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A

Summer Training Project Report
On
“CONSUMER AWARENESS REGARDING DIFFERENT
INVESTMENT ALTERNATIVES”

Submitted for partial fulfillment of requirement for the award of degree
of
MASTER OF BUSINESS ADMINISTRATION
PUNJAB TECHNICAL UNIVERSITY

By
Manoj Kumar
1537487
MBA 3rd SEMESTER
UNDER THE SUPERVISION OF
Mr. Harvinder Singh

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DECLARATION

I Manoj kumar undersigned solemnly declare that the report of the project
work entitled “CONSUMER AWARENESS REGARDING DIFFERENT
INVESTMENT ALTERNATIVES”, is based my own work carried out during

the course of my study under the supervision of “Mr. Harvinder Singh”.

I assert that the statements made and conclusions drawn are an outcome
of the project work. I further declare that to the best of my knowledge and
belief that the project report does not contain any part of any work which has
been submitted for the award of any other degree/diploma/certificate in this
University or any other University.

Manoj Kumar
(Signature of the Candidate)

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Roll No:
1537487CERTIFICATE BY GUIDE

This to certify that the report of the project submitted is the outcome of the
project work entitled “CONSUMER AWARENESS REGARDING
DIFFERENT INVESTMENT ALTERNATIVES” carried out by “Manoj
Kumar” bearing Roll No.:1537487 & Enrollment No.:1537487 carried by
under my guidance and supervision for the award of Degree in Master of
Business Administration of Punjab Technical University (PTU), Jalandhar,
India.

To the best of the my knowledge the report
i) Embodies the work of the candidate him/herself,
ii) Has duly been completed,
iii) Fulfils the requirement of the ordinance relating to the MBA degree of
the University and
iv) Is up to the desired standard for the purpose of which is submitted.

_______________________
(Signature of the Guide)
Name: Mr. Harvinder Singh

Designation:Assistant Prof.
Department:Management
CGC JHANJERI,MOHALI

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________________ ________________ ________________ ________________ Name & Signature of Name & Signature of Internal Examiner External Examiner Date: Date: Forwarded by HOD Department of Management Page | 4 .:1537487been examined by the undersigned as a part of the examination for the award of Master of Business Administration degree of Punjab Technical University. CERTIFICATE BY THE EXAMINERS “CONSUMER AWARENESS REGARDING DIFFERENT INVESTMENT ALTERNATIVES” Submitted by <Manoj kumar > Roll No:1537487 Enrollment No. Jalandhar.

I sincerely acknowledge him for extending his valuable guidance. critical review of project and the report and above all the moral support he had provided to me with all stages of this project. ACKNOWLEDGEMENT I express my sincere thanks to my project guide Mr. I can’t we able to complete my training report. Harvinder Singh for guiding me right from the inception till the successful completion of the project. I also want to thank all the staff and employees of our organization because without the help and support them. support for literature. Manoj kumar Page | 5 .

This analysis will also throw light on various investment avenues available in India that will help in many ways like. This project is being submitted which content detailed analysis of the research under taken by me. The increased significance of understanding pivot for modern researches. Hence my attempt is to cover all the organizational activities and related facts so as to have better control over my primary subject of study.  It will also help the agents and brokers in marketing the existing financial instruments. The expectations of different types of investors regarding particular service requirements can be identified. The awareness lever of the investors about the various investment options and what is the perception of the investors with regard to the investments they want to make.  It also enhances new services initiatives. PREFACE This analysis will help to strengthen investor intimacy. Page | 6 .  The common problem areas faced by the investors can be understood. The experience which I gained by doing this project was essential at this turning point of my career.  It can be used by the financial sector in designing better financial instrument customized to suit the needs of the investor. This analysis will be originated in order to empower the investors with detailed research on various investments avenues available in India.  It will also help the company to understand what is the requirement and expectations of different categories of investors.  It will provide knowledge to the investors about the various financial services provided by the company to their investors. The research provides an opportunity to the student to devote his\her skills knowledge and competencies required during the technical session.  This study will help in gaining a better understanding of what an investor looks for in an investment option. TABLE OF CONTENTS CHAPTE PARTICULAR PAGE NO.

R
1. INTRODUCTION OF TOPIC

PERFORMANCE APPRAISAL 8

2. INTRODUCTION OF HDFC BANK 26
3. REVIEW OF LITERATURE 30
4. RESEARCH METHODOLOGY

OBJECTIVES &RESEARCH 33
PLAN
5. ANALYSIS AND INTERPRETATION 38
6. FINDINGS & SUGGESTIONS 58
7. CONCLUSION 62
BIBLIOGRAPHY 64
ANNEXURE 65

QUESTIONNAIRE

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CHAPTER- 1

INTRODUCTION

OF

TOPIC
DESCRIPTION ON VARIOUS
INVESTMENT ALTERNATIVES
SAVINGS ACCOUNT
As the name denotes, this account is perfect for parking your temporary savings. These
accounts are one of the most popular deposits for individual accounts. These accounts
provide cheque facility and a lot of flexibility for deposits and withdrawal of funds

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from the account. Most of the banks have rules for the maximum number of
withdrawals in a period and the maximum amount of withdrawal, but no bank enforces
these. However, banks have every right to enforce such boundaries if it is felt that the account
is being misused as a current account. At present the interest on these accounts is regulated by
Reserve Bank of India. Presently Indian banks are offering 3.50% p.a. interest rate on such
deposits.

This account gives the customer a nominal rate of interest and he can withdraw money as and
when the need arises. The position of account is depicted in a small book known as 'Pass
Book'. Such accounts should be treated as a temporary parking area because the rate
of interest is much less than Fixed Deposits. As soon as one s savings accumulate to
an amount which he can spare for a certain period of time, shift this money to Fixed
Deposit. The returns on the money kept in Savings Bank account will be less but the
freedom to withdraw is the highest.

FIXED DEPOSITS/ TERM DEPOSITS
The term "fixed" in Fixed Deposits denotes the period of maturity or tenor. Fixed
Deposit, therefore, pre plans a length of time for which the depositor decides to keep
the money with the Bank and the rate of interest payable to the depositor is decided by this
tenure. Rate of interest differs from Bank to Bank. Normally, the rate is highest for deposits
for 3-5 years. This, however, does not mean that the depositor loses all his rights over
the money for the duration of the tenor decided. Deposits can be withdrawn before the
period is over. However, the amount of interest payable to the depositor, in such cases goes
down.

Every Banks offer fixed deposits schemes with a wide range of tenures for periods from 7
days to 10 years. Therefore, the depositors are supposed to continue such Fixed Deposits for
the duration of time for which the depositor decide s to keep the money with the
bank. However, in case of need, the depositor can ask for closing the fixed deposit in
advance by paying a penalty. Soon some banks have even introduced variable interest fixed
deposits. The rate of interest in such deposits will keep on varying with the prevalent
market rates i.e. it will go up if market interest rate goes and it will come down if the market
rates fall.

Tax deduction: Banks should deduct tax at source on interest paid in excess of Rs.

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The refore if an individual has 5 deposits and the aggregate interest earned on these is Rs. PUBLIC PROVIDENT FUND (PPF) PPF is a 30 year old constitutional plan of the Central Government happening with the objective of providing old age profits security to the unorganized division workers and self employed persons. Subscription: The yearly contribution to PPF account ranges from a least of Rs. 2000.70. Currently. the deposits should be made between en 1st and 5th day of the Page | 10 .100. 000 or else the excess amount will be returned without any interest. This is not per deposit but per individual. He may also pledge on behalf of a minor.500 is not deposited in any year. 000 payable in multiple of Rs. Penalty in case of non-subscription: The account will happen to obsolete if the required minimum of Rs. there are almost 30 laths PPF account holders in India across banks and post offices. HUF. Interest is designed on the lowest balance among the fifth day and last day of the calendar month and is attributed to the account on 31st March every year. Interest rate: Deposits in the account earn interest at the rate notify by the Central Govt from time to time. not exceeding 12 in a year.500 along with per malty of Rs. Eligibility: Any individual salaried or non-salaried can open a PPF account.5000 per annum to any depositor.500 to a maximum of Rs. arrears of Rs. So to derive the maximum. The collective annual payment by an individual on account of himself his minor child and HUF/AOP/BOI (of which individual is member) cannot exceed Rs. 7000 though in each individual deposit. tax must be deducted at source. The account can be regularized by depositing for each year of default. AOP and BOI.70.5 either in lump sum or in convenient instalments. Also two adults cannot open a combined PPF account. interest should not exceed Rs. The amount before now deposited will continue to earn interest but with no facility of taking loan or making withdrawals. A person can contain only one PPF account. Even NRIs can open PPF account.

NSCs have a maturity of 6 years. NSCs are issued by the Department of Post. 160. They offer a rate of return of 8% per annum.e. the year of opening the account and adding 15 years to it. the interest is reinvested. NSCs are a practically risk free avenue of investment. That is. This interest is calculated every six months. This means that investments in NSCs and the interest earned on it every year. NATIONAL SAVINGS CERTIFICATE (NSC) National Savings Certificate (NSC) is a fixed interest. NSCs qualify for investment under Section 80C of the Income Tax Act (IT Act). This facility of making partial withdrawals provide liquidity and the withdrawn amount can be used for any purpose. and is merged with the principal. 100 invested. Rate of interest 8% compounded half yearly. 1 Laky. The sum made in the 16th financial year will not earn any interest but one can take advantage of the tax rebate. For every Rs. Even the interest earned every year qualifies under Sec 80C. you receive Rs. 500/. up to Rs. They can be bought from authorized post offices. Withdrawal: The investor is allowable to make one removal every year beginning from the seventh financial year of an amount not more than 50% of the balance at the end of the fourth year or the financial year immediately preceding the withdrawal.No maximum limit. Government of India. as it also enables you to earn interest on your Savings Bank A/c for the previous month. Features of NSC Minimum investment Rs. There is no tax deducted at source (TDS). Since they are backed by the Government of India. long term instrument for investment. Page | 11 . and is paid along with the principal at the time of maturity. whichever is less. are deductible from the income of the investor.10 at maturity.month. Tenure: Even though PPF is 15 year scheme but the effectual period works out to 16 years i.

in six years. The market borrowing of the Central Government is increased through the issue of dated securities and 364 days treasury bills either by auction or by floatation of loans. like KVP (Kisan Vikas Patra). Societies and any other Institutions not eligible to purchase. POST OFFICE SAVINGS There are various investment schemes available in post offices.Rs.grow to Rs. Trusts. 1601/. It is your hard-earned money. Though the interest rates are not so high. In addition to the above. So you need to find out some scheme as per your requirements. and minor through guardian can purchase. All these schemes are completely risk-free. but still you must invest some part of your money into any of these investment instruments. GOVERNMENT SECURITIES (G-secs) Government securities (G-secs) are supreme securities which are issued by the Reserve Bank of India on behalf of Government of India in lieu of the Central Government's market borrowing program. Individuals. The term Government Securities includes: Central Government Securities. These are some of the safe and secure investments that you can opt for. Some schemes offer Tax-saving benefits and some gives tax-free returns. Two adults. No pre-mature encashment. State Government Securities Treasury bills The Central Government borrows funds to finance its ‘fiscal deficit’. so better play safe and invests some part in secure funds also. and you do not need to have large sum of money to start investing in these post office schemes. treasury bills Page | 12 . Companies. 1000/. MIS (Monthly Income Scheme) and various others. Non-resident Indian/HUF cannot purchase.

Benefits of Investing in Government Securities No tax deducted at source Additional Income Tax benefit u/s 80L of the Income Tax Act for Individuals Qualifies for SLR purpose Zero default risk being sovereign paper Highly liquid.of 91 days are issued for managing the temporary cash mismatches of the Government. realizing capital gains or losses. In a mutual fund. Transparency in transactions and simplified settlement procedures through CSGL/NSDL. the fund manager. who is also known as the portfolio manager. The investment proceeds are then passed along to the individual investors. bonds. Features Issued at face value No default risk as the securities carry sovereign guarantee. and collects the dividend or interest income. trades the fund's underlying securities. The value of a share of the mutual fund. Diversification 2. Ample liquidity as the investor can sell the security in the secondary market Interest payment on a half yearly basis on face value No tax deducted at source Can be held in Demat form. Securities qualify as SLR investments (unless otherwise stated). known as the net asset value per share (NAV). Professional Management Page | 13 . and/or other securities. Advantages of Mutual Funds 1. is calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding. Redeemed at face value on maturity Maturity ranges from of 2-30 years. short-term money market instruments. These do not form part of the borrowing program of the Central Government. MUTUAL FUNDS A mutual fund is a professionally-managed firm of collective investments that pools money from many investors and invests it in stocks.

Regulatory oversight 4. Fees and commissions 3. Like other insurance policies. Convenience 6. Facilitates Economic Movements 4. But to a certain extent it is the value derived from the 'peace of mind' experienced by the policyholder. Taxes 4. the policy owner agrees to pay a fixed amount called a premium at regular intervals or in bulge sum. Financial Security 2. critical illness. The assessment for the policyholder is derived not from an actual claim event. Tax benefits 10. Helps to diverts States Resources for Other Purpose 3. Advantages of a Life Insurance Policy 1. Flexibility 8. To be a life policy the insured event must be based upon the lives of the people named in the policy. Liquidity 5. Management risk LIFE INSURANCE Life insurance is a contract between the policy owner and the insurer. life insurance is also a contract between the insurer and the policy owner whereby a benefit is paid to the nominated beneficiaries if an insured event occurs which is covered by the policy. No Guarantees 2. 3. Transparency 7. Helps to Avail Tax Exemptions Page | 14 . Drawbacks of Mutual Funds Following are the few drawbacks of Mutual Funds: 1. Choice of schemes 9. because of the negating of adverse financial consequences caused by the death of the Life Assured. Well regulated 11. In return. where the insure r agrees to pay an amount of money upon the happening of the insured individual's or individuals' death or other event. like terminal illness.

They also promise s to repay the face value of the bond (the principal) when it matures. bond prices will be down and you may well end up incurring losses. this amount varies from issue to issue.000. However. we use the word bonds to indicate debt securities issued by government. or Public sector companies Debentures . It is common practice for FIs and Corporate to raise funds for asset financing or capital expenditure through primary bond issues. If interest rates are running high. Following are allowed to issue bonds Governments Municipalities Variety of institutions Corporations Buying and Holding of Bonds: Investors can subscribe to primary issues of Corporate and Financial Institutions (FIs). there is a liquidity problem which means that it is a tough job to find a buyer. the prices may be at a sharp discount to its intrinsic value. There is no prescribed upper limit to your investment. even if you find a buyer. Some bonds are also available in the secondary market. Third.000 or Rs 10.U.Debt securities issued by private sector companies In other words we can tell that a bond is a debt security. The duration of a bond issue usually varies between 5 and 7 years. semi-government bodies and public sector financial institutions and companies. similar to an I. hence. or Public entity known as the issuer. in return for the loan.BONDS & DEBENTURES Bonds & Debentures. you are lending money to a government. market risk. The minimum investment for bonds can either be Rs 5. The issuer promises to pay you a specified rate of interest during the life of the bond. Debentures are always secured. On the other hand. Second. First. Selling of Bonds: Selling bonds in the secondary market has its own drawbacks.O. you are subject to market forces and. When you purchase a bond. corporation. Page | 15 . these two words can be used interchangeably. We use the word debenture to refer to the debt securities issued by private sector companies.Debt securities issued by Govt. municipality. Bonds. In Indian markets.

you are paid a guaranteed interest that does not change in value Irrespective of the fortunes of the company. A debenture is generally unsecured in the sense that there are no liens or pledges on specific assets. in case of liquidation. Debentures vs. It is defined as a certificate of agreement of loans which is given under the company's stamp and carries an undertaking that the debenture holder will get a fixed return (fixed on the basis of interest rates) and the principal amount whenever the debenture matures. Working of Stock Market Stock market trading is normally done by brokers. you considered as the part owner of the company. However. STOCK MARKET The first step is to understand the stock market. Conventional stock trading entails an investor placing an order for a specific number of Page | 16 . in which Companies need to be listed in order for their shares to be bought and sold. where buyers and sellers of company shares meet and agree on the price at which the transactions would materialize. The company provides collateral for the loan. A share of stock is the smallest unit of ownership in a company. Stock market trading occurs at a physical stock exchange. bondholders will be paid off before debenture holders. This trading market provides with substantial earnings potential and is one among the most popular investment options. the first step is to seek a reliable investment broker. This type of trading usually takes place in a stock exchange. As a result. Moreover. bonds are more secure than debentures. but carry a lower interest rate. If you own a share of a company s stock. In case of both. Bonds: Debentures and bonds are similar except for one difference bonds are more secure than debentures. Stock Market Trading Stock market trading consists of buying and selling of company stocks and as well as stock derivatives.Debentures A debenture is similar to a bond except the securitization conditions are different.

3. This technique is also called open outcry.shares of a company with his/he r broker present in the physical stock market. It helps companies raise capital and handle financial issues. soybeans. Accordingly. The transaction closes only after the buyer agrees on the price quoted by the seller. COMMODITY TRADING The terms commodities and futures are often used to depict commodity trading or futures trading. Online stock market trading engrosses the real time placement of buying and selling orders for stocks. Multi Commodity Exchange (MCX). Drawbacks of Stock Market Trading: 1. It promotes economic growth. This procedure is much quicker and less complicated than trading in the physical stock market. Stock market trading will also takes place online. because it involves traders crying out their bids. It is traded for limited hours in a day. The transaction is accomplished when the trading system is capable to match bids and a confirmation is received. It is similar to the way stocks and equities are used when investors talk about the stock market. Commodities are the actual physical goods like gold. Futures are contracts of commodities that are traded at a commodity exchange like MCX. there is a wait period before you can book healthy profits. Page | 17 . 2. It proposes lower leverage than other forms of trading. 2. etc. 3. corn. The broker forwards the order to the floor clerk. Bids are then exchanged. 4. because stock prices do not appreciate significantly in a short span of time. It helps investors realize substantial profits. It ensures that money is invested in businesses to enhance profit potential. The short selling of stocks is hard. crude oil. who then attempts to locate a trader desire to sell those shares. such as Forex trading. Apart from numerous regional exchanges. Benefits of Stock Market Trading 1. India has three national commodity exchanges namely.

For every trade. You would sell a futures contract if you thought the price of wheat would go down. you were speculating in wheat.Rs 1. 100 gms of gold may be worth Rs. Commodity trading has a bad name as being too risky for the average individual. You are speculating on the future direction of the price in the commodity you are trading.000 per 100 gms. Working of Commodity Market: Commodity Market works Just like stock futures.000 . The fact is that commodity trading is only as risky as you want to make it. So you only end up paying Rs 5. The margin for gold set by MCX is 3. you don't have to pay the entire amount. The terms "buy" and "sell" merely indicate the direction you expect future prices will move.000 per 100 gems. Those who treat trading as a get-rich-quick scheme are likely to lose because they have to take big risks.50. The minimum contract size for a gold future is 100 Gms. If.250. 1. just a fixed percentage of the cost.50. you would buy a futures contract if you thought the price would be going up in the future. Many people have become very rich by investing in commodity markets. you do not really buy anything or own anything. the possibility of success is very high.National Commodity and Derivatives Exchange (NCDEX) and National Multi- Commodity Exchange (NMCE).60. This is like a bet on future price direction.000. Forward Markets Commission (FMC) is the regulatory body of commodity market. the price of gold rose to Rs 1. Neither person has to own any wheat to participate. Let's say you are buying a Gold Futures contract.000) will be credited to your account. for example. Unlike other kinds of investments. So you bought the Gold Futures contract when it was Rs. such as stocks and bonds. If you act carefully. The course of trading commodities is also known as futures trading.000 (Rs 1. This is known as the margin. when you trade futures. The next day. treat your trading like a business and are willing to settle for a reasonable return. It is one of a few investment areas where an individual with limited capital can make extraordinary profits in a relatively short period of time. The low margin means that you can buy futures representing a large amount of gold by paying only a fraction of the price.60.50.5%. Rs 10. The Page | 18 . When you buy Futures. But he has to deposit sufficient capital with a brokerage firm to insure that he will be able to pay the losses if his trades lose money. 1. there is always a buyer and a seller.

and the information. due to the fact that the entire market is run electronically within a network of banks continuously over a 24-hour period. Forex was initially intended to be used by bankers and large institutions and not by small guys. you are in effect buying a share in the Japanese financial system. US dollar (USD). Until the late 1990's only the big guys could play this game. British pound (GBP) or Japanese Yen (JPY). the exchange rate of a currency versus other currencies is a reflection of the condition of that country's financial system compared to the other countries financial system.000 . Think of buying a currency as buying a share of a particular country. as the price of the currency is a direct reflection of what the market thinks about the current and future health of the Japanese economy. Its trading volumes The tremendous liquidity of the market Its geographical dispersion Its long trading hours Page | 19 . In common. All you need to get started is a computer. For example Euro (EUR). The Forex market is measured an Over- the-Counter (OTC) or Interbank market. Currencies are traded through an agent or dealer and are traded in pairs.60.000). Unlike other financial markets like the New York Stock Exchange.55.following day. the price dips to Rs 1.55. When you purchase say Japanese Yen.000. the Forex spot market has neither a physical location nor a central exchange. However because of the rise of the Internet.Rs 1. Here you are not buying anything physical. The foreign exchange market is exclusive because of the following reasons. Rs 5000 will get debited from your account (Rs 1. The first requirement was that you could trade only if you had about ten to fifty million bucks to start with Forex. FOREX MARKET Forex trading is the immediate trade of one currency and the selling of another. this type of trading is confused. a high-speed Internet connection. online Forex trading firms are now able to offer trading accounts to 'retail' traders.

healthcare etc. 5. The low limits of profit compared with other markets of fixed income but profits can be high due to very great trading volumes The use of leverage Benefits of Forex Trading 1. tax structuring benefits and higher security in comparison to other investment options.The variety of factors that affect exchange rates. Forex trading online is instant. primarily driven by the IT and ITES industry that requires an projected office space of more than 367 million sq ft till 2012-13. The demand for office space is expected to increase significantly in the next few years. Real estate industry research has also thrown light on investment opportunities in the commercial office segment in India. A survey by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Ernst & Young has predicted that Indian real estate industry is poised to emerge as one of the most preferred investment destinations for global realty and investment firms in the next few years. since an estimated 70 per cent of the new construction is for the IT sector. 2. Forex prices are predictable. But maximum growth is attributed to its growth from the booming IT sector. hospitality. No Bulls or Bears! 3. The potential of India's property market has a revolutionizing effect on the overall economy of India as it transforms the skyline of the Indian cities mobilizing investments segments ranging from commercial. industrial. REAL ESTATE AS AN INVESTMENT OPTION The growth curve of Indian economy is at an all time high and contributing to the upswing is the real estate sector in particular. Forex trading online is commission free 6. moderate capital appreciations. The boom in the sector has been so appealing that real estate has turned out to be a convincing investment as compared to other investment vehicles such as capital and debt markets and bullion market. retail. residential. It is attracting investors by offering a possibility of stable income yields. Page | 20 . Forex trading online offers great leverage 4. Forex is the largest market. Investments in Indian real estate have been strongly taking up over other options for domestic as well as foreign investors.

you can find most of their gold in their central banks. we use gold mainly as jewels.00.000  Gems & Jewellery constitute 25% of India¡¦s exports about 10% of our import bill constitute gold import.INVESTMENT IN GOLD Gold has got lot of emotional value than monetary value in India. India is the largest Consumer of gold in the world. have generated large marketable surplus and a highly skewed rural income distribution is another factors contributing to additional demand for gold. Indian Gold Market Current Scenario:  Size of the Gold Economy: more than Rs. My dear readers. Demand for gold in the Indian Market: India has the highest demand for gold in the world and more than 90% of this gold is acquired in the form of jewellery. But in India. Supply of Gold: The main economic effects that arise from the changes in the supply of gold can be seen against the quantum of gold that is already in existence in the economy. In western countries. The supply of gold is not up to the requirements as the production of gold is also Page | 21 .000 ¡V 14. The movement of gold prices is one of the important variables determining demand for gold. The increase in the irrigation. technological change in agriculture (through mechanization and high yielding varieties). 30.00. detailed notification is awaited)  Official estimates of the stock of gold in India: 9.000 tons  Gold held by the Reserve Bank of India: 358 tons  Gold production in India: 2 tons per annum. Today I would like to discuss on investments in gold and it’s potential.000  Number of people employed: 5. Following are the factors influencing the demand for gold.  Number of banks allowed importing gold: 15 (While recently this has been liberalized.000 tons  Unofficial estimates of the stock of gold in India: 12.000 crores  Number of gold jewellery manufacturing units: 1. If you look at gold in a business sense. you will understand that gold is one of the all time best investment tool.

such as Page | 22 . High Net worth Individuals [HNIs] or wealthy investors are proactive in portfolio management. Art and passion: Wealthy investors also have their investment in art. and Ernst & Young. HNIs are proactive in identifying new investment options and take inputs from professional advisors in volatile market conditions. HNIs are dynamic in modifying their asset allocation and were among the first investors to move from equities to fixed income during 2001-2002 period of downturn in equity markets. Investment products and avenues Managed products: Managed product service is the most popular investment strategy adopted by wealthy investors globally Real Estate: Wealthy investors have found this asset class very attractive and have invested directly in real estate and indirectly through real estate investment trusts. Investment in non correlated assets. This is because these instruments have low correlation with equity asset class performance.coming down and demand for gold is going up very sharply. EMERGING INVESTMENT AVENUES According to a study undertaken jointly by Merrill Lynch. consolidation financial assets and use of diversification strategies as actively as large institutions. Therefore as a financial consultant my advice to you all is. Practice the habit of buying at least one gram of gold every month. They shifted back to equities when they identified favourable market trends. flexibility. wine. risk manage ment. Precious Metals: Gold and other precious metals are attractive investment options to balance the asset allocation Commodities: Wealthy investors have turned to commodities to offset the lower returns from fixed income securities. Cap Gemini. kindly allocate a portion of your portfolio for gold investments. Gold as an Investment Option: Gold as an investment tool always gives good returns. Alternative investments: Hedge funds and Private equity investments such as venture funds are becoming increasingly popular with wealthy investors to reduce the investment risks related to stock market fluctuations. antiques. safety and liquidity to the investors.

stamps and Art. Hedge Fund Risks:  Lack of transparency  Limited liquidity  Difficulty accessing quality hedge funds  Unreliable or incomplete return data  Valuation risk  Asymmetrical nature of Hedge fund returns distributions [SKEW]  Counterparty risk [Leverage] Page | 23 . The art scene around the world is growing significantly. A hedge fund is a private investment fund.commodities helps to improve diversification of the portfolio amidst volatile market conditions. Art is being incorporated into the investor's overall asset allocation decision. coins. HEDGE FUNDS Over the last 15 years. in any market where in good returns are expected with low risk levels. hedge funds have become increasingly popular with high net worth individuals. INVESTMENT IN ART Today. With more and more investors looking at art as an alternative asset class and a store of a long term value. average annual art valuations have outpaced average annual stock market valuations by more than three times since 2000. which provide them with a diversification away from a particular asset class. These funds are like mutual funds. without having the level of expertise that is required for other dire ct investments. we find that an increasing number of individuals are looking at alternative investments. They can invest on almost any type of opportunity. as well as institutional investors. is now an indulgence which gives them an opportunity to cash in on their hobbies. Investing in the vintage wine. The number of hedge funds has risen by about 20% per year and the rate of growth in hedge fund assets has been even more rapid. People are willing to invest and looking for areas other than the stock market for investing. charging a performance fee and is open to only a limited number of investors. which collect money from investors and use the proceeds to buy stocks and bonds.

$500.000 .$7 billion spread over 1.$60 billion annually. Page | 24 . It is estimated that one-seventh of the 300.000 venture capital investments each year. This investment group exceeds venture capital sources which are estimated at $5 .000 deals each year. high-risk ventures. averaging $230.000.000 Makes one investment every two years Private equity investors have proven to be the single most important players in the entrepreneurial marketplace. A typical profile of a private equity investor: Is someone that prefers to invest within one day of travel? Is very well educated Tends to invest collectively within a group of other private equity investors Usually invests within the dollar range of $10.PRIVATE EQUITY INVESTMENTS Is the most important funding source in the entrepreneurial marketplace? Private equity investments contribute to the funding of around 25 times the numbe r of businesses the venture capitalists fund each year. Private capital investors fund thirty to forty times as many entrepreneurial companies as the entire venture capital industry and estimates put the total amount between $20 . Private equity investments are usually derived from a high net-worth individual who represents an essential source of funding for early stage.000 + start/early growth firms in the US receive funding from angel investors. This translates into over $20 billion of investment in approximately 50.

Every Page | 25 . Government of India plays a significant role in controlling the financial market in India. The financial system in India is regulated by independent regulators in the field of banking. CHAPTER-2 INDUSTRY PROFILE Indian financial industry is considered as one of the strongest financial sectors among the world markets. but there is only one answer which no one can deny. is the effective control and governance of the country s supreme monetary authority the RESERVE BANK OF INDIA (RBI). Government of India controls the financial sector in India. Ministry of Finance. and mortgage and capital market. insurance. Financial sector in India has experienced a better environment to grow with the presence of higher competition. Many industry experts may give various reasons for such Indian financial industry reputation.

risk is dependent on various factors like the past performance. Page | 26 .Securities and Exchange Board of India is one of the regulatory authorities for India's capital market.  Ministry of housing is planning to establish a real estate regulatory and governing body by the end of financial year 2010 .  Investments in gold is governed by the world gold council. 5. and Post Office Savings are all under the control of the central government. Its monetary policy acts as a major weapon in India's financial market. Investment are normally categorized using the risk involved in it. 2. in India we do not have any regulatory authority for investments in gold. Public Provident Fund (PPF). 3. They are 1. RBI is the regulatory body for various Banking and Non Banking financial institutions in India. IRDA Insurance regulatory and development authority in India regulates all the insurance companies in India. AMFI Association of mutual funds in India regulates all the mutual fund companies in India. FIPB Foreign investments promotion board regulates all the foreign direct investments made in India. Medium Risk Investments. Government of India has a control over all the financial bodies in India. SEBI .  Ministry of Finance. involvement of the government etc.Reserve Bank of India is the supreme authority and regulatory body for all the monetary transactions in India. 3. in this scenario Indian investments are classified in to 3 categories based on risk.. High Risk Investments. RBI . The Reserve Bank of India is an apex institution in controlling banking system in the country. 4. there are traditional investment avenues and emerging investment avenues.  Government securities.year the finance ministry presents the annual budget on 28th February. Low Risk/ No Risk Investments.11. Various governing bodies in financial sector: 1. Apart from these. its governing body. 2. National Savings Certificate (NSC).

Traditional Avenues:  Real Estate (property).  FOREX Market. High Risk Avenues:  Equity Share Market.  Government Securities. Moderate Risk Avenues:  Mutual Funds.  Gold/Silver.  Post office savings.  Public Provident fund.  Chit Funds.  Commodity Market. Emerging Avenues:  Virtual Real Estate.  Debentures. Page | 27 .  Bonds.  Art and Passion.Different Investment alternatives available in India Safe/Low Risk Avenues:  Savings Account  Bank Fixed Deposits.  Life Insurance.  National savings certificates.  Hedge Funds/Private Equity Investments.

CHAPTER -3 Page | 28 .

Mittra discussed factors that were related to individuals risk tolerance. Bajtelsmit and VenDerhei. knowledge sophistication.Carbonell and Jonker concluded that males are more risk tolerant Page | 29 . Ferrer-I. Malkiel suggested that an individual s risk tolerance is related to his/her household situation. LITERATURE REVIEW Literature suggests that major research in the area of investors behaviour has been done by behavioural scientists such as Weber. Shiller and Shefrin. Chapman and Domain. which included years until retirement. Hartog. Horvath and Zuckerman suggested that one s biological. income and net worth. Jappelli and Terlizzese. Jianakoplos and Bernasek. Hariharan. Several studies have brought out the relationship between the demographics such as Gender. Guiso. Powell and Ansic. Shiller who strongly advocated that stock market is governed by the market information which directly affects the behaviour of the investors. together with his/her psychological makeup affects one s risk tolerance level. demographic and socioeconomic characteristics. lifecycle stage and subjective factors. Age and risk tolerance level of individuals. Of this the relationship between Age and risk tolerance level has attracted much attention.

C. YOO found that the change in the risky asset holdings were not uniform. The RBI’s survey of ownership of shares and L. Lewellen et. the findings of many of these studies are verified and updated.than females. In the present study. and decrease their risk exposure once they retire. Lewellen et. The NCAER's studies brought out the frequent form of savings of individuals and the components of financial investments of rural households.al while identifying the systematic patterns of investment behaviour exhibited by individuals found age and expressed risk taking propensities to be inversely related with major shifts taking place at age 55 and beyond. The above discussion presents a detailed picture about the various facets of risk studies that have taken place in the past. The Indian Shareowners Survey brought out a volley of information on shareowners. Morin and Suarez found evidence of increasing risk aversion with age although the households appear to become less risk averse as their wealth increases. except a few. Gupta’s enquiry into the ownership pattern of Industrial shares in India were a few in This direction. Indian studies on individual investors' were mostly confined to studies on share ownership. Also investor’s lifestyles based characteristics has been identified. Wallach and Kogan were perhaps the first to study the relationship between risk tolerance and age. Cohn. He found individuals to increase their investments in risky assets throughout their working life time. Rajarajan V classified investors on the basis of their demographics. He has also brought out the investors' characteristics on the basis of their investment size. He found that the percentage of risky assets to total financial investments had declined as the investor moves up through various stages in life cycle. Page | 30 .al found risky asset fraction of the portfolio to be positively correlated with income and age and negatively correlated with marital status.

CHAPTER-4 Page | 31 .

The three golden rules for all investors are:  Invest early Page | 32 . The sooner one starts investing the Better. year after year. By investing early you allow your investments more time to grow. it has reasonable options for an ordinary man to invest his savings. Indian financial scene too presents a plethora of avenues to the investors. Inflation causes money to lose value because it will not buy the same amount of a good or service in the future as it does now or did in the past. by accumulating the principal and the interest or Dividend earned on it. With the savings invested in various options available to the people. whereby the concept of compounding increases your income. RESEARCH METHODOLOGY Savings form an important part of the economy of any nation. the money acts as the driver for growth of the country. The cost of living is simply what it cost to buy the goods and services you need to live. Though certainly not the best or deepest of markets in the world.

Sampling unit: The respondents who will be asked to fill out the questionnaires are the sampling units. different income levels. house wives.7 SOURCES OF INFORMATION Primary Data Information is collected by conducting a survey by distributing a questionnaire to 100 investors in Ambala City . These comprise of employees of MNC s. Sampling area: The area of the research is Hyderabad. The investors are selected by the convenience sampling method. (A copy of the questionnaire is given in the last as ANNEXURE 1). and different qualifications. self employed. Page | 33 . Sampling size: The sample size will be restricted to only 100. Convenience sampling is at its best in surveys dealing with an exploratory purpose for generating ideas and hypothesis.  Invest regularly  Invest regularly Sampling technique Initially. A pilot study will be undertaken in order to know the accuracy of the questionnaire. Convenience sampling technique will be used for collecting the data from different investors. 1. These 100 investors are of different age group. The selection of units from the population based on their easy availability and accessibility to the researcher is known as convenience sampling. a rough draft will be prepared keeping in mind the objective of the research. which comprised of mainly people from different regions of Hyderabad due to time constraints. The final questionnaire will be arrived at only after certain important changes are incorporated. government employees. different occupation. professionals and other investors.

customer perception and awareness level will be measured in important Areas such as: 1.moneymanagementideas.com www. Expert s opinion published in various print media.economictimes. For this analysis. Financial chronicles.Indiamoney. 4.com www. understanding what investors on an ongoing basis is critical for survival. 5. 1. Today s trying economic conditions have forced difficult decisions for companies.com www. Executives need a third party understanding on where investor s loyalties stand.savingwala. Page | 34 . The main objective of the project is to find out the needs of the current and future Investors. 3. To find out how investors get information about the various financial instruments.tax4India. Books written by various Foreign and Indian authors on Investments.com OBJECTIVE OF THE STUDY The purpose of the analysis is to determine the investment behaviour of investors and Investment preferences for the same. 3. 5. they would prefer to invest. partners and employees in Order to continue to innovate and grow. More than ever management needs ongoing feedback from the investors. Business Magazines. 2. Articles in Financial Newspapers (Economic times and Business Standard). Investment Magazines. To understand in depth about different investment alternatives available in India.com www. 2. Investor’s perception will provide a way to accurately measure how the investors think about the products and services provided by the company. The type of financial instruments. 4. Most are making conservative decisions that reflect a survival mode in the business operations. Data available on internet through various websites www.Indiatimes.Secondary Data: This data is collected by using the following means. During these difficult times. To give a recommendations to the investors that where they should invest. The duration for which they would prefer to keep their money invested. What are the factors that they consider before investing? 6.com www.business-standard.

1. There are various companies providing these financial instruments to the public. This analysis on Individual Investors Behaviour is an attempt to know the profile of the investor and also know the characteristics of the investors so as to know their preference with respect to their investments. Firstly. Traditional finance theory is based on the two assumptions. which are beached future returns of the stock. 1. The various limitations of the study are:  The total number of financial instruments in the market is so large that it needs a lot of resources to analyze them all.  The information can be biased due to use of questionnaire.  As the analysis is based on primary as well as secondary data. Handling and analyzing such a varied and diversified data needs a lot of time and resources. However financial economist have now realized that the long held assumptions of traditional finance theory are wrong and found that investors can be irrational and make predictable errors about the return on investment on their investments. investors make rational decisions. perception and behaviour on different financial products.  The lack of knowledge of customers about the financial instruments can be a major limitation.5 LIMITATIONS OF THE STUDY This analysis is based upon investors behaviour for investment preferences during normal time vis-à-vis recessionary period. and secondly investors are unbiased in their predictions about Stock market has been subjected to speculations and inefficiencies. The study also tries to unravel the influence of demographic factors like age on risk tolerance level of the investor. possibility of unauthorized information cannot be avoided.  Reluctance of the people to provide complete information about them can affect the validity of the responses. This analysis would be focusing on the information from the investors about their knowledge.3 NEED FOR THE STUDY To the rationality of the investor. Page | 35 .

CHAPTER-5 DATA ANALYSIS & Page | 36 .

The objective of the report is to find out the investor s behaviour on various investment avenues. Analysis is made only from the information collected through questionnaires no other data or information is taken in to consideration for purpose of the analysis. The questionnaire contains various questions on the investor s financial experience. based on these experiences an analysis is made to find out a pattern in their investments. Interpretations are made on a rational basis. these interpretations may be correct or may not be correct but care is taken to draw a valid and approvable interpretation. Analysis of the Survey: TABLE 1: DEMOGRAPHICS OF THE SAMPLE INVESTOR PARAMETER NO: OF INVESTORS PERCENTAGE GENDER MALE 58 58% FEMALE 42 42% TOTAL 100 100% AGE GROUP Page | 37 . Based on these investment experiences of the 100 sample investors an analysis is made and interpretations are drawn. to find out the needs of the current and future investors. INTERPRETATION Analysis in this report: An analysis is made on the responses received from 100 sample investors.

000 14 14% TOTAL 100 100% Interpretation Table 1 above shows.00.00. 35% of them are in the age group of 30 to 40.00. 14% were professionals. 22% were business class. it was found that 35% are young and significant number under the age group of 20 30. 4. 30% of them are above40 years of age. It was found that irrespective of annual income they earn all the investors interested in Page | 38 . that 58 (58%) of the investors are men and the rest 42(42%) are females. 2.00. There are no investors below 20 years of age.000 .00. Nearly 52% of the investors belong to the salaried class.000 18 18% ABOVE Rs. 2.6.000 37 37% Rs.000 31 31% Rs.4. and therefore they have to make investment (and other) decisions to fulfil the financial obligations. Generally males bear the financial responsibility in Indian society.00. When it comes to age. 11% were housewives and the rest were retired. 6.BELOW 20 0 0% BETWEEN 20 to 30 35 35% BETWEEN 30 to 40 35 35% ABOVE 40 30 30% TOTAL 100 100% QUALIFICATION UNDER GRADUATES 7 7% GRADUATES 46 46% POST GRADUATES 39 39% OTHER 8 8% TOTAL 100 100% OCCUPATION SALARIED 52 52% BUSNIESS 22 22% PROFESSIONAL 14 14% HOOUSE WIFE 11 11% RETIRED 1 1% TOTAL 100 100% ANNUAL INCOME BELOW Rs.000 .

and 8(8%) investors are categorized as others who are either illiterates. It is interesting to note that most investors (covered in the study) can be said to possess higher education (Bachelor Degree and above). TABLE 2 OTHER CHARACTERISTICS OF SAMPLE INVESTOR Table 2. 39(39%) of the individual investors covered in the study are postgraduates.investments since today s inflated cost of living is forcing everyone to save for the ire future needs.1 INVESTORS WILLING TO LOSE PRINCIPAL AMOUNT PARAMETER NO OF INVESTORS PERCENTAGE YES 5 5% NO 95 95% TOTAL 100 100% Page | 39 . had less education than under graduation or who are more qualified than post graduates. 46(46%) investors are graduates and 7(7%) of the investors are under-graduates. 18(18%) investors are earning between 4 lakhs and 6 Lakhs. 14(14%) investors are earning more than 6 lakhs per annum. 37(37%) of the investors are earning less than 2 lakhs per annum. many of them are non risk takers. Since most of the investors are below 4 lakhs annual earnings. and this factor will increase the reliability of conclusions drawn about the matters under investigation. 31(31%) investors are earning between 2 lakhs and 4 lakhs. and invest those saved resources efficiently.

instead of short term or long term. Table 2. 5% are ready to take risk of losing their principal up to certain extent. 95% of the sample investors are not ready to lose their principal investment amount. many of them do not take the risk of losing their principal investment amount.Interpretation: since many of the investors annual earnings are below 2 lakhs and 4 lakhs. 10% preferred Page | 40 . from 1 5 yrs.2 TIME PERIOD PREFERED TO INVEST PARAMETER NO OF INVESTORS PERCENTAGE SHORT TERM 10 10% MEDIUM 60 60% LONG TERM 30 30% TOTAL 100 100% Interpretation: It s interesting to know that many of the investors prefer to invest their money for medium term i.e.

4 INVESTMENTS IN EQUITY MARKET PARAMETER NO OF INVESTORS PERCENTAGE YES 30 30% NO 70 70% TOTAL 100 100% Page | 41 . some of them forget about the investments for many years. Table 2. only 17% of the investors are monitoring their investments daily.3 FREQUENCY OF MONITORING THE INVESTMENT PARAMETER NO OF INVESTORS PERCENTAGE DAILY 17 17% MONTHLY 35 35% OCCATIONALLY 41 41% OTHER 7 7% TOTAL 100 100% Interpretation: Due to the busy life schedule. and 30% preferred long term. 60% preferred medium term. Table 2. many of the investors are not able to spend time in monitoring their investments.short term. 41% . Many of them who have invested in safe investment avenues do not bother about their investments. 35% are monitoring on a monthly basis. the majority investors are monitoring their investments occasionally.

6 INVESTMENT TARGET PARAMETER NO OF INVESTORS PERCENTAGE YES 48 48% NO 52 52% TOTAL 100 100% Page | 42 . very few answered that they would average the investment by buying some more shares. Many people with excess money never cared to make any family budgets. 27% of the investors replied the y never thought of having a budget calculation. many of them replied that they would wait till the market increases instead of selling them at a loss. what would they do if the stock market falls immediately after their investment. Table 2. The investors who invest in equity share market are asked another question. and few think of having a budget but never implemented so far.Out of the total sample investors only 70% of the investors invest in equity share market through their DEMAT A/C.5 FAMILY BUDGET PARAMETER NO OF INVESTORS PERCENTAGE YES 73 73% NO 27 27% TOTAL 100 100% 73% of the sample investors had a monthly family budget for their daily expenditure. 30% of the investors never invested in equity shares. Table 2.

It s interesting to know that almost same proportion of investors have different thoughts. and there wouldn’t be surplus money to worry about. Few investors invest regularly but never thought of having a target every year. Table 2.1 SAVINGS OBJECTIVE PARAMETER VOTES WEIGHTS RANKING CHIDREN’S EDUCATION 71 29 1 HEALTHCARE 57 23 2 RETIREMENT 47 19 3 HOME PURCHASE 38 15 4 CHIDREN’S MARRIAGE 30 12 5 Page | 43 . On personal questioning many of the investors who had an investment target every year are not able to reach their targets due to contingent expenses. the reason may be inadequate income and excess expenditure. and 52% of the investors do not go for any targets for investment. 23 % of the investors have financial advisors.7 FINANCIAL ADVISOR PARAMETER NO OF INVESTORS PERCENTAGE YES 23 23% NO 77 77% TOTAL 100 100% 77% of the investors never had a financial advisor. Table 3 Objectives of Investment Table 3. who manage their investments. they never approached an advisor for their financial needs. 48% of the investors have an investment target every year.

Many of the investors are in the age group of 20 30 and 30 40 as of now they are thinking of saving for their children s marriage. Based on the weights calculated ranks are given in the order of maximum weightage given by investors. investing money for the future of the Childs education is very important than any other need. There is a greater need for Indians to save for their health care who are living a mechanical life. many investors feel that. weights are given for each parameter bases on the votes given by the investors.1 shows the savings objectives of the sample investors. After children s education investors are saving for their own health care. Retirement and home purchase are given subsequent ranks after health care. So children s marriage is given last rank.2 PURPOSES BEHIND INVESTMENT PARAMETER VOTES WEIGHTS RANK WEALTH CREATION 37 22 4 TAX SAVING 43 25 3 EARN RETURNS 45 27 1 Page | 44 . Table 3. the maximum weigthage represents many investors have that as main objective.OTHER 5 2 6 TOTAL 248 100 VOTES Table 3. since there may be one or more answers. investors are given option to select one or more savings objectives. First rank is given to children s education.

Almost all the investors have all the 4 purposes behind investing their money. they have more than one purpose for investing their money. and for future expenditure. Table 3.FUTURE EXPENDITURE 44 26 2 TOTAL 169 100 10 All the investors have very common purposes for investing.3 FACTORS CONSIDERING BEFORE INVESTING PARAMETER VOTES WEIGHTS RANKING SAFETY OF PRINCIPLE 60 43 1 LOW RISK 35 25 2 HIGH RETURNS 27 19 3 MATURITY PERIOD 16 11 4 TOTAL 138 100 Page | 45 . business people invest for the purpose of earning returns. Salaried people invest for tax savings.

and this is not possible in practical Indian investment avenues. higher the risk higher the returns. Percentage of income that can be invested 3. Investment preference. Time period that can be taken for investments 4. 2. lower the risk lower the returns . Independent Variables and Dependent Variables There are total four independent variables 1. These independent variables can be compared with any dependent variables for finding Page | 46 . 3. some investors expect high returns at a very low risk. Occupation. Age group. Level of risk tolerance 2. Annual income There can be many dependent variables like 1. Investors need to know about this principle before investing.When the investors are asked about the factors considering before investment many of them have voted for safety of principal and low risk. 4. First rank is given to safety of principal and 2 nd to low risk. Here there are some contradicting results. Savings objectives 5. Qualification. Investment believes in a proved principle.

00.00. Below are the demographics of the sample investors based on the category occupation. TABLE 4: DEMOGRAPHICS BASED ON OCCUPATION I.00.000 15 29% Rs.000 5 23% Page | 47 . 2.000 – 4. 4. In my analysis I have taken occupation category for comparison with dependent variable investment preference and age group comparing with the dependent variable level of risk tolerance.00.BUSINESS PERCENTAGE AGE GROUP BELOW 20 0 0% BETWEEN 20 -30 2 9% BETWEEN 30 – 40 10 45% ABOVE 40 10 45% TOTAL 22 100% QUALIFICATION UNDER GRADUATES 5 23% GRADUATES 11 50% POST GRADUATES 6 27% OTHERS 0 0% TOTAL 22 100% ANNUAL INCOME BELOW Rs. 2.000 .000 5 10% TOTAL 52 100% II.00.00. 2.00.00. SALARIED PARAMETER NO: OF – SALARIED PERCENTAGE AGE GROUP BELOW 20 0 0% BETWEEN 20-30 22 42% BETWEEN 30-40 18 35% ABOVE 40 12 23% TOTAL 52 100% QUALIFICATION UNDER GRADUATES 0 0% GRADUATES 21 40% POST GRADUATES 25 48% OTHERS 6 12% TOTAL 52 100% ANNUAL INCOME BELOW Rs.000 – 6.6. BUSINESS PARAMETER NO: OF . 2.the relations between the parameters.000 15 29% Rs.000 11 50% Rs.00.000 17 33% ABOVE Rs.4.

00.00.00.000 – 6.00.000 2 14% Rs.000 1 4% ABOVE Rs.000 – 6.000 1 9% Rs. HOUSEWIFE PARAMETER NO: OF . 2.PROFESSIONAL PERCENTAGE AGE GROUP BELOW 20 0 0% BETWEEN 20 -30 8 57% BETWEEN 30 – 40 2 14% ABOVE 40 4 29% TOTAL 14 100% QUALIFICATION UNDER GRADUATES 0 0% GRADUATES 6 43% POST GRADUATES 6 43% OTHERS 2 14% TOTAL 14 100% ANNUAL INCOME BELOW Rs. PROFESSIONAL PARAMETER NO: OF .00.HOUSEWIFE PERCENTAGE AGE GROUP BELOW 20 0 0% BETWEEN 20 -30 4 36% BETWEEN 30 – 40 3 27% ABOVE 40 4 36% TOTAL 11 100% QUALIFICATION UNDER GRADUATES 1 9% GRADUATES 6 55% POST GRADUATES 2 18% OTHERS 2 18% TOTAL 11 100% ANNUAL INCOME BELOW Rs. 2.00.000 0 0% Page | 48 .000 5 23% TOTAL 22 100% III. 2.000 8 57% Rs. 2.00.00. 6.000 9 82% Rs.000 1 7% ABOVE Rs.00.00. 6.00.00. 4. 4.000 – 4.Rs.000 – 4. 4.00.000 3 21% TOTAL 14 100% IV.000 – 6.00.

second to investing in gold. third to bank fixed deposits. The avenue which is given maximum weightage by the investors is ranked first. First Ten ranks are given to the first ten preferred investment avenues.1 Preferred investment avenues for salaried INVESTMENT AVENUES VOTES WEIGHTS RANK LIFE INSURANCE 35 16 1 GOLD 25 12 2 BANK FIXED DEPOSITS 24 11 3 MUTUAL FUNDS 23 11 4 REAL ESTATES 23 11 5 POST OFFICE SAVINGS 20 9 6 PPF 18 8 7 NSC 17 8 8 EQUITY SHARES 16 7 9 SAVING ACCOUNTS 14 7 10 TOTAL 215 100 Since the investor has an option to invest in more than one Investment Avenue. weights are given on the basis of preference to investment avenues.00. First preference is given to life insurance. Table 5: INVESTMENT PREFERENCE BASED ON OCCUPATION Table 5.000 1 9% TOTAL 11 100% ASSUMPTION As a part of the analysis I assumed that preference for investment avenues is dependent on the occupation of the investor. Tenth preference is given to bank savings Page | 49 . Hence preferred investment avenue are derived from the demographics of the sample investor based on occupation. 6.ABOVE Rs.

account. As business people professionals also prefer bank fixed deposits in the first place. Professionals does not prefer national saving Page | 50 . Gold is given 5th place here. then life insurance.3 Preferred investment avenues for professionals III. Professionals are more interested in post office savings rather than mutual funds. where salaried and business people prefer at 4th place. Professionals does not prefer mutual funds(7 rank).2 Preferred investment avenues for business people INVESTMENT AVENUES VOTES WEIGHTS RANK BANK FIXED DEPOSITS 13 16 1 INSURANCE 13 16 2 REAL ESTATE 11 14 3 MUTUAL FUNDS 10 12 4 GOLD 8 10 5 EQUITY SHARES 7 9 6 CHIT FUNDS 6 7 7 POST OFFICE SAVINGS 5 6 8 SAVINGS ACCOUNT 4 5 9 NSC 4 5 10 TOTAL 81 100 Thinking of the business people is almost same to that of salaried people. Table 5. PROFESSIONAL INVESTMENT AVENUES VOTES WEIGHTS RANK BANK FIXED DEPOSITS 10 19 1 INSURANCE 10 18 2 GOLD 6 11 3 REAL ESTATE 6 11 4 POST OFFICE SAVINGS 5 9 5 SAVINGS ACCOUNT 4 7 6 MUTUAL FUNDS 4 7 7 PPF 3 6 8 BONDS 3 6 9 GOVT. but given third preference to real estate. both are similar in preferring insurance and bank fixed deposits. Table 5. SECURITIES 3 6 10 TOTAL 54 100 There is no much difference in the preferences of professionals when compared to salaried and business people. Last place is given to national savings certificates.

certificates at all.  Relation between Age and risk tolerance  Level of risk tolerance dependent on the age of the investor. Table 5.5 Preferred investment avenues overall INVESTMENT AVENUES VOTES WEIGHTS RANK LIFE INSURANCE 67 17 1 BANK FIXED DEPOSITS 55 14 2 GOLD 50 13 3 REAL ESTATE 45 12 4 MUTUAL FUNDS 38 10 5 POST OFFICESAVINGS 35 9 6 EQUITY SHARES 29 8 7 SAVINGS ACCOUNT 25 6 8 NSC 25 6 9 PPF 22 5 10 TOTAL 391 100 HYPOTHESIS . House wives gave least preference to mutual funds.Increase in Age decreases the Risk tolerance level. Housewives have given first rank to gold pushing insurance and bank fixed de posits to second and third place.4 Preferred investment avenues for housewives INVESTMENT AVENUES VOTES WEIGHTS RANK GOLD 9 18 1 INSURANCE 9 18 12 BANK FIXED DEPOSITS 8 16 3 REAL ESTATE 5 10 4 POST OFFICE SAVINGS 5 10 5 CHIT FUNDS 4 8 6 EQUITY SHARES 4 8 7 SAVING ACCOUNT 3 6 8 NSC 2 4 9 MUTUAL FUNDS 1 2 10 TOTAL 5 100 Indian housewives love gold as much as themselves. Table 5. post office savings and chit funds.  Risk tolerance of an investor shows a negative relation to the age of that investor Page | 51 . eliminated it from the top 10. They are more attracted to traditional investment avenues like gold. real estate.

LEVEL OF RISK TOLERANCE WITH RESPECT TO AGE GROUP For the purpose of analysis investors are placed under three categories.040 AGE GROUP LEVEL OF RISK NO.3 risk tolerance of age group above 40 PARAMETER ABOVE 40 AGE GROUP LEVEL OF RISK NO.1 risk tolerance of age group 20 .2 risk tolerance of age group 30 . Low risk category 2. 1. Investors in each age group are classified in to 3 risk categories based on the above factors. OF INVESTORS PERCENTAGE LOW 20 57% MEDIUM 11 32% HIGH 4 11% TOTAL 35 100% Table 6. Investor experience in investing (level of experience). 3. Investor preference for investments. higher the age lower the risk capabilities.30 AGE GROUP LEVEL OF RISK NO.  Lower the age higher the risk capabilities. OF INVESTORS PERCENTAGE Page | 52 .30 PARAMETER 20 . Past investments of the investor. Table 6: Finding relationship between age group and level of risk tolerance Table 6. First the total sample of 100 is divided in to 3 age groups. High risk Classification is done based on three factors 1. OF INVESTORS PERCENTAGE LOW 13 37% MEDIUM 17 49% HIGH 5 14% TOTAL 35 100% Table 6.40 PARAMETER 30 . 2. Medium risk 3.

Same observations are arrived at.3 From the table 6.2. when comparing the high risk category with respect to the age groups. We can see an increasing trend with respect to low risk category as the age increases.30. it is found to be -0. the better seemed his/her performance in comparison Page | 53 .40 has decreased to 32%. 14% came under the high risk category under the age group 20 . 6. when it came to age group above 40 above only 10% came under the high risk category. It has further increased. As the age increases the level of risk tolerance is coming down.40. 70% of the investors in the age group above 40 came under the low risk category.74 When Karl Pearson s correlation coefficient is calculated.30 are in the low risk category. where as the percentage of investors who came under medium risk in the age group of 30 . Attributes Risk Tolerance Level Age -0. 6. Age accounts for the major differences in risk taking decisions by the investors.1 we find that 49% of Investors between the age group of 20 .1.LOW 21 70% MEDIUM 6 20% HIGH 3 10% TOTAL 30 100% OBSERVATIONS: Observations from table 6. 37% of the investors in the age group of 20 . It still came down in the case of investors in the age group of 40 above. there is a large increase in the investors who came under low risk category in this age group. 57% came under the low risk category. which is only 20%. where as Investors under the age group 30 .30 came under medium risk category.74 by which we can conclude that there is a strong negative correlation between Age and Risk tolerance. We can see a decreasing trend in the behaviour of investors towards medium risk when their age increased. The older an investor. From the above observations we can conclude that there is a strong inverse or negative relationship between risk tolerance and age group.

to the younger ones. Over.confidence in their own investment ability among the youngsters largely accounts for the excessive trading among younger investors leading to lower returns and this direct to decline in the risk tolerance level. CHAPTER -6 Page | 54 .

The investment habit was noted in a majority of the people who participated Page | 55 . Most investors opt for two or more sources of information to make investment decisions. FINDINGS & SUGGESTIONS Findings: 1. The study reveals that male investors dominate the investment market in India. non-financial management and some other occupations are very few. Most of the investors possess higher education like graduation and above. 3. more the income more percentage of income they invest. 8. Percentage of income that they invest depend on their annual income. 5. 7. The investor’s decisions are based on their own initiative. Most of the investors discuss with their family and friends before making an investment decision. Majority of the active and regular Investors belong to accountancy and related employment. 6. 2. 4.

Moderate risk tolerance and High risk tolerance. 1978). The investors are divide d into 3 categories i. 10. 12. A.e. There are two common methods of estimating investor’s tolerance of risk.e. B and C depending on their risk tolerance starting with Low risk tolerance. The first method is a clear understanding of the investor and his/her history with investment securities. Generally investors with a low risk tolerance act differently with regard to risk than individuals with a high risk tolerance. rank ordering them differently according to their personal tolerance. Most Investors prefer to park their funds in avenues like Life insurance. Women are attracted towards investing gold than any other investment avenue. Gold and Real Estate. in the study. Low. Risk tolerance level and Suggestion of Suitable Portfolio to the Investors The role of uncertainty and the knowledge about the return on Investment Avenue are important components of any investment. The extent of an investor s ability to tolerate these uncertainties of return is referred as risk tolerance level of an investor (Schaefer. Moderate and High risk tolerance level. Most of the investors get their information related to investment through electronic media (TV) next to print media (News paper/ Business news paper/ Magazines) 11. Most of the investors are financial illiterates. Investor with a high level of risk tolerance would be comfortable with market volatility. The second method is to use a questionnaire designed to elicit feelings about risky assets and the comfort level of the investor given certain changes in the portfolio or certain investment scenarios.. 13. FD. The second method is used to know the risk tolerance level of the investors. 9. Risk tolerance tends to be subjective rather than objective. Increase in age decrease the risk tolerance level. Based on the responses to the questionnaire. Schaefer described the relation this way: two persons may very well agree on the riskiness of a set of gambles. the cumulative scale is constructed and scores are assigned to each investor accordingly to categorize the respondents in to i. but may nevertheless prefer different gambles. while low risk-tolerance individuals require Page | 56 .

Individuals with low levels of risk tolerance require lower chances of a loss. Advice : the investor comes under the age group 30 . His suitable portfolio will be 1. choose not to operate in unfamiliar situations and require more information about the performance of an investment (MacCrimmon & Wehrung). 15% invest in high risk avenues. 7 SUGGESTED PORFOLIO CONSTRUCTION BASED ON AGE GROUP AND LEVEL OF RISK PARAMETER LEVEL OF RISK .40.40 50% 35% 15% 100% ABOVE 40 70% 20% 10% 100% TOTAL 100% 100% 100% 100% Portfolio construction: Step 1: Identify the age group of the investor.1 Page | 57 .stability and are averse to uncertainties. (MacCrimmon & Wehrung.30 30% 50% 20% 100% BETWEEN 30 . 1986). Step 2: investment preference made from the table 5. Suggest suitable portfolio from the above table. Since he comes under the occupation salaried he can choose the preferred investment avenues from table 5.PERCENTAGE OF INCOME TO TOTAL BE APPORTIONED AGE GROUP LOW RISK MEDIUM RISK HIGH RISK BETWEEN 20 .5 or based on his occupation. 35% invest in medium risk avenues. Table. 50% invest in low risk investment avenues. Example: An investor of age 36 working in public sector Company has approached you to invest his 8 lakhs of money in a suitable investment. 3. check in which age group he comes under. 2.

CHAPTER -7 SUMMARY Page | 58 .

there is some commonness in these investors and many of them responded positively to the study. Selection of a perfect investment avenue is a difficult task to any investor. Conclusion This study confirms the earlier findings with regard to the relationship between Age and risk Page | 59 . Despite of many limitations to the study I was successful in identifying some investment patterns. & CONCLUSION Summary This report is a reflection of the behaviour of various categories of investors. This report concentrated in identifying the needs of current and future investors. Investors risk in selecting a particular avenue is dependent on the age of that investor. investor s preference towards various investment avenues are identified based on their occupation. An effort is made to identify the tastes and preferences of a sample of investors selected randomly out of a large population.

salaried.Indiatimes.tax4India.business-standard. by Syed Tabassum Sultana. independent are conservative investors prefer to play safe.com www. BIBILIOGRAPHY BOOKS 1. The Present study has important implications for investment managers as it has come out with certain interesting facets of an individual investor. 2. by Jawaharlal Lal. 4.com www. by Prasanna Chandra.tolerance level of individual investors. well educated. Understanding Indian Investors. RESEARCH PAPERS An Empirical study on Indian individual investor s behaviour.economictimes. 3. This confirms that Indian investors even if they are of high income. by Maria Gonzalez and Graham Bayron. WEB SITES www.com Page | 60 . The individual investor still prefers to invest in financial products which give risk free returns. Investment Analysis and Portfolio Management. Security Analysis and Portfolio Management by Punithavathi Pandian. The investment product designers can design products which can cater to the investors who are low risk tolerant and use TV as a marketing media as they seem to spend long time watching TVs. The Mindful Investor.

com www. Are you aware of the following investment avenues? (Tick which ever applicable in the boxes).savingwala. Page | 61 .com www.Indiamoney.com ANNEXURE 1 Questionnaire 1. www.moneymanagementideas.

Equity Share Market. Commodity Market. Public Provident Fund. Real Estate (property). Mutual Funds. you have invested mostly in (write as many as applicable) __________________________________________________________________ ____________ __________________________________________________________________ Page | 62 .__________________________________ 3. Life Insurance. Reasons for selecting these options : 1____________________________________________________________________ 2____________________________________________________________________ 4.___________________________________ 4. FOREX Market. Art and Passion. Bonds. Private Equity Investments.___________________________________ 3.___________________________________ 5. National Savings Certificates. Emerging Investment Avenues: Debentures.Safe/Low Risk Investment Avenues: High Risk Investment Avenues: Savings Account. Bank Fixed Deposits. Traditional Investment Avenues: Government Securities. What do you think are the best options for investing your money? 1. Virtual Real Estate. In the past. Gold/Silver. Hedge Funds.___________________________________ 6. Moderate Risk Investment Avenues: Chit Funds.___________________________________ 2. 2. Post Office Savings.

What is your investment objective? Long-term Growth Income and Capital Preservation Growth and Income Short-term Gowth Others__________________________________________________________________ _ 9. 8. At which rate do you want your investment to grow? Steadily At an Average Rate Fast 14.)? __________________________________________________________________ _________________________________________________________________ 7. In which sector do you prefer to invest your money? Private Sector Government Sector Foreign Sector Public Sector 6. please give amounts and how the funds are held Education: Amount Rs. safety of principle. Which factor do you consider before investing? Safety of Principal Low Risk High Returns Maturity Page | 63 . Do you have a savings and investment target amount you aim for each year? Yes if yes: Amount____________________________________________ No 13. What are the important factors guiding your investment decisions? (Return. etc._________________ invested in________________________ 11. diversification. What is the purpose behind investment? Wealth Creation Tax Saving Earn Returns Future Expenses Others_____________________________________________________________ ____________ 10. What are your savings objectives? Children’s Education Retirement Home Purchase Children’s Marriage Healthcare Other ____________________. ___________ 5. progressive values. Have you set aside funds specifically for the education and marriage of your children? If yes. Do you have a formal budget for family expenditure? Yes No 12.________________ invested in _______________________ Marriage: Amount Rs.

Do you invest your money in share market? (through a DEMAT A/C) Yes No If yes: Imagine that stock market drops after you invest in it then what will you do? Withdraw your money Wait to increase Invest more in it 16. What is the time period you prefer to invest? Short-term (0-1yrs) Medium-term (1-5yrs) Long-term (>5yrs) 19. Period 15. What is your source of investment advice? Newspapers News Channels Family or Friends Books Internet Magazines Advisors Certified Market Professional/Financial Planners Page | 64 . Can you take the risk of losing your principal investment amount? Yes No If yes: What percentage ________________________ 20. What percentage of your income do you invest? 0-15% 15-30% 30-50% 18. How often do you monitor your investment? Daily Monthly Occasionally 17.

Personal Details (Personal details are kept highly confidential.00.Rs 4. 6.00.000 Rs.000 Page | 65 .000-Rs 6.000 Above Rs.00.00. 4. these details will not be revealed to any third party) Name:__________________________________Designation:_____________________ Organization: ________________________________________ Age Group: Below 20 Between 20-30 Between 30-40 Above40 Qualification: Under Graduate Graduate Post Graduate Other:_________________________ Occupation (what category do you come under): Salaried Business Housewife Student Professional Retired Other: ______________________________________________ Annual income: Below Rs. 2. 2.000 Rs.000.00.00.

Do you have a financial advisor? Yes No Date: Signature: Page | 66 .

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