Introduction

Research Study on Investment Behaviour of male population of working class people in & around St Marks Road, Bangalore, India.

By Group B2 Rohini Swamy Vanissa Colaco Vinisha DeSouza Joseph Zando Paul Raj

Introduction
Table of Contents
1. Introduction.......................................................................................................................................... 4 1.1 I. II. III. IV. V. 1.2 1.3 2. Methods of investing .................................................................................................................. 4 Debt securities :- ........................................................................................................................... 4 Equity securities: - ........................................................................................................................ 5 Hybrids:- ................................................................................................................................... 5 Derivative contracts :- ............................................................................................................... 5 Based on risk factors :-.................................................................................................................. 5 Objective of the study ................................................................................................................ 6 Hypothesis ................................................................................................................................... 6

Sample study ...................................................................................................................................... 7 2.1 2.2 Objective of sample study ......................................................................................................... 7 Advantages of the sample study .............................................................................................. 7

2.3 Disadvantages of the sample study .............................................................................................. 7 2.4 Cost: .................................................................................................................................................. 8 3. 4. 5. Research methodology ..................................................................................................................... 9 Epilogue ............................................................................................................................................. 10 Data analysis..................................................................................................................................... 11 5.1 Respondent profile ........................................................................................................................ 11 5.2 Financial management behaviour ............................................................................................... 11 5.3 The purpose of investment ......................................................................................................... 13 5.4 The Saving Objective .................................................................................................................... 15 5.5 Investment plans made for children ............................................................................................ 15 5.6 Investment Information ................................................................................................................. 16 6. Hypothesis ......................................................................................................................................... 18 6.1 Relationship between Investment avenues and gender & age group. .................................. 18 6.2 Relationship between Investment avenues and educational- occupational. ........................ 18 6.3 Relationship between Investment avenues and Annual Income ........................................... 18 6.4 Relationship between Investment avenues and Annual savings ........................................... 19 7. Summary ............................................................................................................................................... 21 Appendix .................................................................................................................................................... 22 QUESTIONNAIRE ............................................................................................................................... 22 2

Introduction
Bibliography .............................................................................................................................................. 26

Table 1: Investment behaviour based on Annual income in Rupees ............................................ 11 Table 2: Study on the purpose of investment (A) ......................................................................... 14 Table 3:Study on the purpose of investment (B) .......................................................................... 14 Table 4: Study on the Savings objective ....................................................................................... 15 Table 5: No. Respondents having children ................................................................................... 16 Table 6: Study on the investment made for the children by the respondents having children ..... 16 Table 7: Study on the sources of investment information ............................................................ 17 Table 8: Study on the Investment avenues & annual income with group statistics ...................... 18 Table 9: Study on the Investment avenues & annual income Independent sample test. .............. 18 Table 10: Study on the Investment avenues & annual savings with Group statistics................... 19 Table 11: Study on the Investment avenues & annual savings with Independent sample test ..... 20

Introduction

1. Introduction
Investment refers to putting ones savings in the revenue generating assets. These assets could be land, machine or building that generates rental income; shares generating dividend income and debt generating interest income. In the fast growing economic country like India, the financial market of the country is in the process of being more stable and offers varied form of investment opportunities to the investors apart from the traditional investment instruments like the bank deposits. The investors are required to make the most appropriate investment choice including maintain and manage the investments. Bangalore is the IT hub of India with the average literacy rate of 88.48% of the total literacy rate in Karnataka. According to 2011 Bangalore Census report, the population has also grown from 35.09% to 46.68% and IT professionals to 55%. Bangalore is also an emerging capital for the venture capital. It is often argued that the most working professionals are well informed of the investment opportunities and make rational investment decisions. As a result, they invest more on the riskier assets that generate relatively higher returns on the asset and the premium so earned shall cover the associated risk. 1.1 Methods of investing

Investors follow two various methods of investing in assets 1) Self-Analyses 2) Financial Consultant Whichever method chosen the process of analyses stays the same. The investor chooses a portfolio which gives a higher return than the cost of capital. This is usually calculated by determining the future cash flows and then determining the Beta for the firm and that of the industry it is in. The weighted average cost to capital is then determined. The investor can invest in mainly the four types of financial securities. I. Debt securities :-

Debt securities are any debt instrument that can be bought or sold between two parties and has basic terms defined. The original buyer of the debt security lends the issuer money in exchange for the security. The holder of a debt security is typically entitled to the payment of principal and interest, together with other contractual rights under the terms of the issue. He also has the right to sell the security to someone else. a. b. c. d. e. Treasury bills Treasury notes Treasury bonds Strips Municipal bonds

Introduction
II. Equity securities: -

An equity security is a share of equity interest in an entity such as the capital stock of a company, trust or partnership. Unlike debt securities, which typically require regular payments to the holder, equity securities are not entitled to any payment.

III.

Hybrids:-

Hybrid securities combine some of the characteristics of both debt and equity securities.

a. Preference shares b. Convertible bonds

IV. Derivative contracts :-

Derivative Contract is based on but independent of another contract, and involving a party not associated with the origin contract a. b. c. d. V. Forwards Futures Options Swaps

Based on risk factors :-

The riskiness of investment includes zero to negative returns on investment, volatility of the financial market in which certain investments are traded, depreciation of the intrinsic value of the investments and; uncertainty & low liquidity of the investment avenues. Based on these risk factors, the investments avenues are classified into a. Safe/low risk investment avenues: i. Savings account ii. Bank deposits iii. Public Provident fund iv. National savings certificates v. Post office Savings vi. Government securities. b. Moderate Risk Investment avenues: i. Mutual Funds
5

Introduction
ii. Life insurance iii. Debentures iv. Bonds c. High Risk Investment avenues: i. Equity share market ii. Commodity market iii. FOREX market d. Traditional Investment avenues: i. Real Estate/ Properties ii. Gold/Silver iii. Chit Funds e. Other emerging Investment avenues: i. Private equity Investments ii. Art & passion 1.2 Objective of the study

The general purpose of our research was as we mentioned earlier was to determine: Are the investors well informed of the financial market instruments and their risks & returns? What are the factors that influence ones investment decisions? Do the people make investment decisions that are too conservative to meet their intended objectives? Do people take enough risk to achieve their objectives?

1.3 Hypothesis There seems to be no significant relevance between investment choices and gender and age groups. There is no significant relation between investment avenues and income level and savings.

Introduction

2. Sample study
As we had decided our research design and questionnaire, we chose working class individuals in & around St.Marks Road, Bangalore on 6th march 2013. We had our sampling frame i.e. working class people who had to fill questionnaire about investment behaviour (investment risk aversion). 2.1 Objective of sample study To study the factors that influence investment behaviour of investors in and around St. Mark's Road. To study the attitude of respondents towards the various investment choices available to them.

Our research questionnaire consisted of fifty questionnaire consisting 22 questions. as we mentioned earlier there was 70% supervision as we targeted sample and not the population. After the questionnaires were filled it was coded in SPSS.

2.2 Advantages of the sample study

The main advantages of this research were: a) b) c) d) We interacted with many people. Working class people expressed their opinions. They shared some of their own experiences and gave insights. We had good learning experience.

2.3 Disadvantages of the sample study The constraints we faced were: a) It was not easy to approach people as people were busy. b) These questionnaire were mainly filled by male respondents and only 5 % of it was filled by female respondents. c) There was language barrier as some people did not understand the questions.

Introduction
2.4 Cost: Each member in the group invested Rs.50, which consisted of photo copying and spiral binding the research proposal and no other expenses will be incurred.

Introduction
3. Research methodology
In this section we explain the methodologies used in our study. The methodology includes data and sources of data, sample size, area of the study and framework of analysis. The study is based on primary and secondary data. 1. Primary data was collected from ___ respondents with the help of questionnaires. The questionnaires were distributed in and around St Mark's Road. 1. Secondary data was collected by means of newspapers, journals, internet (investment related sites). The overall response was 100%, while the male respondents were 86%.

Introduction
4. Epilogue
This particular study of investors' behaviour while making investment choices has been undertaken with the objective, to analyze the investment choice of people in and around St Mark's road. Analysis has been undertaken with the help of the survey conducted. The study is entirely based on the sample size mentioned earlier which closely reflects the attitudes of the respondents in our sample size.

10

Introduction
5. Data analysis
5.1 Respondent profile

The average respondents were highly educated, male, the average age is between 25- 30 years. There are only 7 female respondents out of 50 respondents. Hence the study is limited to the male investors to avoid any biased analysis and findings. The mean average of the annual income is between 4-6 lakhs with a standard deviation of 2.526 lakhs. 5.2 Financial management behaviour

It is observed that most respondents saved a percentage of annual income in direct proportion to their annual income. This means that the higher their annual income, the greater percentage is their savings. This also showed that people earning above 6 lakhs p.a, had more future commitments like their childrens education & marriage, retirement expenses as well as for the future investments. 86.05% of the respondents are investors and the remaining 13.95% also trade in financial market. Except for two respondents who monitored their investment portfolio yearly, majority monitored daily, monthly or occasionally. It was also observed that irrespective of the knowledge of various investment avenues the respondents had, majority of them still preferred the traditional investment & safe/low risk investment avenues. The respondents who earned more than 4 lakhs, also preferred to invest in mutual funds, bonds, life insurance & emerging avenues like the private equity investment and arts& passion. However, only 9.3% respondents (who also have financial advisor), preferred to invest in high risk investment avenues.

Table 1: Investment behaviour based on Annual income in Rupees Annual income (amount in rupees) No. of respondents Having financial advisor Aware of investments Below 2lacs 9 2 2lacs-4lacs 6 2 4lacs-6lacs 3 0 Above 6lacs 25 6

11

Introduction
avenues: Safe or low risk All knew safe investment & low investments. Moderate risk All knew Life investment insurance, mutual funds and bonds except for debentures All knew safe & low investments. All knew moderate risk investments. All knew safe & low investments. All knew, except for 1 respondent who didnt know bonds & debentures. All knew safe & low investments. Only 3 people didnt know debentures and bonds; while 3 other respondents didnt know about debentures. Most of them Except for the only knew commodity about the equity market, most share market of them knew the equity share and FOREX market Except for one All of them respondent who knew about did not know traditional about the investment Traditional except for two investment and who were not another aware of chit respondent who fund. knew only about the real estate. Everyone knew Everyone only about the knew about the private equity private equity investments, investments, and not art and except for passion seven who didnt know about the emerging investment Each one of Only two them preferred respondents traditional, safe preferred high or moderate risk
12

High risk Only three investment respondents were not aware.

Most of them only knew about the equity share market

Traditional All except two investment respondents knew about the real estate, gold and silver. Only one person knew about the chit fund.

Everyone only knew about the real estate, gold and silver. But not the chit fund.

Other emerging Except for one investment respondent, none of them knew.

One person didnt know all the emerging avenues, while one respondent knew both.

Preferred choice of investment

Except for two respondents who prefer high risk investment,

Except for one respondent who preferred safe or low risk investment, all

Introduction
all prefer safe or low risk investment. preferred traditional investment. risk investment. None preferred High risk and emerging investment avenues. investment, and other s preferred traditional, moderate or emerging investment. Most of them saved between 15-30%, except for two respondents who saved 40% & above and 8 respondents who saved between 3050%. All were investors, except for six respondents who was both trader & investor. Most of them monitored daily, monthly or occasionally except for one respondent who monitored yearly.

Percentage of Savings on Annual income

Except for two respondents who saved @ 30-50%, others saved between 0-15%

All saved between 15-30%.

All saved between 30%50%.

Trader or investor

All were investors

All were investors

All were investors, except for one respondent who was both trader & investor. Except for one respondent who monitored daily, other two monitored monthly.

Frequency of monitoring ones investment

Only one respondent monitored daily, five occasionally, two monthly and one yearly.

All monitored investments monthly except for two respondents who monitored monthly & one daily.

5.3 The purpose of investment

Only two respondents have not mentioned the purpose of investment while more than 12 respondents have at least 2 purposes which included Wealth creation, high returns and tax savings, Growth & Income and capital preservation. Only 5 respondents made investment for future expenses.

13

Introduction
Table 2: Study on the purpose of investment (A)

Frequency Valid None wealth creation tax savings earn returns future expenses 1 8 6 4 5 4 12 3 43

Percent 2.3 18.6 14.0 9.3 11.6 9.3 27.9 7.0 100.0

Valid Percent 2.3 18.6 14.0 9.3 11.6 9.3 27.9 7.0 100.0

Cumulative Percent 2.3 20.9 34.9 44.2 55.8 65.1 93.0 100.0

All 2 purpose 3 purpose Total a. Gender = Male

Table 3:Study on the purpose of investment (B)

Valid

None Income & capital preservation Growth & Income long term growth short term growth All 2 objectives

Frequency 2 5 10 7 1 2 12 4 43

Percent Valid Percent 4.7 4.7 11.6 11.6 23.3 16.3 2.3 4.7 27.9 9.3 100.0 23.3 16.3 2.3 4.7 27.9 9.3 100.0

Cumulative Percent 4.7 16.3 39.5 55.8 58.1 62.8 90.7 100.0

3 objectives Total a. Gender = Male

14

Introduction

5.4 The Saving Objective

Only one person has not mentioned the purpose of savings while more than 10 respondents have at least 2 purposes which included Children education & marriage, retirement and home purchase. Only 1 respondent made savings for health care. Table 4: Study on the Savings objective

Frequency Valid None children education Retirement home purchase childrens marriage Healthcare Other All 1 4 6 5 1 1 1 6 10 8 43

Percent 2.3 9.3 14.0 11.6 2.3 2.3 2.3 14.0 23.3 18.6 100.0

Valid Percent 2.3 9.3 14.0 11.6 2.3 2.3 2.3 14.0 23.3 18.6 100.0

Cumulative Percent 2.3 11.6 25.6 37.2 39.5 41.9 44.2 58.1 81.4 100.0

2 objectives 3 objectives Total a. Gender = Male

5.5 Investment plans made for children

About 46.51% respondents have children out of which3 respondents have at least 2 children. Out of these 17 respondents only 3 respondents invested in both childrens education & marriage fund in the form of bank deposits, mutual funds and traditional investment avenues like gold, silver and real estate.

15

Introduction
Table 5: No. Respondents having children

Valid

0 1-2 2-3 3& above Total

Frequency 23 17 2 1 43

Percent 53.5 39.5 4.7 2.3 100.0

Valid Percent 53.5 39.5 4.7 2.3 100.0

Cumulative Percent 53.5 93.0 97.7 100.0

a. Gender = Male

Table 6: Study on the investment made for the children by the respondents having children

Valid

None education fund invested

Frequency 33 6 1 3 43

Percent Valid Percent 76.7 76.7 14.0 14.0 2.3 7.0 100.0 2.3 7.0 100.0

Cumulative Percent 76.7 90.7 93.0 100.0

marriage fund invested Both Total a. Gender = Male

5.6 Investment Information

Only one person has not mentioned the source of investment information while more than 24 respondents received investment information from at least 2 sources which included family & friends, news channel , news paper, internet, personal experience and personal homework.

16

Introduction

Table 7: Study on the sources of investment information

Valid

None Family & friends

Frequency 1 4 6 6 10 14 2 43

Percent Valid Percent 2.3 2.3 9.3 9.3 14.0 14.0 23.3 32.6 4.7 100.0 14.0 14.0 23.3 32.6 4.7 100.0

Cumulative Percent 2.3 11.6 25.6 39.5 62.8 95.3 100.0

News channels, Internet & newspaper Past experience & Personal Homework 2 sources 3 sources All Total a. Gender = Male

17

Introduction

6. Hypothesis
a. There is no significant relation between investment avenues and gender & age group. b. There is no significant relation between investment avenues and educational and occupational. c. There is no significant relation between investment avenues and income level and saving level. 6.1 Relationship between Investment avenues and gender & age group.

We could not do the conclusive study of the relationship between the investment avenues and the age-gender group, because of the biased sampling. 6.2 Relationship between Investment avenues and educational- occupational.

We could not do the conclusive study of the relationship between the investment avenues and the age-gender group, because of the biased sampling. 6.3 Relationship between Investment avenues and Annual Income

Table 8: Study on the Investment avenues & annual income with group statistics Group Statistics Code below 4 lacs 4 & above N 17 33 Mean 6.00 7.18 Std. Deviation 3.873 3.405 Std. Error Mean .939 .593

Table 9: Study on the Investment avenues & annual income Independent sample test. Independent Samples Test Levene's Test for Equality of Variances

Sig.

df

t-test for Equality of Means Mean Std. 95% Confidence Sig. (2- Differen Error Interval of the tailed) ce Differen Difference
18

Introduction
ce Lower 1.065 -3.323 Upper .960

Equal variances assumed Equal variances not assumed

2.271

.138 -1.110

48

.273

-1.182

-1.064 28.978

.296

-1.182

1.111

-3.453

1.090

At the confidence interval of 95% and statistical significant at 5%, using the independent sample test, we derive the p = 0.296, which is greater than 0.05. Hence it is concluded that There is a significant relationship between investment avenues and annual income of the male population of St Marks Road, Bangalore. 6.4 Relationship between Investment avenues and Annual savings

Table 10: Study on the Investment avenues & annual savings with Group statistics Group Statistics Code 0-30% 30% & above N 30 20 Mean 6.63 7.00 Std. Deviation 3.828 3.244 Std. Error Mean .699 .725

Q4

Independent Samples Test Levene's Test for Equality of Variances

t-test for Equality of Means 95% Confidence Std. Interval of the Mean Error Difference Sig. (2- Differe Differe df tailed) nce nce Lower Upper 48 .726 -.367 1.042 -2.461 1.728

Q4 Equal variances assumed

F Sig. T 1.867 .178 -.352

19

Introduction
Equal variances not assumed -.364 45.152 .718 -.367 1.007 -2.395 1.662

Table 11: Study on the Investment avenues & annual savings with Independent sample test At the confidence interval of 95% and statistical significant at 5%, using the independent sample test, we derive the p = 0.718, which is greater than 0.05. Hence it is concluded that there is a significant relationship between investment avenues and annual savings of the male population of St Marks Road, Bangalore.

20

Introduction

7. Summary
Our study was initially on the investment behaviour of the working class people in and around the St Marks Road, Bangalore, Karnataka, India. And conducted a study on their risk assessment based on the sample study of 50 respondents, out of which 86% were male. Hence our new study is restricted to the male population of the working class people of the same area. Though the primary data was conducted mainly through questionnaire, we also interviewed these respondents to know more of how they make the investment decisions. In our study, we find that majority of the male population of working class people heavily depend on the investment information from newspaper, internet, news channel & personal experience. It was also observed that majority also take the investment advice from family & friends along with the other sources of information. We also find that the majority of the sample framework is investor and have investment objective safety of principal, high returns, capital growth and tax savings. The male investors with children are more likely to not to make investment in childrens education & marriage. The reason could be because the average age of the sample framework is between 25-30 years and they believe in financially securing oneself first and then the children. However, additional research is required to get a conclusive study on this. We also find that there is a significant relationship between investment avenues and annual income - savings of the male population of St Marks Road, Bangalore.

21

Introduction

Appendix QUESTIONNAIRE
Dear Respondent, We are a group of 1st year students currently pursuing our MBA at St Josephs College of Business Administration. As part of the curriculum; we are conducting a research study on Investment behavior (Risk aversion) of the working class people on St Marks Road, Bangalore. We seek your kind assistance in completing the questionnaire which should take approximately 10mins of your valuable time. Your response shall be treated as strictly confidential. Note: There is no right or wrong answer. To make this study successful, your kind co-operation and honest responses are greatly valued.

(Personal details will be kept highly confidential and shall not be revealed to any third party) Name (Optional): Gender: Male Age Group: Below 20 yrs 20 30 yrs Qualification: Under Graduate Graduate Occupation: Self employed Public Sector Employee Bank Employee IT Employee Annual Income: Below Rs 2 Lac Rs 2-4 Lac Do you have a financial advisor? Yes

Female

30- 40 yrs Above 40 yrs Post Graduate Other (Please Specify) Other private sector employee Student Retired Others( please specify) Rs 4-6 Lac Above Rs 6 lac

No 22

Introduction

1. Tick the investment opportunities available in India that of which are aware by you. a. Safe/ Low Risk Investment Avenues Savings Account Post office Savings Bank Deposits Government securities (Treasury Bills/ Bonds) Public Provident Fund National Savings Certificates b. Moderate Risk Investment Avenues Mutual Funds Life Insurance c. High Risk Investment Avenues Equity Share Market Commodity Market d. Traditional Investment Avenues Real Estate/ Properties Gold/Silver e. Other Emerging Investment Avenues Private Equity Investments

Debentures Bonds

FOREX Market

Chit Funds

Art & Passion

2. Can you suggest what you feel are the best options for investing your money? (Choose from above list & Rank in the order of preference) a. d. b. e. c. f. 3. Give reasons for selecting the above options: a. b.

c. d.

4. Your preferred choice of investment in the past is? Savings Account Government securities (Treasury Bank Deposits Bills/ Bonds) Public Provident Mutual Funds Fund Life Insurance National Savings Certificates Debentures Post office Savings Bonds Equity Share Market

Commodity Market FOREX Market Real Estate/ Properties Gold/Silver Chit Funds Private Equity Investments Art & Passion

5. Please state the sector in which you would prefer to invest your money? 23

Introduction
Private sector Government sector Public Sector Foreign sector Others (please specify)

6. What factors would you consider before your investment decisions? Returns Progressive values Safety of principle Others (please specify) Portfolio Diversification 7. What is your savings objective? Childrens Education Retirement Home purchase 8. What is your investment objective? Income & Capital Preservation Growth & Income Long-Term Growth 9. Investment is required for the purpose of : Wealth creation Tax Savings Earn Returns 10. Do you have children? Yes 11. If yes, how many children do you have? 1-2

Childrens Marriage Healthcare Others (please specify)

Short-Term Growth Others (please specify)

Future Expenses Others (please specify)

No

2-3

3 & above

12. Have you set aside funds specifically for the education and marriage of your children? If yes, Please specify how the funds are held Education fund invested in________________________________________ Marriage fund invested in _________________________________________ 13. Do you have formal budget for family expenditure? Yes 14. What are your sources of investment? Savings/ Personal Loans

No

Pledging

15. What percentage of your income do you save every year? 0-15% 15-30%

30-50% 40% & above 24

Introduction

16. At what rate do you want your investment to grow? (Please tick one of the 7 spaces that closely represent your choice) a. Steady _ _ _ _ _ _ _ Fast 17. What best describes your investment experience? (Please tick one of the 7 spaces that closely represent your choice) a. Beginning _ _ _ _ _ _ _ Experienced b. Unacquainted _ _ _ _ _ _ _ Knowledgeable

18. Which factor do you consider before investing? Safety of principle Low risk 19. Are you a Trader or investor? Trader

High Returns Maturity Period

Investor

Both

20. If you are an investor, imagine that stock market drops after you invest in it then what will you do? Withdraw your money Invest more in it Wait to increase 21. How often do you monitor your investment? Daily Monthly

Yearly Occasionally

22. What is your source of investment advice? (Mark all that applies) Family & friends Brokers Advice News Channels Personal Homework Insider Information Research Report Past Experience Newspapers Street Talk / Rumors Internet

25

Introduction

Bibliography
Enugala, R. (n.d.). Questionnaire-An-Analysis-on-Investor-Behaviour-on-Various-InvestmentAvenues-in-India. Retrieved from Scribd.: http://www.scribd.com/doc/30778181/QuestionnaireAn-Analysis-on-Investor-Behaviour-on-Various-Investment-Avenues-in-India investors-10-most-common-behavioral-biases. (3012, 07 16). Retrieved from RPSeawright.com: http://rpseawright.wordpress.com/2012/07/16/investors-10-most-common-behavioral-biases/ Sharma, D. (n.d.). Questionnaire-on-Investment-Pattern-of-Investors. Retrieved from scribd.: http://www.scribd.com/doc/27325034/Investment-Pattern Stammers, R. (2011, 12 21). Three Behavioral Biases That Can Affect Your Investment Performance. Retrieved from Forbes: http://www.forbes.com/sites/cfainstitute/2011/12/21/threebehavioral-biases-that-can-affect-your-investment-performance/2/

26