CHAPETER-1

INTRODUCTION
Introduction:

Determination of where, when, and how much capital to spend and/or debt to

acquire in the pursuit of making a profit. An investment decision is

often reached between an investor and his/her investment advisors.
Depending on the type of brokerage account an investor has,
investment managers may or may not have tremendous leeway in
making decisions without consulting the investor himself/herself.
Factors contributing to an investment decision include, but are not
limited capital on hand, projects or opportunities available, general
market conditions, and a specific investment strategy.

Any investment is a sacrifice of certain present value for the

uncertain future. It chiefly entails making on type, mix, amount,, timing,
grade etc., of investment also disinvestment. We invest for a positive
rate of return, suitably adjusted for inflation and risk. All savings must
be converted into investment and there must be balanced approach in
selection of securities. Planning is a precursor to ant type of
investment. Investing without planning entails losing money.
 OBJECTIVES OF THE STUDY

 To analyze various investment options to help in comparing the returns

given by various investment decisions of the investors.

 To identify various investment opportunities that cater to the different

needs of investor, these options are also compared on the basis of various
parameters like safety, liquidity, risk, and entry/exit barriers, etc.

 To create a basis not only for ongoing analyses but also for structural
changes in the investment process.

 To make a study about the investment decisions in equity, bond, real

estate, gold and mutual funds and discuss their types, working and returns.
 LIMITATIONS OF THE STUDY

 The study was limited to only six investment options they are Equities,
bonds, Real estate, Gold, mutual funds and life insurances.

 The information collected mostly restricted to secondary data.

 The data is compared and analyzed on the basis of performances of the

investment options over the past five years.

 While considering returns from mutual funds only top performing schemes
were analyzed.
 CHAPTER-2
REVIEW OF LITERATURE
Article-1:
Abstract:
Investment decision making focuses on how investors make decisions to buy or
sell securities. What guides their choices among alternatives, what are their
investment objectives, constraints, and risk profile; and ultimately, what influences
their decision making during the stock selection process. Behavioural finance deals
with the psychology of the investor. It tries to explain how an investor makes an
investment decision and how behavioral and other factors influence the decision
making of an investor. Behavioral factors primarily include behavioral biases and
personal characteristics of an investor, that is, personality, attitude, risk tolerance,
and demographic factors, while other factors include external contextual factors
like accounting information, market situations, brand image, and so forth, which
have a bearing on decision making. The present paper provides an in-depth review
of literature of prominent studies in the area of behavioural finance. The first part
of the paper explains the concept of behavioral finance, the second part gives a
detailed discussion on the classification of behavioural biases, and the third part
discusses the effect of behavioural biases on the trading behaviour of the investors
and the feelings of investors after experiencing the outcomes of investment.
Towards the end, a comprehensive framework has been formulated representing
the influence of behavioural biases on investment behaviour of an investor. The
paper concludes that behavioural biases play a significant role in the decision
making of the investors, and these biases not only shape the current investment
decisions, but also influence investors' future decision making.

Deepa Mangala , Mamta Sharma ( Indian Journal of Finance,

August 2014)
Article-2:
Abstract:
Purpose : Behavioral finance is a paradigm shift that combines psychological
aspects of human behaviour with traditional finance concepts to understand
investment decision making process of investors. In the course of such analysis, it
brings to light some departures from rational decision making by investors which
are termed as biases. In cognitively complex situations, individuals use biases to
take the most optimum, but not the most rational decisions. The purpose of
creating archetypes of investors is to customize investment advice based on biases
exhibited by the individual investor. The benefit of archetypes is that they help in
communicating a lot of information without much explanation or analysis. Hence,
this is a very practical tool to assist financial service providers to understand the
investment decision making process and develop more effective financial products
that would help investors in achieving their investment goals.

Meghna Dangi , Bindya Kohli (Indian Journal of Finance, March

2018)

Article-3:
Abstract:
Very often it came to the mind of the people that what are the factors which drives
the investors' behaviour. It is also seen that one believes that he/she is behaving
rationally while at the same time assuming that others often do not. Most of the
investment and financial theories are based on the idea that everyone takes careful
account of all available information before making investment decisions. But there
is much evidence that it is not the case. Behavioral finance, a study of the markets
that draws on psychology, is throwing more light on why people buy or sell the
stocks they do - and even why they do not buy stocks at all ( Singh R&Bhowal A,
2007). This research on investor behavior helps to explain the various 'market
anomalies' that challenge standard theory. It is emerging from the academic world
and beginning to be used in money management.

Ranjit Singh , Amalesh Bhowal (Indian Journal of Finance, June

2009)
Article-4:
Abstract:
Since time immemorial, women have great propensity to save and invest. If not
completely, to a great extent, the socioeconomic status of women has been
growing in the positive direction. Obviously, their investment decisions and risk
perceptions are also changing positively. Unlike previous studies, the present
research aims at understanding the risk perceptions of women exclusively. The
main aim of the study is to quantify the risk appetite score of women grouped on
various socio-demographic bases. The study is based on the sample survey of 120
women in Mysore city. A questionnaire comprising of a 14-item financial risk-
tolerance scale developed by Grable and Lytton (1998) (but slightly modified) was
used. Risk appetite score was assigned to each respondent on a 5- point Likert
summated scale. The respondents were grouped on the basis of the obtained score.
The results show that two-thirds of the respondents were above the average score
of risk tolerance. Correlation between investment objective and occupation shows
a slightly negative relationship. Correlation between risk appetite score and various
independent variables allowed us to have a regression model. The regression
model suggests that there is a negative influence of age of women on their risk
tolerance levels, a finding which is supported by many studies. Only age and
education had a positive influence on the risk appetite of women. The study has
great implications for the government and investment industry in framing various
policies.

P. Paramashivaiah , Puttaswamy , Ramya S. K ( Indian journal of

Finance, June 2014)
Article-5:
Abstract:
Indian stock market opened to Foreign Institutional Investors in 14th September
1992, initially with lot of restrictions. The regulation on them are liberalized and
minimized now, since 1993 has received a considerable amount of portfolio
investment from foreigners in the form if FIIs investment in equities. This has
become a turning point of India stock market. The government of India announced
the policy of the government to permit the FII investment in India capital market.
The objective of the study were ;To study the role of FII investment in the Indian
stock market;To examine the causal relationship between net FII investment and
BSE sensex using granger causality test ;To examine the causal relationship
between net FII investment and NSE sensex using granger causality test ;To
examine whether FIIs were a channel of global disturbance into the Indian stock
market. The liberalization policies had the desired expansionary effect and had
either increased the mean level of FII inflows and/or the sensitivity of these flows
to a change in BSE returns and/or the inertia of these flows. On the other hand, the
restrictive measures aimed at achieving greater control over FII flows also did not
show any significant negative impact on the net inflows, it had found that these
policies mostly render FII investment sensitive to the domestic market returns and
raise the inertia of the FII flows.

Nidheesh K. B ( Indian Journal of Finance, June 2008)

Article-6:
Abstract:
The trend of gold demand in India has been growing continuously. Global physical
demand of gold increased by 34% for the time period from 2004-2013 ; whereas,
physical demand of gold in India increased by more than 40% for the same period.
Though India did not count for even 1% of gold production, more than 21% of the
global gold consumption was attributed to India in 2013, which was mainly
supplied through imports. During the same period, in addition to jewellery,
demand for bars and coins also increased substantially, indicating probably that
gold is being chosen as a secure investment alternative by Indians. But is gold a
good investment option? Is it more reliable than other financial investments?
India's fascination for the yellow metal - is a reality or is it a myth? Gold as an
investment option for an Indian investor was analyzed in this paper. Four popular
Indian beliefs about gold were examined - (a) gold as an inflation hedge, (b) gold
investment as an attractive alternative to fixed income investment, (c) gold
investment as a less riskier investment than stock investment, and (d) rupee-dollar
exchange rates and its bearing on the returns on gold investment. With a simple
statistical analysis of data spanning from a period from 1971-72 to 2012-13, we
found evidence for rejection/acceptance of the four beliefs.
 Rajesh Panda , Madhvi Seth ( Indian Journal of Finance, May
2016)
Article-7:
Abstract:
The nature of financial markets has changed drastically. Investing money has
become a very complex task because of the huge number of savings and
investment companies and products offered by them, terms and conditions of
investments, and prevalent complex rules and regulations. Most of the investors,
particularly rural investors, are found to be unaware about investment avenues and
rules and regulations. In spite of remarkable growth of our economy and increasing
income levels of people, the pace of savings mobilization is lower in India. Rural
savings are not mobilized and invested properly. Investment is an economic
activity which creates capital required for various sectors of the economy. So,
every earning person should be motivated to save and invest his/her money. The
study attempted to find out the awareness levels of rural investors about various
investment avenues, their preferences, and considerations for investing money. A
sample of 300 respondents was selected from four villages from Sillod block of
Aurangabad district, Maharashtra. The major focus of the study was on
investigating whether there was a difference between investment awareness levels
and educational qualifications of male and female rural investors. The study
disclosed that there was no significant difference in awareness levels of rural male
and female investors and their educational qualifications. The investment
preference order of the respondents indicated that they wished to park their
investments in 'safe' options only. Bank deposits, gold and jewelry, real estate were
popular investment avenues for a majority of the investors.

Murlidhar A. Lokhande ( Indian Journal of Finance, July 2015)

Article-8:
Abstract:
Domestic savings of a nation determine the strength of an economy. Over a
decade, savings behaviour of individuals in small cities and towns has influenced
the gross domestic savings of nations across the globe. This changing savings
pattern has an influence on the investment patterns as well. Hence, to understand
this, a study was conducted in a Z category city - Vellore , Tamil Nadu. The study
aimed to understand the drift in savings and investment patterns, awareness about
the modern means of savings and investment options, and how effective is the role
of investment advisors in instrument selection. The data were collected through a
structured questionnaire that was administered to the residents of Vellore city. The
results were tested with statistical tools like analysis of variance (ANOVA) and
chi-square. The results revealed that individuals of the city were quite aware of the
difference between savings and investments, irrespective of their demographic
aspects. However, proper guidance is needed, for which investment advisors need
to take measures. In addition, similar studies need to be conducted at several places
across India, and effective measures, such as implementation of Pradhan Mantri
Jan Dhan Yojana and such others need to be promoted to improve the general
public's financial inclusion process in the Indian money market.

Seetha Ram Vedantam , Sriram G ( Indian Journal of Finance,

November 2015)
Article-9:
Abstract:
The bounded rationality of human behavior has become the most prominent issue
nowadays for the researchers of applied economics and finance. A lot of evidence
is available that shows the psychological and social patterns merging with
individuals' capital markets investing behaviour that nullifies the well established
theories and models of modern finance. The modern financial models like CAPM
argue that the investors are fully rational, and the market is fully efficient as no
individual can take the advantage of arbitraging. Studies advocating behavioral
finance have confirmed social influences and psychological biases which deviate
individual investors from their calculated and predetermined decisions, and reject
the hypothesis of individuals being fully rational while taking decisions related to
stock markets. Through this review paper, the concepts related to behavioral
finance were illustrated by using various studies, and a conceptual framework
showed the influential factors related to behavioral changes impacting the
individual investors' decision making, that is, creating irrational investors and
inefficient markets. Through the review of various studies, we observed that social
factors like herding, emotional contagion, imitation, and information cascades
along with psychological patterns like representativeness availability and
anchoring heuristics are the basic key factors that determine individual decisions.
This paper highlighted the common decisional errors made by investors, and the
study will be useful for investors and portfolio managers as it will aid them in
making their choices keeping the discussed behavioral biases in mind.

Rajdeep Kumar Raut , Niladri Das ( Indian Journal of Finance,

April 2015)
Article-10:
Abstract:
Behavioral finance attempts to explain the emotions in the stock market which lead
to anomalous stock market behavior. Behavioral biases exhibited by the investors
explain their irrational decision making. Knowledge about the interaction among
the biases would help to comprehend the investors' financial personality better.
Using a dataset of 436 secondary equity investors residing in Chennai, this study
measured eight behavioral biases on a Likert scale through a questionnaire survey.
The biases studied included mental accounting, anchoring, gambler's fallacy,
availability, loss aversion, regret aversion, representativeness, and overconfidence.
Significant relationships among the behavioral biases were documented in the
study. The biases: (a) overconfidence, regret aversion, and anchoring biases; (b)
loss aversion and anchoring; (c) representativeness, gambler's fallacy, and mental
accounting; (d) mental accounting and availability biases exhibited by the
secondary equity investors were found to be interrelated. Hence, the financial
advisors could improve their advice and recommend guidelines to the investors
based on the biases they are likely to exhibit.

R. Renu Isidore , P. Christie ( Indian Journal of Finance,

September 2018)