Indian Journal of Commerce & Management Studies
ISSN : 2240-0310
INVESTMENT CHOICE OF OCCUPANTS OF BANKING FINANCIAL SERVICES AND INSURANCE (BFI) SECTOR – A DEMOGRAPHIC STUDY AT RANEBENNUR Prof.Mahesh Bendigeri,
Ms. Savita S Gorantli,
Assistant Professor Global Business School, Hubli, India.
Research Scholar Global Business School, Hubli, India.
ABSTRACT Investment is referred to as the concept of deferred consumption, which might comprise of purchasing an asset, rendering a loan, keeping the saved funds in a bank account such that it might generate lucrative returns in the future. The options of investments are huge; all of them having different risk-reward trade off. Indian financial scenario presents a plethora of avenues to the investors. Though certainly not the best or deepest of markets in the world, it has reasonable options for an ordinary man to invest his savings. No doubt the main aim of the investor is to minimize the risk involved in investment & maximize the return. Today there are number of options available to investor like Post Office investment, Bank Deposit, Stock Market, Insurance, Mutual Fund, PPF, gold, real estate, etc. In this paper an attempt has been made to find the association between demographic variables and investment choice of occupants, and to identify preferred saving avenue among investors and to identify the saving pattern of investors and also to explore the investment choice of occupants. And It was found that there is no association between demographic variables, like gender, age, marital status, occupation, annual income with the investment choice, whereas there is a significance association between qualification and investment choice among the respondent working in banking, financial service, and insurance sector. Keywords: Investment Choice, Risk and Return, Demographic Variables, Investment grow. Where by the concept of compounding increase your income, by accumulating the principal and interest or dividend earned on it, year after year.
Introduction: Savings form an important part of the economy of any nation. With the savings invested in various options available to the people. The money acts as the driver for growth of the country. Indian financial scene too presents a plethora of avenues to the investors. Though certainly not best or deepest of markets in the world. It has reasonable option for an ordinary man to invest is savings. One need to invest and earn return on their idle resources and generate a specified sum of money for a specific goal in life and make a provision for an uncertain future. One of the important reasons why one needs to invest wisely is to meet the cost of inflation. Inflation is the rate at which the cost of living increases. The cost of living is simply what it cost to buy the goods and services you need to live. 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. The sooner one starts investing the better. By investing early you allow your investments more time to
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The three golden rules for all investors are: • Invest early • Invest regularly • Invest for long term and for short term. Objective of the Study: • To study the association between demographic variables and investment choice of occupants. • To explore the investment choice of occupants. • To know the risk tolerance level of the individual investors and suggest a suitable portfolio. • To study the dependence / independences of the demographic factors (Age) of the investor and his / her risk tolerance level.
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Indian Journal of Commerce & Management Studies
ISSN : 2240-0310 Literature review:
• To identify preferred saving avenue among investors and to identify the saving pattern of investors. • To understand the different categories of investors based on the investment habits.
Researchers and practitioners have suggested that demographic factors can be used to differentiate individuals into risk-tolerance categories. A majority of the research conducted in the area of measuring individual risk-taking behavior analyzes the influence of demographic variables on financial risk-taking behavior. The focus has been on the various demographic characteristics such as gender, age, marital status, profession, income, and education and finance related knowledge. Behavioral Financing: Demographic Factors and Services of Brokerage Houses in Bangladesh by Wahinda Farzana, Masud Ibn Rahman and Mohammad Nurul Huda Mazumder found that the investors are investing after carefully investigating all market related issues and education and occupation of the investors are found to be significant factors for investment, preference and consideration of buying shares whereas no effect of age and gender are found. Dibyojyoti Bhattacharjee and Ranjitsigh in Equity Investment decisions: Are demographic variables Really significant found that out of the four demographic variables namely age, gender, qualification, and designation considered for the study only age is having significant influence on the equity share investment decisions in past, present and future however, gender is only having impact on the present equity investment decisions, other than these other demographic variables are not significant for equity investment decisions.
Hypothesis: A number of researches have shown that investment choice is affected by various demographic factors associated with the individual. The target population of this research work is occupants of banking, financial services and insurance sector who are assumed to have relatively more exposure, hence expected to behave rationally irrespective of various demographic factors like gender, age, and marital status, nature of occupation, household income and qualification. The following hypothesis were set for the study: H1: There is no association between gender and investment choice of occupants of banking, financial services, and insurance sectors in Ranebennur. H2: There is no association between age and investment choice of occupants of banking, financial services, and insurance sectors in Ranebennur. H3: There is no association between marital status and investment choice of occupants of banking, financial services, and insurance sectors in Ranebennur. H4: There is no association between nature of occupation and investment choice of occupants of banking, financial services, and insurance sectors in Ranebennur. H5: There is no association between annual income and investment choice of occupants of banking, financial services, and insurance sectors in Ranebennur. H6: There is no association between qualification and investment choice of occupants of banking, financial services, and insurance sectors in Ranebennur.
Analysis and Result: Table 1: Demographic Characteristics of Respondents Variables Gender
Scope of the Study: The study covers in depth analysis of investment choice the people working in Banking, Financial services, and Insurance Sectors also the factors they consider in making choice of investment avenue and the relative risk and return trade off, without comprising on the objective of investment. The study also try to explore the relation between various demographic factors and their influence on investment choice.
Age
Marital Status Occupation
Research Methodology: The study was conducted with the sample size of 110 respondents working in banking, financial service, and insurance sector. Stratified Random Sampling Method was used for identifying and collection of data. In all 200 questionnaire were given to the respondents for filling, out of which 110 questionnaire were duly filled in. Hypothesis were set and using Chi Square Test the hypothesis were tested. Statistical package for social science (SPSS), is used for analysis purpose.
Volume IV Issue 1(1), Jan. 2013
Annual Income
Education
2
Female Male Total Nascent Young Adult Old Total Married Single Total Salaried Self-Employed Total Less than 1.5 lakh 1.5 to 3 lakh 3 to 5 lakh 5 lakh to 7 lakh Above 7 lakh Total Post-Graduate Graduate Diploma Total
Frequency
Percentage
99 11 110 0 21 42 47 110 84 26 110 85 25 110
90% 10% 100% 0 19.1% 38.2% 42.7% 100% 76.4% 23.6% 100% 77.3% 22.7% 100%
27
24.5%
37 34 10 2 110 29 78 3 110
33.6% 30.9% 9.1% 1.8% 100% 26.4% 70.9% 2.7% 100%
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are the least preferred choice of respondents with a mean score of 3.52. Only 14 respondents have ranked equity and derivatives as their most preferred choice.
Interpretation: Table 1 above shows that among 110 respondents 99 (90%) the respondents are male and the rest 11 (10%) are females. Generally male bear the financial responsibility in Indian society and therefore they have to make investment choice to fulfill the financial obligations. When it comes to age it was found that 21(19.1%) are young, 42 (38.2%) are adult, and 47(42.7%) are old age, In marital status 84 (76.4%) of the respondents are married and the 26 (23.6%) of the respondents are single (Unmarried). Further 85 (77.3%) of the investors belong to the salaried, 25 (22.7%) of the investors belong to the self employees. In annual income 27 (24.5%) of the investors are earning less than 1.5 lakh per annum, 37 (33.6%) investors are earning between 1.5 to 3 lakh, 34 (30.9%) investors are earning between 3 to 5 lakh, 10 (9.1%) investors are earning between 5 to 7 lakh, 2 (1.8%) investors are earning more than 7 lakh per annum. In education 29 (26.4%) of the individual investors covered in the study are post graduates, 78 (70.9%) investors are graduate and 3 (2.7%) of the investors are Diploma.
Table 4: Rank your investment objectives
Capital Appreciation Growth and Income Maximum Asset Appreciation Low Volatility Inflation Protection
N
Min
Max
Mean
Standard Deviation
Rank
110
1
5
3.52
1.35
5
110
1
5
2.58
1.20
1
110
1
5
3.13
1.34
4
110
1
5
3.02
1.47
3
110
1
5
2.73
1.54
2
Equities and Derivatives Mutual Fund and Insurance Fixed Return Investments Real Estate Gold and Bullion
R2
R3
R4
R5
Total Score
14
7
33
20
36
110
17%
24
34
21
26
5
110
23%
15
24
26
22
23
110
19%
26
17
18
27
22
110
20%
32
28
12
14
24
110
R2
R3
R4
R5
Total Score
%
36
25
21
15
13
110
23%
46
20
27
8
9
110
25%
11
29
35
24
11
110
20%
8
18
19
32
33
110
16%
9
17
8
33
43
110
15%
Interpretation: Table 4 first objective influencing investment objective in the 36 out of 110 which work 32.7% of them , has indicated capital preservation as their first objective in choosing the investment alternatives. The second investment objective in the selection of investment alternative maximum asset appreciation. This stated by 29 out of 110 which will work out to 26.4% of the total. The two objectives are followed by growth and income, low volatility and inflation protection. Hypothesis: Association Between Gender and Investment Choice H1: There is no association between gender and investment choice of occupants of banking, financial services, and insurance sectors in Ranebennur. A close look at the chi-square value of 0.25 with a degree of freedom 4 and significance level of 2.78 reveals that there is no association between gender and investment choice at 5% significance level. Hence, the null hypothesis H0: There is no association between gender and investment choice of occupants of banking, financial services, and insurance sectors in Ranebennur is accepted. Thus, it can be concluded that there is no difference between gender and investment choice.
Table 3: Rank your Investment Choice? R1
R1
100%
Table 2: Descriptive Statistics Investment Preferences Equities and derivatives Mutual Fund and Insurances Fixed return investment Real Estate Gold and Bullion
ISSN : 2240-0310
%
22% 100%
Association Between Age and Investment Choice H2: There is no association between age and investment choice of occupants of banking, financial services, and insurance sectors in Ranebennur. Table 2 is showing a chi-square value of 0.709 with a degree of freedom of 12 and a significance level of 1.78, which indicate that there is no association between age and investment choice at 5% significance level. Hence, the null hypothesis H0- There is no association between age and investment choice of occupants of banking, financial services, and insurance sectors in Ranebennur-is accepted. It can be concluded that there is no difference between respondents of various age groups for various investment choices.
Interpretation: Table 3 depicts the relative preference of an investment choice from the point of view of all the respondents. Table 2 shows that the mean value of mutual funds and insurance is 2.58 which is least among the five choices given to the respondents. It employs that mutual fund and insurance is the most preferred investment choice of respondents. As high as 34 respondents have ranked it to be their most preferred choice. This is followed by gold and bullion, real estate, and fixed return instruments with mean score of 2.73, 3.02 and 3.13, respectively. Equity and derivatives
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Indian Journal of Commerce & Management Studies
ISSN : 2240-0310
Table A: Cross Tabulation and Chi-Square Values for Gender and Investment Preferences Investment Preference Count % Count % Count %
Male Female Total
Mutual Funds and Insurance 20 20% 4 36% 24 22%
Equities and derivatives 13 13% 1 9% 14 13%
Pearson Chi-Square
Fixed return investment
Real Estate
14 14% 1 9% 15 14% Value
25 25% 0 0% 25 23% df
0.25
4
Gold and Bullion
Total
27 99 27% 100% 5 11 45% 100% 32 110 29% 100% Critical value @5% 2.78
Table B: Cross Tabulation and Chi-Square Values for Age and Investment Preferences Investment Preference Nascent Young Adult Old Total
Count % Count % Count % Count % Count %
Equities and Derivatives 2 10% 6 14% 6 13% 15 14%
Mutual Funds and Insurance
Fixed return investment
Real Estate
5 24% 8 19% 11 23% 24 22%
5 24% 14 33% 9 19% 28 25%
4 19% 12 29% 10 21% 26 24%
Pearson Chi-Square
Value
df
0.709
12
Gold and Bullion
Total
7 21 33% 100% 8 42 19% 100% 17 47 36% 100% 32 110 29% 100% Critical value @5% LOS 1.78
Table C: Cross Tabulation and Chi-Square Values for Marital Status and Investment Preferences Investment Preference Count Married % Count Single % Count Total %
Equities and derivatives 12 14% 2 8% 14 13%
Mutual Funds and Insurance 18 21% 6 23% 24 22%
Pearson Chi-Square
Fixed return investment 9 11% 6 23% 15 14%
Real Estate 19 23% 7 27% 26 24%
Value
df
0.399
4
Gold and Total Bullion 26 84 31% 100% 5 26 19% 100% 31 110 28% 100% Critical value @5% LOS 2.7
Table D: Cross Tabulation and Chi-Square Values for Occupation and Investment Preferences Investment Preference Count Salaried % Count SelfEmployed % Count Total %
Equities and derivatives 10 12% 4 16% 14 13%
Mutual Funds and Insurance 19 22% 5 20% 24 22%
Pearson Chi-Square
Real Estate 17 20% 9 36% 26 24%
Value
Df
0.84
4
Gold and Total Bullion 27 85 32% 100% 4 25 16% 100% 31 110 29% 100% Critical value @5% LOS 2.13
The chi-square value of 0.399with a degree of freedom of 4 and a significance level of 2.7 reveals that there is no association between marital status and investment choice at 5% significance level. Hence the null hypothesis H3There is no association between marital status and
Association between Marital Status and Investment Choice H3: There is no association between marital status and investment choice of occupants of banking, financial services, and insurance sectors in Ranebennur.
Volume IV Issue 1(1), Jan. 2013
Fixed return investment 12 14% 3 12% 15 14%
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ISSN : 2240-0310
Table E: Cross Tabulation and Chi-Square Values for Annual Income and Investment Preferences Investment Preference Count % Count % Count % Count % Count % Count %
Less than 1.5 lakh 1.5 lakh to 3 lakh 3 lakh to 5 lakh 5 lakh to 7 lakh Above 7 lakh Total
Equities and derivatives 4 15% 3 8% 4 12% 3 30% 0 0%
Mutual Funds and Insurance 9 33% 5 14% 8 24% 2 20% 0 0%
Fixed return investment 3 11% 7 19% 3 9% 2 20% 0 0%
14
24
15
26
Value
Df
0.39
16
Pearson Chi-Square
Real Estate 6 22% 9 24% 8 24% 1 10% 2 100%
Gold and Bullion 5 19% 13 35% 11 32% 2 20% 0 0%
Total 27 100% 37 100% 34 100% 10 100% 2 100%
31 110 Critical value @5% LOS 1.75
Table F: Cross Tabulation and Chi-Square Values for Education and Investment Preferences Investment Preference Post graduate Graduate Diploma Total
Count % Count % Count % Count %
Equities and derivatives 3 10% 10 13% 1 25% 14 12%
Mutual Funds and Insurance 7 24% 16 21% 1 25% 24 22%
Pearson Chi-Square
investment choice of occupants of banking, financial service and insurance sectors in Ranebennur is accepted. It can conclude that marital status and investment choices independent.
Real Estate 5 17% 20 26% 2 50% 25 23%
Value
df
0.244
8
Gold and Total Bullion 6 29 21% 100% 24 77 31% 100% 0 4 0% 100% 32 110 29% 100% Critical value @5% LOS 1.86
H0-There is no association between household income and investment choice of occupants of banking financial service, and insurance sectors in Ranebennur is accepted. It can be concluded that there is no difference between respondents with different annual incomes for various investment choices.
Association between Occupation and Investment Choice H4: There is no association between nature of occupation and investment choice of occupants of banking, financial services, and insurance sectors in Ranebennur. The chi square value shown in Table 4 for this association is 0.84with a degree of freedom of 4 and a significance level of 2.13. This represents that there is no association between occupation and investment choice at 5% significance level. Hence, the null hypothesis H4-There is no association between salaried and self-employed respondents for various investment choices is accepted.
Association Between Qualification and Investment Choice H6: There is no association between qualification and investment choice of occupants of banking, financial services, and insurance sectors in Ranebennur. On the basis of qualification, respondents were classified into post graduate, graduate, and diploma. The respondents in ,’post graduate’, ‘graduate’ qualification category and have ranked fixed return instruments as the most preferred investment choice with 28% and gold and bullion 31%, respectively, while the respondents in ‘diploma’ qualification category have ranked real estate as the most preferred investment choice with 51% (Table 6). Table 6 shows that the chi-square value of 0.244 is significant at 1.86 levels with degree of freedom equal to 8. In the light of this, the null hypothesis H0- There is an association between qualification and investment choice of occupants of banking, financial service, and insurances sectors in Ranebennur is accepted Thus, we can conclude
Association between Annual Income and Investment Choice H5: There is no association between annual income and investment choice of occupants of banking, financial services, and insurance sectors in Ranebennur. A chi-square value of 0.39 with a degree of freedom of 8 and with a significance level of 1.75 reveals that there is no association between household income and investment choice at 5% significance level. Hence, the null hypothesis
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Fixed return investment 8 28% 7 9% 0 0% 15 14%
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ISSN : 2240-0310 individuals. These studies have proved that investors do not behave rationally and their choice of investment is decided by demographic factors like age, gender, income level, etc. On the contrary, there also exists a number of research works exploring the impact of financial knowledge and experience on the investment choice of individuals. These studies have proved that investors behave more rationally as their financial knowledge and experience increases. So investment is the not necessarily the function of demographic variable but it is a combination of both demographic and other external variable which determine the investment choice of people.
that there is significant difference between respondents with different qualification for various investment choice. Findings: From the analysis it is revealed 38.18% of the respondents are adult age and 70.90% are graduates and 77.27% are salaried class, and 90% are male 33.63% of respondent annual income level is 3 to 5lakh per annum, 76.36% of the investors are married. 34% investors have ranked mutual fund and insurance, and gold and bullion as most preferred choice. 32.7% investors have indicated capital preservation as their first objective. 48.2% respondents are willing to park their investment money for a period of 1 to 3 years. 52.7% of the respondents expect annual rate of return of 10% to 20% 34.5% Respondents understand that the value of their investments may fluctuate and willing to accept some fluctuation in their capital for the potential of achieving higher returns over the longer them. 34.5% respondents are concern about the impact of taxation accept a small reduction in capital value from time to time for the potential of achieving tax advantaged income. 46.4% respondents are concerned about the purchasing power of saving and investments moderately. 40% of respondents are not very familiar with investment markets. 61.8% respondents stated their maximum tolerance to a reduction in investment value in 1% to 15%. 29.1% respondents preferred to have a spread of investment in a balance portfolio. 19% respondents are highly satisfied with mutual fund and insurance, 32% towards fixed return investment. Through Chi Square Test of Hypothesis it is found that there there is no association between demographic variables, like gender, age, marital status, occupation and annual income and investment choice. It is found that there is significance association between qualification and investment choice
References: [1] Anuj Sharma and Rajender Singh “How Households save and invest: Evidence from NCAER Household Survey”. [2] Anbalagan and Pujitha B.V.T.S “A study on Investor’s preferences on Investment of capital Market in India. (Vijaywada)” KKIMRC IJRFA, Vol 1, No 2, Dec- Feb 2011-2012, ISSN : 2277-1204 [3] Dibyojyoti Bhattacharjee and Ranjitsigh “Equity Investment decisions: Are demographic variables Really significant”. Journal Article, Jan 2010, ISSN: 0971-8907, volume 14, Issue :1,pg.no.7. [4] Hiriyappa (2007) Investment Management: Securities and Portfolio Management New Age International Pvt Ltd Publishers; 1st Ed. edition [5] Parihar, Deepika singh Parihar and Rajeev Sharma (2006)” Analyzing Investor’s Attitude Towards Mutual Funds an Investment Option”: IUP Journal of Management Research, July1, 2009, ISSN: 09725342, Volume:8, Issue: 7,pg. 56. [6] Prasanna Chandra(2008), Investment Analysis and Portfolio Management, Mc Graw Hill Education, 3rd edition [7] Wahinda Farzana, Masud Ibn Rahman and Mohammad Nurul Huda Mazumder” Behavioral Financing: Demographic Factors and Services of Brokerage Houses in Bangladesh”. World Journal of Social Science, Vol 2, No 4, July 2012, Pg. 15 – 33
Conclusion: Based on the research and various Studies conducted by academicians, research scholars and research organization it is evidence that the demographic variables have a significance association with the investment choice of ******
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