AN ANALYSIS ON THE INVESTMENT PATTERN

OF INVESTORS

INTRODUCTION• SAVINGS and INVESTMENT are the two smart options available to

individuals through which they can make money from the extra money they have by directly investing in capital equipment or indirectly through purchase of securities that can be used to tackle future uncertainties.

• Fixed income investment such as bonds, fixed deposits, preference shares, and Variable income investment such as business ownership (equities), or property ownership.

• Investing on the basis of certain factors, purposes, objectives, maturity period, their decision to change their portfolio based on market conditions.

Objectives of the Study-1) To analyse the objectives of investors2) To study the investment options available to the investors3) To analyse the investment patterns of investors 4) To study the investment decisions of different social class investors

Importance of the Study-The significance of this research study lies in studying the investor’s behaviour towards his investment portfolio which is affected through various factors like the maturity period of their investment, their frequency of investing, their attitude towards riskier assets and safer assets and their decision of investing based on the importance they give to the investment horizon, risk tolerance, market trends, risk coverage and the dependents. 

 

RESEARCH METHODOLOGY ADOPTED

• Sources of data: The data collected in this research study is done through

• Primary Data– Collection of information with the help of distributing a structured questionnaire to the respondents present in the twin cities so as to analyse their investment patterns and factors.

• Secondary Data- Collection of information with the help of published printed sources, books and published e-journals and general websites like Google scholar, Investopedia.

• Sample size- 100 respondents, sampling areas was Hyderabad- Secunderabad

• Sampling Procedure- Random sampling

• Statistical tools- Tools to measure investor responses and to give a statistical base to the study through Ms- Excel- bar diagrams, pie charts, Anova analysis. SPSS- Cross tabulation.

DATA ANALYSIS AND

INTERPRETATION

DEMOGRAPHIC PROFILE OF THE RESPONDENTS

Number of respondents (100) Percentage

Age 20-26, 27-31, 32- 36, 37-41, 42 and above 20-26 (6.8%), 27-31 (65%), 32-36(7.8%), 37-41(9.7%), 42 and above(10.7%).

Gender Male, Female Female( 55.8%), Male(44.2%)

Education SSLC, Intermediate, Graduate, PG, Professional, Other SSLC(3.9%), Intermediate(7.8%), Graduate(45.1%), PG(13.7%), Professional(25.5%), Other(3.9%).

Occupation Entrepreneur/ Business man, Employee, House Wife, Unemployed, Retired

Entrepreneur/ Business man(27.2%), Employee(46.6%), House Wife(1%), Unemployed(25%), Retired(0 %)

Income per month 0 -25, 25- 50, 50- 75, 75- 100, 100 and above 0 -25(25.5%), 25- 50 (35.3%), 50- 75(15.7%), 75- 100 (9.8%), 100 and above(13.7%)

64%

16%

19%

Service providers preferred

57%Higher Returns

Objective of investment

41% safe returns

2% others

Preference of security to invest in

9.95%18.6%

7.04%4.14%

13.27%15.35%

19.08%7.46%

3.73%

Purpose of investing

27.11%

19.20%

11.29%16.94%

23.16%2.25%

22.5% Budget

52%Bank interest rates

Factors to consider before investing

3.9%

Inflation rates

8.8%

Tax rates

12.7%

Current price

20.6%Annually

25.5%Less frequently

13.7%Half yearly

21.6%Monthly

18.6%quarterly

Frequency of investment

14.9%5 years to 10 years

13.9% 10 years and beyond

71.3%0 to 5 years

Since how long have they been investing

31.6%10 to 14 %

59.2%5 to 9%

Returns out of your investment

7.1%15 to 19 %

2%20 or more%

30.6%No

69.4%yes

Satisfaction from the returns

18.2% Friends & relatives

14.1%Financial advisors

52.5%self learning

Influences on investment decisions 

7.1%

ads

8.1% followjournals

33.3%Somewhat agree

43.4%Agree

selling riskier assets and investing in safer assets during market declines

3.1%strongly disagree

7.1% Disagree

13.1%

Strongly agree

Preferred investment style in case inherited Rs 10 lakhs

36.4%

58.6%13.1%

16.2%

33% Stay put, you are investing for the long term

17.5%Buy more stock since the market is down

20.6%Move everything into cash

28.9%

Sell some positions

Response if the account value (trading account) decreased by 12 % in one quarter

45.9%Situation B (loss of Rs1000, gain of Rs1920)

43.9%Situation A (loss of Rs 100, gain of Rs 400)

10.2%

Situation C (loss of Rs3500, gain of Rs4200)

Investment preference towards investing in low, moderate and high gain and loss situations

ANOVASource

of Variation SS df MS F P-value F critBetween Groups

1620.571 4

405.1429 3.584731

0.016683

2.689628

Within Groups

3390.571 30 113.019

Total5011.14

3 34

Age and objective of investments Inference: In this case, the F critical value 2.6896 is less than F value 3.5847. Hence, we reject h0 as it represents null hypothesis and therefore there is no enough evidence to conclude that there is relationship between the age and the objective of investors.

ANOVA

Source of Variation SS df MS F P-value F crit

Between Groups2268.

8 4 567.24.21835

50.01228

82.86608

1

Within Groups2689.

2 20 134.46

Total 4958 24

Occupation and the objective of investment

ANOVA

Source of Variation SS df MS F P-value F crit

Between Groups141

8 4 354.53.38817

60.01915

12.64146

5

Within Groups366

2 35104.628

6

Total508

0 39 Income and objectives of the investors

ANOVA

Source of Variation SS df MS F

P-value F crit

Between Groups

4.266667 1

4.266667

0.049902

0.824019

4.006873

Within Groups

4959.067 58

85.50115

Total4963.3

33 59

Gender and Purpose of the investment

ANOVASource of Variation SS df MS F P-value F crit

Between Groups35.063

03 311.687

680.1604

490.9224

042.8023

55

Within Groups3423.6

43 4772.843

47

Total3458.7

06 50

Purpose of investment and importance of dependents

FINDINGS OF THE STUDY

1. To analyse the objectives of investorsThe questionnaire helped me understand the three basic objectives of the investors with highest preference to Safe returns against Higher returns from their investments and the least followed by other reasons (unmentioned). Through the Anova analysis it was also understood that objectives of the investors along with the demographics like occupation of an individual, and the income of the individual played a pivotal role in the decision making for an investment

2. To study the investment options available to the investorsFigure 3.7 displays the options selected by the investors as their security to invest. The catch here is in the way you strategies your portfolio to invest in the available avenues. There has to be proper asset allocation to categorise the assets you own and the percentage of each you have in your investment portfolio. one should have a mixed variety of investments to minimize the investment risk.

3. To analyse the investment patterns of investors

it was observed that during the market decrease in the trading account of the investors, most of the investors would prefer Staying put for long term. These Investors wait for smoother roads ahead. Selling some positions meant they want to balance the risk by selling some and holding some for a longer duration. good percent decrease in their trading a/c wouldn’t affect their investment. And some investors preferred moving everything into cash as they are not confident about their returns and plan to liquidate immediately. The rest of the investors preferred investing more in these stocks as they think the market is down and would increase in the future.

4. To study the investment decisions of different social class investors

It was observed that the high risk perceivers who expects high returns invest in equity market from a long term perspective. The new investors who do not have much knowledge about investment markets prefer investing in Mutual funds. The moderate return on minimum risk investors preferred investing in Gold, PPF and House properties. Till some extent tax free bonds were also preferred. And lastly, the low return on low risk investors invest in bank deposits and post office schemes.

CONCLUSIONS

• Indian capital markets are more familiar with equity markets from investor’s perspective and to earn high capital gains irrespective of the risk involved. On the other hand, a shift in the debt market is the recent phenomena of the economic policies whereby the market forces have been leeway in influencing the allocation of resources. And that all the recent developments is in the Bond market which has formed its own place in the financial systems.

• The commercial market majorly denotes the highest percentage of 70 % investment, which provides services like Fixed deposits and / or savings accounts identically followed by the commodity market that trades gold (here) followed by the insurance companies trading LICs and / or ULIPS with 37 % and closely followed by the money market with 32.3 % of investment in Mutual funds , which means most of the investors prefer taking moderate risk with moderate returns

• It was also noted that the individuals of the twin cities have a fair knowledge of financial markets-Equity and stock and the money market-chit funds but not many individuals prefer investing in these securities. This is because of the time, cost and constant monetarisation (in equity market) which they undergo and the amount of frauds, reduction in savings accrued, discounts on principal amount, liquidity and the interest earnings which you receive which is relatively lower (chit funds) than fixed deposits. This was justified as almost 53 % of the individuals take investment decisions based on self-learning.

• It was noted that 58% of people in case of availability of funds with them would still proportionate their investments in savings accounts and mutual funds. Also that almost 72 % of people have been investing since 0-5 years which indicates high investment growth in the recent past which is due to employment. 21 % respondents prefer investing in long term securities against monthly investment with a fair respondent % of 21.6% followed by quarterly and half yearly investments.

SUGGESTIONS

• As there is a volatility in the trading system to optimize the response time and algos (algorithmic) changes in the financial market, it may not be valid to perform risk management in lively markets. Therefore secondary risk management should be implemented in the existing setup which helps in going long way in instilling confidence among all participants.

• There are around 33 mutual fund companies offering near to 400 schemes but out of them just 20 to 25 % perform well and provide returns to the investors better than the fixed deposit rates. Therefore measure should be taken to improve the efficiency in the mutual fund market.

• Peer-to-peer lending is a new investment opportunity. Here, investors lend what could be very small sums to peers, and they pay it back with interest. The risk with peer-to-peer lending is that the loans can go into default, which leaves you at a loss. However, when one decides to invest a certain amount of money with Lending Club or another lending site, one can split up that sum among many borrowers, thereby keeping the portfolio diversified.

• Real estate is attractive and profitable If you have a good knowledge about the realities of the housing market. Buying shares in a Real Estate Investment Trust is one way to benefit from property ownership without becoming a landlord, although some argue this option isn’t a far reach from the stock market.

• Gold is safe and a perfect tool for inflation, in the sense that it never really depreciates in value and provides a safer long-term investment. Gold investment should be for the investors who are not in a need of steady flow of money as in the case of rental properties as gold is considered as dead weight and would benefit only if inflation hits high but once it is purchased nothing can really be done to cause it to bring in a steady flow of cash.

Thank you