Research Report On

Factors aFFecting investment aspects of individual

Submitted to

Prof. Shakti Awasthi

By Ravikiran A Sawant. Roll No: 1140 Div : A

ORIENTAL INSTITUTE OF MANAGEMENT, VASHI, NAVI MUMBAI.

2011-2013

Introduction The topic Factors affecting investment aspects of people deals with various people belonging to service, students, businessman. This topic basically deals with various investment opportunities a individual has at a particular period of time. The investment factor which affects the individual is the age factor, the risk taking ability, various investment initiatives such as investment in Stock Market, investment in Mutual Funds, investment in Fixed Deposits, investment in mcx market i.e. in commodity market, Real Estate, no. of bank accounts the individual employees hold, where the individual works, what is his current designation, what is his current CTC. Let us define each term in detail Stock Exchange Stock Exchange basically deals in all secondary market securities. The shares which are already listed on the stock exchange. These shares are traded on regular basis i.e. it would be on daily basis. Basically the people who deal in stock exchange can be categorized as short term investor or long term investor. The main thing while investing in stock exchange is the risk taking ability of the investor on the whole. This shows that whether the investors are conservative in nature or they are risky investors. Indian stock markets particularly the BSE and the NSE, had been a preferred destination not only for the Indian investors but also for the Foreign investors. Although Indian Markets had been through tough times due to various scams, but history shows that they recovered very fast. Many types of scrip had been value creators for the investors. People have earned fortunes from the stock markets, but there are people who have lost everything due to incorrect timings or selection of fundamentally weak companies.

Mutual Funds - A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of the fund Fixed Deposits Fixed Deposits are basically assured returns. These are the investments in bank. Fixed Deposits are basically investment for short, medium as well as long term period. This investment gives assured returns to investors based on their investment capacity. Investment period would range from 15 days to 400 days. Rate of Retun would be 3.5% to 10.5% based on investment period.
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MCX Market Investment in Mcx Market is same as investment in stock exchange. It basically deals in all secondary market securities. Investment includes investment in gold, silver, copper, crude oil etc to name a few. Basically the people who deal in stock exchange can be categorized as short term investor or long term investor. The main thing while investing in stock exchange is the risk taking ability of the investor on the whole. This shows that whether the investors are conservative in nature or they are risky investors.

Real Estate- Returns are almost guaranteed because property values are always on the rise due to a growing world population. Residential real estate is more than just an investment. There are more ways than ever before to profit from real estate investment. No. of Bank Accounts: - The no. of bank accounts an individual hold. This shows that how much interest a bank provides to an individual. Bank also provides various investment services to its customers. Through this investment services a customers comes to know various investment aspects which can provide him various returns based on his investment decisions.

Earning Capacity: - This shows how much an individual earns in order to make an investment. Suppose if we take an example Mr A who earns Rs 40,000 per month and Mr B who earns Rs 30,000 per month. Mr A would definitely invest more money compared to Mr B. We can make one assumption that as the earnings of individuals are more this investment would be more compared to other people. He would be an risky investor who would invest his more money on stock exchange, mutual funds, MCX Market compared to his investment in fixed deposits. This shows that Mr A is risky investor and Mr B is conservative investor.

Objective of the study

It is done to analyse the financial thinking of the people which changes from time to time. It is done to analyse how people invest their money. Financial thinking is done to get an overall view of how an investment is done keeping all the factors in minds which may affect the investment at any point of time. It is done basically to differentiate between investors based on age, sex, occupation, marital status and annual income. It is done to analyse the saving and investment preference of an individual.

 To understand the features and various aspects of investment decisions taken by the investors. What are the factors affecting the investment decisions of the individual.

Literature Review Past market trends Sometimes history repeats itself; sometimes markets learn from their mistakes. You need to understand how various asset classes have performed in the past before planning your finances. Your risk appetite The ability to tolerate risk differs from person to person. It depends on factors such as your financial responsibilities, your environment, your basic personality, etc. Therefore, understanding your capacity to take on risk becomes a crucial factor in investment decision making. It shows whether the investor is risky investor or a conservative investor. The more the person takes the risks returns are high on that type of investment. But Investment risk should be calculated risk. Investment horizon How long can you keep the money invested? The longer the time-horizon, the greater are the returns that you should expect. Further, the risk element reduces with time. It also shows the time period of investments. Investible surplus How much money are you able to keep aside for investments? The investible surplus plays a vital role in selecting from various asset classes as the minimum investment amounts differ and so do the risks and returns. Investment need How much money do you need at the time of maturity? This helps you determine the amount of money you need to invest every month or year to reach the magic figure. E.g. If a person is need of a large amount of surplus after 5 yrs. He will take calculated risk and would like to calculate the amount which he would get after 5 yrs. Mostly in such case the investment would be done in fixed deposits by the individuals. Expected returns
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The expected rate of returns is a crucial factor as it will guide your choice of investment. Based on your expectations, you can decide whether you want to invest heavily into equities or debt or balance your portfolio. It also shows what you expected from your investments. i.e. Whether you are interested in short term or long term investments.

RESEARCH METHODOLOGY Meaning of Research: Research in common parlance refers to a search for knowledge. Research can also define research as a scientific and systematic search for pertinent information on a specific topic. In fact, research is an art of scientific investigation. The Advanced Learners Dictionary of Current English lays down the meaning of research as a careful investigation or inquiry especially through search for new facts in any branch of knowledge. Marketing research is the systematic design, collection, analysis, and operating of data and findings relevant to a specific marketing situation or problems.

Research Methodology Research methodology may be understood as the science of study how research is done significantly and scientifically. This research is basically done by collecting various primary data from individual. The main purpose of this research is to evaluate how various factors affect the investment aspects of individual. Factors which affect investment aspects of individual are age, income, diversification of investment etc to name a few. How individual take various decisions regarding their investment such as 1) 2) 3) 4) 5) 6) 7) Where they want to do the investment Time period for investment Is the investment decision risky for investor Investment is for Short term or long term Risk taking ability of investor Expected Return on Investment Whether the investment decision is taken with the help of Financial Advisor.

DATA COLLECTION Data collection includes the type of data and the source of data that we have collected. Primary Data is collected from various individuals. Where questions are asked to various individuals. There are various questions which the individuals need to answer. Individuals need to answer all the questions and based on their response. This questions are framed in such a way to analyse the investment aspects of individuals. The data is evaluated on various parameters. The data is collected from primary source.

Primary Data

Primary Data is collected from various individuals based on their age, gender, source of income, investment aspects. Its basically firsthand experience. Where various questions are asked to various individuals. Based on those parameters evaluation is done.

Sampling Design

A procedure or plan drawn up before any data is collected to obtain a sample from a given population. It is also known as sampling plan or survey design.

Sample Size:

Basically the sample size in this research is 100. Where data is collected from 100 individuals from various backgrounds such as service people, business, students etc. Sample size is from various backgrounds to differentiate among the investment aspects of various individuals at particular period of time.

Sampling Technique

The sampling technique used in this case is CHI- Square Test. General procedures followed in this case are 1) State the hypothesis to be tested 2) Formulate & analyse the plan 3) Analyse the sample data according to the plan 4) Accept or Reject the null hypothesis.

Hypothesis: In this research hypothesis would be what are the major factors which affect the investment decisions of individual. Investment to be made by individual is an independent variable but what type of investment to be made would be and dependent variable affecting the decision of the individual. Salary affects the investment aspect of individual. Age affects the investment aspect of individual.

Questionnaire

Do you Invest in Stock Market No. of Respondents 100

YES 28

NO 72

28

Do you Invest in Stock Market

YES

72

NO

Interpretation: Today also many people dont invest in stock exchange. As this collected data also shows the same thing. About 28% invest in Stock Exchange compared to others i.e. 72% dont invest. This shows that people dont want to take monetary risk.

Do you invest in Mutual Fund? No. of Respondents 100

Yes 21

NO 79

0 21

Do you Invest in Mutual Funds

YES

NO 79

Interpretation: As this collected data also shows that about 21% invest in Mutual Funds compared to others i.e. 79% dont invest. This shows that people dont want to take monetary risk.

Do you invest in Fixed Deposits? No. of Respondents 100

YES 64

NO 36

36 64

Do you Invest in Fixed Deposits YES NO

I Interpretation: As this collected data also shows that about 64% invest in Fixed Deposits compared to others i.e. 36% dont invest. This shows that people want steady returns. You can assured returns.

Do you invest in MCX Market? No. of Respondents 100

YES 8

NO 92

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Do you Invest in MCX Market YES NO

Interpretation: As this collected data also shows that about 8% invest in MCX compared to others i.e. 92% dont invest. This shows that people dont want to take monetary risk. You can also say that as the MCX Market is new in the current scenario. People are not aware of it.

Do you hold Credit Card? No. of Respondents 100

YES 54

NO 46

46 54

Do you hold any Credit Card YES

NO

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Interpretation: As this collected data also shows that about 54% hold credit cards compared to others i.e. 46% dont invest. This shows that people dont want to use the money which they dont have. Do you depend on financial planner for your investment decisions? No. of Respondents 100

Yes 13

No 87

Do you depend on Financial planner for your investment decisions YES

NO

Interpretation: As this collected data also shows that about 13% have appointed Financial Planner to make their investment decisions compared to others i.e. 87% who have not appointed. This shows that people dont want to make use of opportunity costs

No. of Bank Account held by an individual? No. of Respondents 100 More than 2 35

1-2 65

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35

No. of Bank Account held by an individual more than 2 ONE

65

More than TWO

Interpretation: As this collected data also shows that about 65% have only 1-2 bank accounts compared to others i.e. 35% who have more than 2 bank accounts. These shows dont want to diversify their investment services provided by their banks

What is your Source of Income? No. of Respondents 100

Salary 71

Others 29

80 70 60 50 40 30 20 10 0

Source of Income

salary

others

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29 Source of Income salary others 71

Interpretation: As this collected data also shows that about 71% earn salary compared to others i.e. 29% who are either the students or business class people. What is your profession? No. of Respondents 100

Service 49

Others 51

51 51 50 50 49 49 48 Profession Service Others

Interpretation: As this collected data also shows that about 49% are service class compared to others i.e. 51% who are either the students or business class people
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 What is your Current CTC? More than Rs 250,000 29

No. of Respondents 100

Upto Rs250,000 12

None 59

CURRENT CTC
70

60

50

40

30

20

10

0 upto 2,50,000 More than 2,50,000 None

Interpretation: As this collected data also shows that about 12% have salary upto Rs 250,000 and 29 % have more than salary of Rs 250,000 and remaining 59% are students and they dont earn salary.

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Chi Square Analysis Chi-Square test is conducted to test whether two or more attributes are associated or not. Chisquare can only be used if the experimental data or sample observation are independent of each other. The data collected must be Drawn at random from the universe or population they use the following formula For calculating the value of chi-square. X^2= (O - E) ^2 E Where O = observed frequency E = expected or theoretical frequency The degree of freedom is calculated from the frequency table called Contingency table by using the formula d. f = (C-1)*(R-1) Where, c = no. of cell frequencies in columns; r = no. of frequencies in rows. Chi Square data is done for Earning Capacity and Investment in Stock Exchange. 1. Null Hypothesis (H0): There is no significant relationship between the earning capacity of individual and his investment decisions. Alternative Hypothesis (H1): There is a significant relationship between earning capacity and his investment decisions. Factors YES NO TOTAL Earning Capacity 41 59 100 Investment in stock exchange 28 72 100 Total 69 131 200

Chi-Square Table: O 41 59 28 72 E 34.5 65.5 34.5 65.5 O-E 6.5 -6.5 -6.5 6.5 (O-E)2 42.25 42.25 42.25 42.25 (O-E)2/E 1.2 0.6 1.2 0.6
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Therefore the sum of tables is 3.6 Degree Of Freedom = (r-1)*(c-1) Degree Of Freedom = (r-1)*(c-1) = (2-1)*(2-1) = 1 Significance Level at 0.05 Calculated Value = 3.6 and Tabulated Value = 0.053145074 Therefore Tabulated value = 0.053145074 is greater than significance level 0.05. Hence the value is Accepted.

Calculation done in Excel Sheet Earning Investment in stock Factors Capacity exchange YES 41 NO 59 TOTAL 100 Total 28 69 72 131 100 200

34.5 65.5 0.053145074

34.5 65.5

Conclusion From this we can draw the conclusion that these are the various factors which affect the investment aspects of individuals. Based on their earning capacity and risk taking ability investors invest in various schemes. Therefore Tabulated value = 0.053145074 is greater than significance level 0.05. Hence the Hypothesis is accepted.

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