factors affecting individual investment behavior
DESCRIPTION
A final presentation of my Project on Factor Affecting Investment Behavior in final sem.TRANSCRIPT
FACTORS AFFECTING INDIVIDUAL INVESTMENT BEHAVIOR
Vicky Saini
About Investment
Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in the form of interest, income, or appreciation of the value of the instrument. Investment is related to saving or deferring consumption.
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
The Investment Avenues I have considered in my project are:
Shares Insurance Mutual Funds Fixed Deposits Government Securities
More Avenues (not considered in my project):
Gold Real Estate Postal Saving Schemes Bonds, Chit Funds & Company FDs
Factors Affecting Investment
The factors which affect the investment decisions (considered in my project as well):
Risk Tolerance: Risk refers to the volatility of portfolio’s value. The amount of risk the investor is willing to take on is an extremely important factor.
Return Needs: This refers to whether the investor needs to emphasize growth or income.
Investment Horizon: The time horizon starts when the investment portfolio is implemented and ends when the investor will need to take the money out.
Tax Exposure: Investors in higher tax brackets prefer such investments where the return is tax exempt, others will have no such preference.
Market Trends: You need to understand how various asset classes have performed in the past before planning your finances.
Investment Needs: How much money do you need at the time of maturity?
Risk Coverage: A type of insurance coverage that can exclude only risks that have been specifically outlined in the contract.
Dependents: People who relies on another person, especially a family member, for financial support.
About The Project
The objective of the project was to understand respondent’s perception about the various investment avenues available to them while making investment and its impact on the investment behavior of people. While understanding the customer’s investment behavior, I got encouraged to do in-depth research on the weight of various factors influencing the customer’s decision to invest in the Investment Avenues.
The study aims to look at various factors that affect the investment decision. I tried to
analyze this by conducting graphical analyses.
Through this study we also aim to test the following hypothesis:
H1.1: Return is the main factor which affects the investment decision of investor. H1.2: The main for not investing is the unexpected fluctuations in the market.
Research & Outcomes
• Avenue Type Classification
• Income Type Classification
• Reasons For Not Investing
• Preferred Investment
• Assumptions
Middle Income
Risk Ta
king C
apaci
ty
Depen
dents
Return
s
Tax E
xemption
Investm
ent H
orizon
Market
Trends
Investm
ent N
eeds
Risk Cove
rage
0
1
2
3
4
5
Risk Ta
king C
apaci
ty
Depen
dents
Return
s
Tax E
xemption
Investm
ent H
orizon
Market
Trends
Investm
ent N
eeds
Risk Cove
rage
0
1
2
3
4
5 High Income
Risk Ta
king C
apaci
ty
Depen
dents
Return
s
Tax E
xemption
Investm
ent H
orizon
Market
Trends
Investm
ent N
eeds
Risk Cove
rage
0
1
2
3
4
5 Low Income
Combined
Shares
Middle Income
High IncomeLow Income
Insurance
0
1
2
3
4
5
0
1
2
3
4
5
0
1
2
3
4
5
Combined
Insurance
Middle Income
High IncomeLow Income
Mutual Funds
0
1
2
3
4
5
Mutual Funds
Risk T
akin
g Cap
acity
Depen
dent
s
Retur
ns
Tax
Exem
ptio
n
Inve
stm
ent H
orizon
Marke
t Tre
nds
Inve
stm
ent N
eeds
Risk C
over
age
0
1
2
3
4
5
Risk T
akin
g Cap
acity
Depen
dent
s
Retur
ns
Tax
Exem
ptio
n
Inve
stm
ent H
orizon
Marke
t Tre
nds
Inve
stm
ent N
eeds
Risk C
over
age
0
1
2
3
4
Combined
Mutual Funds
Middle Income
High IncomeLow Income
Fixed Deposits
Risk T
akin
g Cap
acity
Depen
dent
s
Retur
ns
Tax
Exem
ptio
n
Inve
stm
ent H
orizon
Marke
t Tre
nds
Inve
stm
ent N
eeds
Risk C
over
age
0
1
2
3
4
5
0
1
2
3
4
5
0
1
2
3
4
Combined
Risk T
akin
g Cap
acity
Depen
dent
s
Retur
ns
Tax
Exem
ptio
n
Inve
stm
ent H
orizon
Marke
t Tre
nds
Inve
stm
ent N
eeds
Risk C
over
age
Fixed Deposits
Middle Income
High IncomeLow Income
Government Securities
Risk T
akin
g Cap
acity
Depen
dent
s
Retur
ns
Tax
Exem
ptio
n
Inve
stm
ent H
orizon
Marke
t Tre
nds
Inve
stm
ent N
eeds
Risk C
over
age
0
1
2
3
4
5
Risk
Taki
ng C
apa.
..
Depen
dent
s
Retur
ns
Tax
Exem
ptio
n
Inve
stm
ent H
or...
Mar
ket T
rend
s
Inve
stm
ent N
eeds
Risk
Cover
age
0
1
2
3
4
5
0
1
2
3
4
5
Combined
Risk T
akin
g Cap
acity
Depen
dent
s
Retur
ns
Tax
Exem
ptio
n
Inve
stm
ent H
orizon
Marke
t Tre
nds
Inve
stm
ent N
eeds
Risk C
over
age
Government Securities
• Security Type Classification
• Income Type Classification
• Reasons For Not Investing
• Preferred Investment
• Assumptions
Research & Outcomes
Risk Taking
Capacity
Dependents
Returns
Tax Exemptio
n
Investment Horizon
Market Trends
Investment Needs
Risk Coverage
Income Groups Outcome
Lower Middle Upper
Hypothesis 1.1 Proved
True
3.09 3.05
3.68
3.02 3.09
2.9
3.61
3.4
3.2
3.4
3.85
3.2
3.47
3.17
3.42
3.68
3.183
3.8
3.62
3.42
3.04
3.43.29
• Security Type Classification
• Income Type Classification
• Reasons For Not Investing
• Preferred Investment
• Assumptions
Research & Outcomes
Reasons for Not Investing
64
14
4
10 112
1
4 1
1
Lower Middle Upper
42%
58%
Respondents Who Don’t Invest Their Reasons for Not Investing
Hypothesis 1.2 Proved Wrong
• Security Type Classification
• Income Type Classification
• Reasons For Not Investing
• Preferred Investment
• Assumptions
Research & Outcomes
Shares Insurance Mutual Funds Fixed Deposits Govt. Securities
1
1413 13
1
Preferred Investment
• Security Type Classification
• Income Type Classification
• Reasons For Not Investing
• Preferred Investment
• Assumptions
Research & Outcomes
Assumptions
Below are the assumptions considered during the project:
•The interest rates & economic conditions are same in last six months
•Each investment factor used in the avenues has the importance
•The employees are from different places in India, hence the thinking of each respondent varies
Thank You…