The Factors that Affects

the Investment Behavior

of Income Earners
from Naga City

Researchers:
Albania, Helen May A.
Javier, Jiezle C.
Reyes, Janet S.
San Buenaventura, Cindy S.
San Buenaventura, Hanna R.
Toledo, Jessica M.
 CHAPTER 1
INTRODUCTION
Investment is essentially an asset that is created to allow
money to grow. The wealth created can be used for a variety
of objectives such as meeting shortages in income, saving
up for retirement, or fulfilling certain specific obligations such
as repayment of loans, payment of tuition fees, or purchase
of other assets. There are a large number of investment
instruments available today. Some of them are marketable
and liquid while others are non-marketable and illiquid. Some
instruments are highly risky while others are not. The major
types of investment are ownership investments, lending
investments, cash equivalents, alternative and funds.
Nowadays, people are not fully aware and educated on how an
investment works because of their investment behavior.
 Only 8 percent of Filipinos have
some form of investment like
stocks, mutual funds, or insurance.
Studies show that about 25.2
percent of Filipino families belong to Mr. Randell Tiongson

the ’middle’ class and 0.1 percent

belong to the ’upper’ class for a
total of 25.3 percent. And yet only 8
percent invest. This shows that
every income earner has different
behavior in terms of investment.
 In United States of America , 14% of
American families are directly invested
in individual stocks, 52% of which
have some level of investment in the
market. Most of this comes in the form
of retirement accounts. And among
Kim Parker
families headed by a young adult
(those under 35), 41% own some
stock, either directly or indirectly. This
is true of a majority of households
headed by those ages 35 to 64 and
half of those ages 65 and older. This
shows that investment behavior of
income earners in USA vary by age.
 Investment behaviors are defined as how the
investors judge, predict, analyze and review the
procedures for decision making, which includes
investment psychology, information gathering defining
and understanding, research and analysis.(Slovic,
1972; Alfredo and Vicente, 2010).
 Investment behavior is critical to an individual’s future
and that decision may be contingent on many factors. It
has been argued that attitudes among other variables can
predict the investment decision process (East, 1993). Prior
research has suggested that the improvement of
education in financial management significantly
correlates with decision-making on critical investment
issues (Chen and Volpe, 1998). To get the best out of
investment, an understanding of human nature in
financing perspective is required .
This research study aims to discuss the Factors
that affect the Investment behavior of
Income Earners from Naga City. Also, this
study will offer recommendations that are
supported by published literature which will
be cited in the latter part of this study.
Significance of the Study

STUDENTS
FACULTY
INCOME
FUTURE
EARNERS IN
NAGA CITY
RESEARCHERS
Statement of the Problem
1. What is the demographic profile of income earners
from Naga City along age, gender, civil status,
educational attainment, occupation, employment
status and monthly income?
2. What are the psychological factors that contributes
to the investment behavior of income earners in
decision making?
3. What are the quantitative factors affecting
investment behavior?
4. What is the relative importance of these different
factors in shaping the individual?
5. Determine what kind of investor each income
earner possesses.
Scope and Delimitation

This study covered all the income earners from

Naga City ages 21-45 years old. The method
that will be use to collect all the information
needed is through survey. This will be use to
evaluate the different factor that affects the
investment behavior of income earners. The
researchers have planned to survey 100
respondents from Naga City.
Figure 1: Theoretical Paradigm illustrating the main and supporting theories related
to the Factors that affects the Investment behavior of Income Earners from Naga
Siebert (1963) Internal
Funds Theory of Investment
Explained that the desired capital stock and,
hence, investment depends on the level of
profits. Since investment presumably
depends on expected profits, investment is
positively related to realized profits.
Alternatively, it has been argued that
managers have a decided preference for
financing investment internally.
Markowitz (1950) Modern
Portfolio Theory
Cited that it allows an investor to mathematically trade off risk
tolerance and reward expectations, resulting in the ideal
portfolio. This theory was based on two main concepts:(1)
Every investor’s goal is to maximize return for any level of risk
(2) Risk can be reduced by diversifying a portfolio through
individual, unrelated securities. MPT works under the
assumption that investors are risk-averse, preferring a portfolio
with less risk for a given level of return. Under this assumption,
investors will only take on high-risk investments if they can
expect a larger reward. But investors are risk-averse, meaning
they prefer a less risky portfolio to a riskier one for a given
level of return. As a practical matter, risk aversion implies that
most people should invest in multiple asset classes.
Pieters and Zeelenberg
(2007) Regret Theory
States that many investors consider the possibility that t
hey will regret their investment
decisions. The spectre of regret may have different eff
ects on different persons. For example, it may motivat
e one investor to take more risks because he/
she would regret not doing so if the price of securities i
ncreases a great deal. Likewise, it may motivate anoth
er investor to be more risk
-averse because he/she would regret buying some stoc
ks if the price drops significantly. The study of regret is 
one example of behavioral finance.
Conceptual Framework

This research focused on the income earners from Naga

City. The information will help to determine the
factors affecting the investment behavior of income
earners. In this case, survey method was used in the
conduct of the research for the supporting details of
the survey.
This research will help the income earners them realize
the importance of investment and will help them in
decision making. With the help of the information
gathered, they can manage and understand the
importance of investment.
Figure 2: Conceptual Paradigm illustrating the
relationship among variables
Assumption

1. In the demographic factors, income is the

number one factor that affects the
investment behavior of the income
earners from Naga City.
2. All of the psychological factors given
affects the investment behavior of the
income earners from Naga City.
3. Investment return plays a big role in
income earner’s decision making.
Hypothesis

1. Different factors contribute to income

earner's investment behavior.
2. The investment behavior of an income
earner affects their decision making.
3. Decision making of income earners from
Naga City differs in terms of priorities.
4. Each income earner has different
personalities in investing.
Definition of Terms

 Investment.In this study, it refers to the action or

process of investing money for profit. Investment can
be defined as an asset, which is purchased with the
expectation that it will create income, or value will
increase in the future.
 Income earners.In this study, it refers toan individual
who through work, investments or a combination of
both derives income but in this study the researchers
will focus on  income earners who derive most of
their income from occupational activities.
 Investment Behavior.In this study, it refers
to as how the investors judge, predict,
analyze and review the procedures for.
decision making, which
includes investment psychology, information
gathering, defining and understanding,
research. and analysis.
 Investor.In this study, it refers to a person or
organization that puts money into financial
schemes, property, etc. with the expectation
of achieving a profit.
 Demographic Factor.  In this study, it refers to the
socioeconomic characteristics of a population
expressed statistically. These typically include such
factors as age, gender, level of education, amount of
income, marital status, occupation, religion, birth rate,
death rate, the average size of a family, the average
age at marriage etc. But the researchers will focus on
the Age , Gender, Marital Status, Income, Profession
and Awareness and knowledge regarding investment.
 Financial Literacy. In this study , it refers to the ability
to understand and effectively use
various financial skills, including
personal financial management, budgeting, and
investing.
 Belief on luck. In this study , it refers to
the perception that good luck.
 Media Coverage. In this study , it refers to
all blog articles, video content or other
types of digital content (produced by
individuals or organizations other than your
own company) where your brand, products
or services are discussed or shown,
 Psychological Factors.In this study, it
refers to the factors that talk about
the psychology of an individual that drive
his actions to seek satisfaction.
 Quantitative factors.In this study, it refers to the
numerical outcomes from a decision that can be
measured. These factors are commonly included in
various financial analyses, which are then used to
evaluate a situation. 
 Profession. In this study , it refers to a paid
occupation, especially one that involves prolonged
training and a formal qualification.
 Investment return. In this study , it refers to the
gain or loss generated by an investment in relation
to its initial cost. It allows the reader to gauge the
efficiency and profitability of an investment and is
often used to influence financial decisions, compare
a company’s profitability, and analyze investments.
 Risk. In this study , it refers to factor(s) that
will lower profits or lead it to fail. 
 Interest rate. In this study , it refers to the
return on investment for a bank savings
account or an investment.