
28. www.investopedia.com
29. www.scribd.com
30. www.citeman.com
31. www.investorswords.com
32. www.investorglossery.com
33. www.economywatch.com

CHAPTER 3

ANALYSIS AND
INTERPRATION OF DATA

The procedure of analysis is essential to interpret the results obtained and to draw up
influences, in order to have a meaning for the study. Sample size is limited to 100 investors and
this study is purely based on the data collected through questionnaire which may be inadequate
to measure the true opinion of the investors. Each question from the questionnaire, which is the
source of primary data collected, is converted in the form of the table. The table illustrates the
classification of data collected and the percentage of data, which falls under a particular criterion,
forms etc.

PROFILE OF RESPONDENTS
TABLE 3.1
AGE WISE CLASSIFICATION
AGE

NO.OF
RESPONDENTS

PERCENTAGE

Below 30 yrs

25

25

Between 30-40 yrs

Between 40-50 yrs

26

26

Above 50 yrs

40

40

TOTAL

100

100

Source: Primary data

The above table 3.1 reveals that 25% of the respondents are belonging to 30years and
below, 9% of the respondents are from 30 years to 40 years, 26%of the respondents are from 40
years to 50 years, 40%of the respondents are above 50 years. Hence, the study reveals that
majority of the respondents belong to the age group of 50 years and above. These facts are
diagrammatically represented in the chart 3.1.1as follows

CHART 3.1.1
AGE WISE CLASSIFICATION

40
35
30
25
40

20

NO. OF RESPONDENTS

15

26

25

10
5

AGE

TABLE 3.2
GENDER PROFILE
GENDER

NO.OF
RESPONDENTS

PERCENTAGE

Male

59

59

Female

41

41

TOTAL

100

100

Source: primary data

The above table 3.2 shows that 59%of the respondents are male and 41% of the

respondents are female. These facts are also presented in the chart 3.2.2 as follows

CHART 3.2.2
GENDER PROFILE

41
59

Male
Female

TABLE 3. 3
MARITAL STATUS CLASSIFICATION
MARITAL STATUS

NO. OF
RESPONDENTS

PERCENTAGE

Married

79

79

Unmarried

21

21

TOTAL

100

100

Source: Primary data

The above table3.3 indicates that 79%of the respondents are married and 21%of the
respondents are unmarried. These facts are diagrammatically represented in the chart
3.3.3which as follows

CHART 3.3.3
MARITAL STATUS

21
Marrie d
Unmarrie d

79

TABLE 3.4
EDUCATIONAL QUALIFICATION OF THE INVESTORS
EDUCATIONAL
QUALIFICATION

NO.OF
RESPONDENTS

PERCENTAGE

SSLC/+2

21

21

Graduate

34

34

Post Graduate

28

28

Professional

17

17

TOTAL

100

100

Source: Primary data

The above table 3.4 reveals that 21% of the respondents belongs to SSLC/+2 , 34% of

the respondents are Graduate, 28% of the respondents are Post Graduate and 17%of the
respondents are at Professional level. Hence the study reveals that majority of the
respondents are graduates. These facts are also presented in the chart 3.4.4 as follows

CHART 3.4.4
EDUCATIONAL QUALIFICATION OF THE INVESTORS
40

35

30

25

20

NO. OF RESPONDENT

15

10

21

34

28

QUALIFICATION

17

TABLE3. 5
OCCUPATION CLASSIFICATION OF RESPONDENTS
OCCUPATION

NO. OF
RESPONDENTS

PERCENTAGE

Business

Salaried employee

69

69

Professional

Retired

14

14

Home maker

TOTAL

100

100

Source: primary data

The above table 3.5 indicates that 69% of the respondents are salaried employees,14 %
respondents are retired, 8% of the respondents are home maker and 6% of the respondents are
leading a Business life, 3% of the respondents are Professionals. A study reveals that majority of
the respondents belong to the salaried employees category. A diagrammatic representation of
chart 3.5.5 as follows

CHART 3.5.5
OCCUPATION CLASIFICATION OF RESPONDENTS

69
70

60

50

40

NO .OF RESPONDENT 30

20

10

14
8

6
3

OCCUPATION

TABLE 3.6
INCOME PROFILE OF RESPONDENTS
MONTHLY INCOME

NO. OF
RESPONDENTS

PERCENTAGE

Below Rs 20,000

38

38

Between Rs 20,000to 30,000

20

20

Between Rs30,000to 40,000

11

11

Between Rs 40,000t0 50,000

10

10

Above 50,000

21

21

TOTAL

100

100

Soure: primary data

The above table 3.6 shows that 38%of the respondents have Monthly income below
Rs20, 000, 20%of the respondents have monthly income between Rs 20,000 to Rs 30,000, 11%of
the respondents have monthly income between Rs 30,000 to Rs 40,000, 10% of the respondents
have monthly income between Rs40, 000 toRs50, 000 and 21% of the respondents are above
Rs50, 000. This study reveals that majority of respondents a have monthly income below Rs
20,000. These facts are also presented graphically in chart 3.6.6 as follows

CHART 3.6.6
INCOME PROFILE OF RESPONDENTS

Above 50,000

21

Between Rs 40,000t0 50,000

INCOME GROUPS

10

Between Rs30,000to 40,000

11

Between Rs 20,000to 30,000

20

Below Rs 20,000

38

5 10 15 20 25 30 35 40

NO.OF RESPONDENTS

TABLE 3.7
INVESTMENTS OWNED BY INVESTORS

INVESTMENTS
OWNED

NO OF
RESPONDENTS

PERCENTAGE

MUTUAL FUND

11

11

BONDS

EQUITY SHARES

20

20

INSURANCE

34

34

BANK DEPOSITS

20

20

GOVT.SECURITIES

GOLD

12

12

TOTAL

100

100

Source: primary data

The above table 3.7 reveals that the 11% of the respondents prefer to invest in mutual
fund, 2% of the respondents prefer to invest in bonds, 20% prefer equity shares, 34% are
insurance, 20% prefer bank deposits, 1% government securities, and only 12% prefer gold.
Hence, the study reveals that majority of the respondents prefer to invest in insurance (34). These
facts are presented diagrammatically on chart 3.7.7 as follows

CHART 3.7.7
INVESTMENTS OWNED BY INVESTORS
34

35

30

25
20

20

20

NO. OF RESPONDENTS

15

12

11
10

INVESTMENTS OWNED

TABLE 3.8
RANKING OF INVESTMENT OBJECTIVES
OPTIONS

ASSURED

TOTAL

1
30

2
12

3
25

4
25

5
8

331

34

13

24

14

15

337

19

23

14

22

22

295

19

20

20

35

241

11

33

17

19

20

296

100

100

100

100

100

100

SAFETY OF
PRINCIPAL
TAX
AVOIDANCE
INCOME FOR
CURRENT
LIFE STYLE
ACCUMULATE
ASSEST FOR
CHILDREN
ACCUMULATE
WEALTH FOR
RETIREMENT
TOTAL

Source: Primary data

FACTORS

WEIGHTED SCORE

RANK

ASSURED SAFETY OF
PRINCIPAL

331

TAX AVOIDANCE

337

INCOME FOR CURRENT

LIFE STYLE

295

ACCUMULATE ASSET FOR

CHILDREN
ACCUMULATE WEALTH
FOR RETIREMENT

241

296

Source: primary data

Weighted average method is performed to find out the major objectives of investors while
making investment decision. In order to find out the major objective, weights have been assigned
to various options in the descending order and highest score is calculated to find out total scores
of the respondents. From the table 3.8 it can be concluded that investors of this sample feel that
the primary objective is tax avoidance, and second rank is assured safety of principal. Third rank
given by the investors is accumulated wealth for retirement, Income for current life style have
ranked fourth and the last rank given by the investors in this sample is accumulated assets for
children.

CHART 3.8.8
INVESTMENT OOBJECTIVES

296
241

331
337

295

ASSURED SAFETY OF
PRINCIPAL
TAX AVOIDANCE
INCOME FOR
CURRENT LIFE STYLE
ACCUMULATE ASSET
FOR CHILDREN
ACCUMULATE WEALTH
FOR RETIREMENT

TABLE 3.9
PREFERRED INVESTMENT TENURE
PERIOD OF
INVESTMENT

NO. OF
RESPONDENTS

PERCENTAGE

Short term investment (1-2

yrs)

30

25

Medium term investment(25yrs)

Long term investment(510yrs)

42

38

28

24

100

100

TOTAL
Source: primary data

The above table 3.9 reveals that 30% of the respondents invest in short term investment
(1- 2 yrs), 42% of the respondents invest in medium term investments (2-5 yrs), and 28% invest
in long term investments (5- 10 yrs). This study reveals that majority of the respondents 42%
invest in medium term investment (2- 5 years); these facts are shown diagrammatically in chart
3.9.9 as follows

CHART 3.9.9
PREFERRED INVESTMENT TENURE

28

30
Short term
investment (1-2 yrs)
Medium term
investment(2-5yrs)
Long term
investment(5-10yrs)

42

TABLE 3.10
INVESTORS KNOWLEDGE OF INVESTMENTS OWNED
INVESTORS
KNOWLEDGE

NO.OF
RESPONDENTS

PERCENTAGE

No knowledge

15

15

Limited

52

52

Good

30

30

Extensive

TOTAL

100

100

Source: primary data

Table 3.10 reveals that 15% of the respondents have no knowledge about their
investment, 52% have limited knowledge, 30% have a good knowledge about their investment
and 3% of the respondents have an extensive knowledge about investments. Hence, the study
reveals that majority of respondents have limited knowledge of investment. These facts are also
represented diagrammatically on chart 3.10.10 as follows

CHART 3.10.10
INVESTORS KNOWLEDGE OF INVESTMENTS OWNED

15

30

No knowle dge
Limite d
Good
Exte nsive

52

TABLE 3.11
SOURCES OF INVESTMENT INFORMATION

SOURCES OF
INFORMATION

NO OF
RESPONDENTS

PERCENTAGE

SELF
RESEARCH/INTERNET
ADVERTISEMENT

48

47

FRIENDS, RELATIVES

19

19

BROKERS, AGENTS

27

22

TOTAL

100

100

Source: primary data

The above table 3.11 reveals that 48% of the respondents are influenced by self research
through internet to choose an investment, 6% are influenced by advertisement, 19% are
influenced by friends and relatives, and only 27% are influenced by brokers and agents. Hence,
the study reveals that majority of the respondents are influenced by self research through internet
(48%) to choose investments. These facts are also represented diagrammatically in chart 3.11.11
as follows

CHART 3.11.11

SOURCES OF INVESTMENT INFORMATION

50

48

45
40
35
30

27

25
19

20
NO. OF RESPONDENTS

15
10

5
0

SOURCES OF INFORMATION

TABLE 3.12
CROSS TABULATION BETWEEN INCOME AND INVESTORS
INVESTMENTS OBJECTIVES
INCOME

LOW INCOME

HIGH INCOME

(LESS THAN

(MORE THAN RS

RS 50,000)

50,000)

(RANK 1)
ASSURED SAFETY
OF PRINCIPAL

22

30

TAX AVIODANCE

10

12

INCOME FOR
CURRENT LIFE
STYLE
ACCUMULATE
ASSETS FOR
CHILDREN
ACCUMULATE
WEALTH FOR
RETIREMENT

22

25

18

25

TOTAL

79

21

100

INVESTMENTS

TOTAL

OBJECTIVES
RANKED AS

Source: primary data

In table 3.12 a cross tabulation is attempted to find out the investment objectives ranked
as (rank1) of low income group (less than Rs 50,000) and high income group (more than Rs
50,000). Out of 79 people belonging to low income group , 22 of them have given rank I for

assured safety of principal and income for current life style, 18 of them for accumulating assets
for children , 10 of them for tax avoidance and 7 of them for accumulating wealth for retirement .
Out of 21 people belonging to high income group ,8 of them have given rank I for assured safety
of principal, 7 of them for accumulating assets for children , 3 for income for current life style , 2
for tax avoidance and rest only one for accumulating wealth for retirement.

TABLE 3.13
CROSS TABULATION BETWEEN AGE AND PREFERRED INVESTMENT TENURE
INVESTMENT

SHORT TERM

MEDIUM

LONG TERM

TENURE

INVESTMENT

TERM

INVESTMNET

TOTAL

INVESTMENT
AGE
BELOW 30

11

25

YEARS
BETWEEN 30

TO 40 YEARS
BETWEEN 40

13

26

TO 50 YEARS
ABOVE 50

12

14

14

40

YEARS
TOTAL

30

42

28

100

Source: primary data

From the table 3.13, it is observed that out of 100 respondents, 42 of them have chosen
medium term investment. In this group 15 of them belong to the age group less than 40 years and
27 of them belong to above 40 years of age group. It can be inferred, the above 40 years age
group does not prefer long term investment.

CHI-SQUARE TEST

A chi square test enables us to test whether more than two population proportion can be
considered equal. We can also use chi-square, when we classify the population into several
categories with respect to two attributes (for example age and percentage of income invested)
and then chi square test is used to determine whether the two attributes are independent of each
other. We use the chi-square test to examine the differences among more than two sample
proportions and to make inferences about whether such examples are drawn from the same
population. It is the most popular test of significance in social science research. It is used to
make comparisons between two or more variables. Chi square is used to make comparison
between frequencies rather than between mean scores.

TABLE 3.14
RELATIONSHIP BETWEEN INVESTMENTS OWNED BY INVESTORS

TOTAL

GOLD

GOVERNMENT
SECURITIES

DEPOSITS BANK

INSURANCE

INVESTMENT
TENURE

BONDS

MUTUAL FUND

INVESTMENTS
OWNED

SHARES EQUITY

AND PREFERRED INVESTMENT TENURE

SHORT TERM

30

MEDIUM
TERM

11

14

42

LONG TERM

11

28

TOTAL

11

20

34

20

12

100

CHI SQUARE TEST

PARTICULARS

CALCULATED
VALUE

DEGREES OF
FREEDOM

TABLE VALUE

PEARSONS CHISQUARE

8.700

12

21.026

Table 3.14 indicates that the relationship between investments owned by investors and
investors preferred investment tenure; a chi-square test has been applied. It reveals that
calculated value (8.700) is less than table value (21.026) at 5% level of significance. Therefore,
there is no association between investments owned by investors and preferred investment tenure.

Any investment to reap capital appreciation benefits must be held for a long time. A
majority of respondents (42%) in this study have a medium term investment (2 to 5 years) as a
preferred tenure. Insurance is seen as an investment destination by a majority. Hence, there is no
significant relationship between investments owned and tenure of holdings per chi-square test
results.

TABLE 3.15

RELATIONSHIP BETWEEN INVESTMENTS OWNED BY INVESTORS

SHARES EQUITY

INSURANCE

DEPOSITS BANK

GOVERNMENT
SECURITIES

GOLD

TOTAL

AND SOURCES OF INVESTMENT INFORMATION

11

12

14

48

19

BROKERS/AGENT
S

10

27

TOTAL

11

20

34

20

12

100

MUTUAL FUND

BONDS

INVESTMENTS
OWNED

0
FRIENDS/
RELATIVES

SOURCES OF
INFORMATION
SELF RESEARCH/
INTERNET
ADVERTISEMENT

CHI SQUARE TEST

PARTICULARS
PEARSONS CHISQUARE

CALCULATED
VALUE
23.363

DEGREES OF
FREEDOM
18

TABLE VALUE
28.869

Table 3.15 indicates the relationship between investments owned by investors and sources
of investment information, a chi-square test has been applied. It reveals that calculated value
(23.363) is less than table value (28.869) at 5% level of significance. Therefore, there is no
relationship between investments owned by investors and sources of investment information.

TABLE 3.16

RELATIONSHIP BETWEEN OCCUPATION AND INVESTORS

PREFERRED INVESTMENT TENURE
INVESTMENT

SHORT TERM

MEDIUM

LONG TERM

TENURE

(1 -2 YEARS)

TERM

(5-10 YEARS)

TOTAL

(2-5 YEARS)
OCCUPATION
BUSINESS

SALARIED

14

34

21

69

PROFESSIONAL

RETIRED

14

HOME MAKER

TOTAL

30

42

28

100

EMPLOYEE

CHI SQUARE TEST

PARTICULARS
PEARSONS CHISQUARE

CALCULATED
VALUE
17.797

DEGREES OF
FREEDOM
8

TABLE VALUE
15.507

Table 3.16 indicates the relationship between occupation and investors preferred investment
tenure, a chi-square test has been applied. It reveals that calculated value (17.797) is greater than
table value (15.507) at 5% level of significance. Therefore, there is a relationship between
occupation and investors preferred investment tenure.

TABLE 3.17

RELATIONSHIP BETWEEN INVESTORS EDUCATIONAL

QUALIFICATION AND INVESTOR KNOWLEDGE OF INVESTMENTS

LIMITED

GOOD

EXTENSIVE

TOTAL

EDUCATIONAL

NO KNOWLEDGE

INVESTORS

SSLC/+2

12

21

GRADUATE

18

34

POST

17

28

PROFESSIONAL

17

TOTAL

15

52

30

100

KNOWLEDGE

GRADUATE

CHI SQUARE TEST

PARTICULARS
PEARSONS CHISQUARE

CALCULATED
VALUE
10.658

DEGREES OF
FREEDOM
9

TABLE VALUE
16.919

Table 3.17 indicates the relationship between investors educational qualification and
investors knowledge of investments, a chi-square test has been applied. It shows that calculated
value (10.658) is less than table value (16.919) at 5% level of significance. Therefore, there is no
relationship between investors educational qualification and investors knowledge of
investments.

CHAPTER 4
FINDING, SUGGESTION
AND CONCLUSION

FINDINGS
1.
2.
3.
4.

Majority of investors in this sample belong to the age group of above 50 years.
It shows that majority of respondents were male (59%) than female (41%).
It reveals that majority of the respondents were married (79%).
It is interesting to note that most of the respondents possess graduation (34%), followed
by post graduate (28%), SSLC /+2 (21%) and the least were professionals (17%) among

the respondents.
5. Majority of the investor fall under salaried class (69%) next comes the retired class
(14%), home maker (8%), business people are (6%) and the least were professionals (3%)
among the occupation classification of respondents.
6. The majority of the respondents belong to the monthly income category of below Rs
20,000(38%)
7. It is found that majority of the respondents prefer to invest in insurance (34%).
8. It reveals that the investor of this sample feel that the primary objective is tax avoidance
followed by assured safety of principal, accumulated wealth for retirement, income for
current life style and accumulated assets for children.
9. It was found that majority of the respondents 42% invest in medium term of investment
(between 2 to 5 years).
10. It is interesting to note that the majority of the investors have limited knowledge (52%) of
investments owned.
11. It was found that majority of the respondents are influenced by self research through
internet (48%) as the most important sources of investment information, followed by
brokers and agents (27%), friends and relatives (19%) and advertisement(6%).
12. It was found that majority of the respondents belonging to low income group have given
rank 1 i.e. (Assured safety of principal) as an investment objective as per table 3.12 and
very few have hive given rank 1 (Accumulating wealth for retirement).
13. It is observed that out of 100 respondents 42 of them have chosen medium term
investment. In this group 15 of them belong to the age group less than 40 years and 27 of

them belong to above 40 years of age group. It can be inferred the above 40 years age
group does not prefer long term investment.
14. A majority of respondents (42%) in this study have a medium term of investment (2 to5
years) as a preferred tenure. Insurance is seen as an investment destination by a majority.
Hence, there is no significant relationship between investments owned and tenure of
holdings as per chi-square test result.
15. It was found that there is no relationship between investments owned by investors and
sources of investment information available for investor.
16. It is interesting to note that there is a relationship between occupation and investors
preferred investment tenure.
17. It shows that there is no relationship between educational qualification of the respondents
and investors knowledge of investments.

SUGGESTIIONS
Respondents of this study had given following suggestions
1. Seminars and lectures on future financial planning and systematic investment plan will
enable the investors in planning for the future.
2. False and misleading advertisements make the investors take wrong decisions. Hence,
investors should take knowledge decision.
3. The broker must guide the investors in taking the correct decision.
4. The education about finance should be inculcated at school level.

5. Planning is not only for making investments but also for expenditure. Investor should
diversify portfolio to avoid risk and look for long term gain.
6. Investment decision should be based on economic indicators.
7. There has to be some moral values for the financial advisors and agents before suggesting
an investor. Presently they are simply focused for their gains and it is difficult to trust
them. There are many fly by night operators in the market.
8. Investment should be based on proper understanding and knowledge. Investors should
grab proper opportunities.
9. Investors can go for one time investment of fundamentally strong stock when markets are
dull.
10. Assuring safety of principal will improve financial stability of individual investors.
11. Investor should invest only after fulfill their personal needs. Investing is highly rated
securities will reduce the risk of default.
12. For investors having aptitude of investment in stock, commodity market etc., adequate
knowledge dissemination by regulatory agencies like SEBI is suggested.
13. It is advisable to invest in land especially agricultural land which will fetch return and
appreciation in long term and also benefit them with tax free income.
14. Investors should not completely rely on the brokers, agents and financial advisor.
15. Diversify; it is the best strategy to tackle underperforming assets in a portfolio. It has
been witnessed that most of the time it seems prudent to maintain the asset allocation and
ride the volatility without much action. Do not put all eggs in one basket.
16. Invest in mutual funds to reduce risks of direct investment in equity during market
downturns. Pick a fund which has maintained a consistent performance both in good and
bad times.
17. Stay invested in the market for at least five years.
18. Always stick to golden goals of investment, namely growth, security, and income.

19. Goals can be short term, medium term, or long-term. Short term goals (less than 2 years)
like a short vacation must be planned with investments in bank FDs or mutual fund
investments. Medium term goals such as buying a car (2-5 years) mast be planned with
investments in equity and bonds and long-term goals, like children education,,(more than
5years) must be planned with direct investment in equity and ETFs.

CONCLUSION
Today life has become more mechanical and people dont find time in reading facts and
figures, they just see the rise and fall in price and decide that any one financial asset is worthy to
invest. After so many scams in the market the investors have learnt one lesson of not relying
completely on the brokers, agents and rely more on self research and opinion from friends and
relatives. Thus the study has revealed that the majority of investors in this sample are above 50
years. They, through their experience or after retirement spend time on financial asset
investment. The study reveals the individual investors investments preferences, investment
objectives and preferred source of investment information. Hence the study concludes that
investors should have a clear thought before investing their money to take correct investment
decision. The individual investor must try to gain more returns from their investment not only by
choosing the right investment but also learning to invest in the right time. Young investors should
realize the power of compounding and start investing right from a young age.

BIBLIOGRAPHY

BOOKS:
1. Baker, H.K, and J.A.Haslem. Informational needs of individual investors, The Journal
2.
3.
4.
5.

of Accountancy, 1973, pp.64-69.

Martin J. Technical analysis Mc Graw-Hill, 1991.
Investment analysis and portfolio management.- M.ranganatham , R. madhumathi.
Trippy, Robert .L. financial markets, Mc Graw-Hill, 1994.
Tversky .A and D.Kahneman, The framing of decision and the psychology of

choice,science ,211,1981,pp.453-458.
6. Varshane and Mittal, Indian financial system, Sultan chand and sons, sixth edition 2003.

JOURNALS AND MAGAZINES:

1. Cronqvist, Henrik (2008) Advertising and Portfolio Choice. Working Paper Series,
SSRN, September 11, 2008 (http://ssrn.com/abstract=920693).
2. Gavini, Augustine, L., and Prashanth Athma (1999), 'Small Saving Schemes of Post
Office Need to Be Known More', Southern Economist, 37(20), February 15, pp. 1314.

3. Gupta (2004) An empirical study of stock behavior-indian journal of finance and

research vol14, issue 1,2.
4. Gupta .L.C (1995)International research journal of finance and economicsvol 4pp361.
5. Kanagasabapathi. P and Gayathri.M (2004) A study on savings and investment
preferences of working people in Coimbatore city, Unpublished report, P.S.G.
College of Technology, Coimbatore.
6. Karthikeyan (2001), 'Small Investors' Perception on Post Office Small Savings
Schemes', unpublished thesis, Madras University, Tamilnadu, India.
7. Kumar, Rohit Vishal and Sarkar, Amitava (2008), Psychographic Segmentation of
Indian Urban Consumers (May 10, 2008). Journal of the Asia Pacific Economy, Vol.
13, No. 2, pp. 204-226. Available at SSRN: http://ssrn.com/abstract=1628050.
8. MacGregor, D. G., Slovic, P., Berry, M., and Evensky, H. R (1999). Perception of
financial risk: A survey study of advisors and planners. Journal of Financial Planning,
12, 8: 68-86.
9. Navasiyam (2006),study of socioeconomic factors, the journal of finance and
economics , 2006, vol4, pp324.
10. NCAER,'Savings in India', New Delhi. SEBI-NCAER (2000), 'Survey of Indian
Investor', Mumbai
11. Rajarajan.V (2003) Investors Demographics and Risk Bearing Capacity,Finance
India, Vol. XVII, No. 2, June 2003, pp.565-576.
12. Sandipan14(2007) Investors preference towards stock investment, Journal of finance,
vol4, no4,pp145.

13. Shanmugasundaram and Balakrishnan (2010), investment decision making,

behavioral approach , International Journal of Business Innovation and Research,
Volume 4, Number 6, 3 October 2010 , pp. 584-597(14).
14. Sivaranjani.S(2007) A study on investors preferences, Unpublished report,
P.S.G.College of Technology, Coimbatore.
15. Slovic (2005) Investors choice towards mutual fund, The Journal of Behavioral
finance , vol2, no3,pp157.
16. Somasundaram, V.K(1998), 'A Study on Savings and Investment Pattern of investors
, journal of finance ,vol 2pp44
17. sunaya khurana(2008) , journal of behavioural finance, issue 44.
18. Vaidhyanathan (2007), 'Small Savings Schemes in Tamil Nadu', unpublished thesis,
University of Madras, Tamilnadu.
19. Vanitha Tripathi (2009), Investment strategy in Indian stock exchange , Indian Journal
Of finance, nov 2009,vol 3 no11.pp223.
20. Yeshodadevi.N, V.S.kanchana, and s.sujatha (2009) , a study on investment behavior
on investors , The Journal of Business Management studies vol 4, no.1.
21. `A crisis of confidence, The Financial Express, October 24, 2009.
22. Sushant Nagpal, B.S Bodla, Impact of Investors life style on their investment
pattern: an empirical study, The ICFAI Journal of Behavioural finance, Vol. VI, No.
22, June 2009.
23. Meeu Varma, Wealth Management and Behavioural finance: The effect of
demographics and personality on investment choice among Indian investors, Journal
of Behavioural finance, ICFAI, Dec. 2009.

24. Dmrity Makarov, Astrid U. Schoruick, Explaining Households Investments

Behaviour SSRN.Com Abstract No. 949189.
25. MAXNEWYORK AND NCAER STUDY FINDINGS ;( 2008) 8: HOW INDIA
EARNS, SAVES,AND SPENDS?.
26. `Measuring the middle class NCAER study, The Economic times May 15, 2009.

WEBSITES:
1. www.citeman.com
2. www.economywatch.com
3. www.globalinvestors.com
4. www.google.com
5. www.investopedia.com
6. www.investorsinfo.com
7. www.investorglossery.com
8. www.investorswords.com
9. www.scribd.com
10. www.ssrn.com
11. www.sebi.org.in
12. www.sematech.org
13. www.indiamart.com
14. www.investormap.com
15. www.neweconomyindex.org

16. www.eqis.com

ANNEXURE

QUESTIONNAIRE
A STUDY ON INVESTORS PREFERENCES TOWARDS VARIOUS
INVESTMENTS

Sir/Madam,
This study is being conducted as a requirement for the syllabus of M.com degree
course. I kindly request you to spare your valuable time in answering the questionnaire. The data
is collected purely for research purpose and shall be kept confidential.

1. Age:
a. below 30 yrs

b. between 30-40 yrs

c. between 40-50 yrs

d. above 50 yrs

2. Gender:
a. Male

b. Female

3. Marital status:
a. Married

b. Unmarried

4. Education Qualification:
a. SSLC/+2

b. Graduate

c. Post graduate

d. Professional

e. Others (please specify)

5. Occupation:
a. Business

b. Salaried employee

c. Professional

d. Retired

e. Home Maker

f. Any others (pl specify)

6. Monthly Income:
a. below Rs20,000

b. between Rs20,000 to 30,000

c. between Rs 30,000 to 40,000

d. between Rs40,000 to 50,000

e. Above Rs 50,000

7. Investments owned
a. Mutual Fund

b. Bonds

c. Equity shares

d. Insurance

e. Bank deposits
g.Gold

f. Govt. securities

h.

h. others please specify

8. Rank the objectives for choosing any investment? (Rank from 1-6)
PARTICULARS
Assured safety of principal
Tax avoidance
Income for current life style
Accumulate assets for children
Accumulate wealth for retirement
Others please specify
9. What is your preferred investment tenure?

RANK

a. Short term investment (1to2 yrs)

b. Medium term investment (2to5 yrs)

c. Long term investment (5 to 10 yrs)

10. Describe your knowledge about investments you make
a. No Knowledge

b. Limited

c. Good

d. Extensive

11. Sources of investment information

a. self research/internet
c. through friends , relatives

b. through advertisement
(News papers, TV,Magazines etc.,)

d. through brokers &agents

12. Suggestions if any please specify

THANK YOU