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investment behavior

investment behavior

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Published by Manju Akash

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Published by: Manju Akash on Mar 23, 2011
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02/05/2015

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CHAPTER-1
 
INTRODUCTION
 
1.1
 
INTRODUCTION TO THE REPORT
 
Savings form an important part of the economy of any nation. With thesavings invested
 
in various options available to the people, the money acts asthe driver for growth of the
 
country. Indian financial scene too presents aplethora of avenues to the investors. Though
 
certainly not the best or deepestof markets in the world, it has reasonable options for an
 
ordinary man toinvest his savings.
 
One needs to invest and earn return on their idle resources and generate aspecified
 
sum of money for a specific goal in life and make a provision for anuncertain future. One of the
 
important reasons why one needs to invest wiselyis to meet the cost of inflation. Inflation is
 
the rate at which the cost of livingincreases.
 
The cost of living is simply what it cost to buy the goods andservices you need to live.
 
Inflation causes money to lose value because it will not buy the same amountof a good or 
 
service in the future as it does now or did in the past. The sooner one starts investing the
 
better. By investing early you allow your investmentsmore time to grow, whereby the concept
 
of compounding increases your income, by accumulating the principal and the interest o
 
dividend earned onit, year after year.
 
The three golden rules for all investors are:Invest early.
 
Invest regularly.
 
Invest for long term and not for short term
.
 
 
1.2
 
OBJECTIVE OF THE STUDY
 
The purpose of the analysis is to determine the investment behaviour of investors and
 
investment preferences for the same. Investors perception willprovide a way to accurately
 
measure how the investors think about theproducts and services provided by the company.
 
Today is trying economic conditions have forced difficult decisions for companies. Most are
 
making conservative decisions that reflect a survivalmode in the business operations. During
 
these difficult times, understandingwhat investors on an ongoing basis is critical for survival.
 
Executives need a third party understanding on where investor sloyalties stand. More than
 
ever management needs ongoing feedback fromthe investors, partners and employees in
 
order to continue to innovate andgrow.
The main objective of the project is to find out the needs of the currentand future
 
investors.
 
For this analysis, customer perception and awareness level will bemeasured in important
 
areas such as:
 
1.
 
To understand in depth about different investment avenues available inIndia.
 
2.
 
To find out how investors get information about the various financialinstruments.
 
3.
 
The type of financial instruments, they would prefer to invest.
 
4.
 
The duration for which they would prefer to keep their money invested.
 
5.
 
What are the factors that they consider before investing?
 
6.
 
To give a recommendations to the investors that where they shouldinvest.
 
7.
 
To know the risk tolerance level of the individual investor and suggest asuitable
 
portfolio.
 
8.
 
To develop a profile of sample Indian individual investor in terms of their demographics.
 
And demographics based on occupation of thesample investor.
 
9.
 
To identify the objective of savings of an investor.
 
 
10.
 
To study the dependence/independences of the demographicfactors (Age) of the
 
investor and his/her risk tolerance level.
 
Plan of the study
 
Chapter 1 covers the core areas of the report: The introduction, objectives,need,
 
limitations and research methodology of the study. It also covers valueaddition and
 
sources of information.
 
Chapter 2 covers the literature review given by various behavioural scientistsand
 
investment experts.
 
Chapter 3 covers the industry profile, which is a brief explanation of thefinancial
 
industry, governing bodies and various investment avenues.
 
Chapter 4 covers data analysis and interpretation part. Analysis is made fromthe data
 
obtained through questionnaires.
 
Chapter 5 covers the findings and suggestions drawn from the data analysisand
 
interpretations.
 
Chapter 6 covers the summary and conclusion of the report.
1.3
 
NEED FOR THE STUDY
 
Stock market has been subjected to speculations and inefficiencies, which arebeached
 
to the rationality of the investor. Traditional finance theory is basedon the two assumptions.
 
Firstly, investors make rational decisions; and secondly investors are unbiasedin their 
 
predictions about future returns of the stock. However financialeconomist have now realized
 
that the long held assumptions of traditionalfinance theory are wrong and found that investors
 
can be rrational and makepredictable errors about the return on investment on their 
 
investments.
 
Thisanalysis on Individual Investors Behaviour is an attempt to know the profileof the
 
investor and also know the characteristics of the investors so as to know

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