A STUDY ON INVESTMENT PATTERN AMONG
EMPLOYED WOMEN
Thesis submitted in partial fulfilment for the award of
Degree of Doctor of Philosophy
In Management
By
V Venkateshraj
Under the Supervision of
Dr H Nagaraj
VINAYAKA MISSIONS UNIVERSITY
SALEM,TAMILNADU, INDIA
June 2015
Dr. Nagaraj H
Associate Professor
Head of the Department (Commerce)
St. Joseph’s Evening College
Museum Road, Bangalore – 560025
Certificate
I , Dr Nagaraj H , Associate Professor and Head of the Department
of Commerce, St. Joseph‟s Evening College , Bangalore , Certify
that the thesisentitled “A Study on Investment Pattern of
Employed Women” submitted for the Degree of Doctor of
Philosophy by Mr. V Venkateshraj is the record of research work
carried out by him during the period from June 2009 to August
2014 under my guidance and supervision and that this work has
not formed the basis for the award of any degree, diploma ,
associate-ship , fellowship, titles in this or any other University or
other similar institutions of higher learning
Date:Dr. Nagaraj H
Research Supervisor
Declaration
I,V Venkateshraj declare that the thesis entitled “A Study on
Investment Pattern among Employed Women” submitted by me
for the Degree of Doctor of Philosophy is the record of work
carried out by me during the period from June 2009 to August
2014 under the guidance of Dr.Nagaraj H , Associate Professor
and Head of the Department , St. Joseph‟s Evening College ,
Bangalore and has not formed the basis for the award of any
degree, diploma , associate-ship , fellowship, titles in this or any
other University or other similar institutions of higher learning.
Place: Bangalore
Date:Venkateshraj V
Acknowledgement
Several Individuals and Institutions have rendered their invaluable
guidance and support for carrying out this research work and
important among them deserve to be mentioned here. Dr. H
Nagaraj,the Head of the Department of Commerce, St. Joseph‟s
Evening College, not only guided and supervised the research but
stood along with me as friend and philosopher right from day one.
His words, wisdom and encouragement has led me to complete
my work.
I am greatly indebted to Dr.Nagaraj H for providing me an
opportunity to carry out this research under his noble guidance.
Without his scholarly direction, sympathetic interaction and
professional approach, it would not have been possible for me to
complete this study.
I am thankful to Dr. K. Rajendran, Dean, Research, Vinayaka
Missions University for critically evaluating my report and for his
valuable suggestions in order to improve the quality of my
research work.
I am thankful to the Director of SJCBA for providing me the
opportunity to purse higher studies. My work would not have been
possible without the help of theLibrarian of SJCBA, Mr. Prabhu
andassistant Librarian Mr Shivakumar, whoarranged the journals
and online research data bases for carrying out the literature
survey.
Mr. Anand, Faculty and Computer lab in charge, SJCBA, needs
special mention for providing continuous support during the
analysis of data using SPSS package.
I am thankful to Ms Jinsey and Ms Dishafor proof reading the
report and suggesting the required changes for improving the
quality of the report.
I am thankful to all the respondents, authors and researchers
whose works have been quoted in my thesis.
I am thankful to my wife Dr. Vasanthi for enduring with me during
the entire research period and pushing me during the times when
things were not going well.
Venkateshraj V
i
TABLE OF CONTENTS
Chapter Title Page No.
CERTIFICATE DECLARATION ACKNOWLEDGEMENT TABLE OF CONTENTS LIST OF TABLES LIST OF FIGURES LIST OF ABBREVIATIONS
i v viii ix
CHAPTER – I
INTRODUCTION 1.0 Introduction to investments 1.1 Classification of investments 1.2 Investment concepts 1.3 Investment theories 1.4 Indian investment scenario 1.5 Types of financial markets
1 – 35 1 7 14 20 24 26
ii
Chapter Title Page No.
CHAPTER – II
REVIEW OF LITERATURE 2.0 Introduction 2.1 Conclusion of literature survey 2.2 Research gap
36 – 67 36 63 67
CHAPTER – III
INVESTMENTSAVENUES 3.1 Banking products 3.2 Company deposits 3.3 Postal department products 3.4 Provident fund 3.5 National pension scheme 3.6 Bonds 3.7 Insurance 3.8 Mutual funds 3.9 Equities 3.10 Derivatives market 3.11 Chit funds 3.12 Gold 3.13 Real estate 3.14 Commodity market 3.15 Operational definitions
68 – 109 70 73 74 75 77 78 83 92 98 101 101 103 104 106 107
iii
Chapter Title Page No.
CHAPTER – IV
RESEARCH METHODOLOGY 4.1 Introduction 4.2 Statement of the problem 4.3 Need for the study 4.4 Scope of the study 4.5 Objectives of the study 4.6 Hypotheses 4.7 Research Methodology 4.8 Limitation of the study 4.9 Chapter scheme
110– 124 110 111 111 112 113 114 115 122 124
CHAPTER – V
ANALYSIS OF DATA 5.1 Profile of respondents 5.2 Analysis of investment pattern of respondents 5.3 Analysis of financial literacy level and investment pattern 5.4 Analysis of preferred financial products of the respondents 5.5 Attributes influencing investment decisions 5.6Hypothesis testing
125 – 189 125 136 161 169 175 181
iv
Chapter Title Page no.
CHAPTER - V
Summary of Hypothesis test results Correlation Coefficient between select variables
187 189
CHAPTER – VI
FINDINGS AND CONCLUSION 6.1 Profile of respondents 6.2 Investment Pattern of employed women 6.3 Financial literacy 6.4 Types of assets held by employed women 6.5 Suggestions 6.6 Scope for further Research
191 – 209 192 196 200 202 208 209
Bibliography
Annexure Survey Questionnaire
v
ListofTables
Sl. No Title of the table Page No
1.1 Distribution of Investments (as % of Total
investment)
4
1.2 Preferred form of saving based on population of
cities
5
1.3 House hold saving as percentage of GDP 12
1.4 Asset break up 12
1.5 Return on Sensex and gold 13
1.6 Proportion of household investment in Equity
31
3.1 Fixed deposit Rates 72
3.2 Tax saving products returns 77
3.3 Return on government bonds 82
3.4 Stock Indices returns 100
3.5 Return on physical gold ( 10 grams coin) 104
3.6 Return on residential property index ( in % ) 106
5.1.1 Citi wise distribution of respondents 126
5.1.2 Age wise distribution of respondents 127
5.1.3 Marital status of respondents 128
5.1.4 Education profile of respondents 129
5.1.5 Sector wise distribution of respondents 130
5.1.6 Nature of the job of respondents 131
5.1.7 Sector and nature of employment
132
5.1.8 Family size of respondents 133
5.1.9 Work experience of respondents 134
5.1.10 Income profile of respondents 135
5.2.1 City wise investment Pattern 136
5.2.1.1 Chi Square test for Association between investment pattern and city of residence
138
vi
List of Tables
Sl. No Title of the table Page No
5.2.2 Age wise investment Pattern 140
5.2.2.1 Chi Square test for Association between
investment pattern and age 142
5.2.3 Investment Pattern and Education 143
5.2.3.1 Chi Square test for Association between investment pattern and educational background
145
5.2.4 Investment Pattern and Income 146
5.2.4.1 ANOVA for investment pattern and annual
income 148
5.2.5.1 Investment Pattern and Sector of employment 149
5.2.5.2 Investment Pattern and nature of Job
149
5.2.5.3 Chi Square test for Association between
investment pattern and sector of employment 151
5.2.5.4 Chi Square test for Association between
investment pattern and nature of job 153
5.2.6 Marital status and investment Pattern 154
5.2.6.1 Chi Square test for Association between
investment pattern and marital status
155
5.2.7 Investment Pattern and family size 157
5.2.7.1 Chi Square test for Association between
investment pattern and family size 158
5.2.8 Investment Pattern and Work Experience 159
5.3.1 Financial literacy level of respondents 162
5.3.2 Financial literacy and investment pattern 163
5.3.2.1 Chi Square test for Association between
investment pattern and financial literacy level
164
vii
List of Tables
Sl. No Title of the table Page No
5.3.3 Top five risky products 166
5.3.4 Equity risk perception and financial literacy level 167
5.3.4.1 Chi Square test for Association between
financial literacy level and risk perception of
financial products
level and risk perception of financial
products
168
5.4.1 Investments held by respondents 169
5.4.2 Awareness level and actual investments held
171
5.4.3 Respondents awareness, investment and risk perceptionof financial products
173
5.5.1 Criterion for Investment 175
5.5.2 Purpose of Investment 176
5.5.3 Source of Information 178
5.5.4 Tax saving product preference 179
5.6.1 Type of advisor and investment Pattern
181
5.6.1.1 Chi Square test for Association between investment pattern and investment consultant
181
5.6.2 Review period and investment Pattern
183
5.6.2.1 Chi Square test for Association between investment pattern and review period
184
5.6.3 Purpose of investment and Investment Pattern
185
5.6.3.1 Chi Square test for Association between investment pattern and purpose of investment
185
5.6.4 Summary of Hypothesis test results to find
associationbetween identified variable and
investment pattern
187-188
5.6.5 Identifying relationship between select
variables using correlation coefficient
189
6.1 Demographic profile of Respondents 193
viii
List of Figures
Sl. No Title of the figure Page No
5.2.1 City wise investment pattern 136
5.2.2 Age wise investment pattern 140
5.2.3 Education wise investment pattern 143
5.2.4 Investment Pattern and Annual Income 146
5.2.5.1 Sector wise investment pattern 150
5.2.5.2 Investment pattern and nature of job 152
5.2.6 Marital status and Investment pattern 154
5.2.7 Investment Pattern and family size
157
5.2.8 Investment Pattern and Work Experience 159
5.3.1 Financial literacy and investment pattern 163
5.4.1 Investments held by respondents
170
5.4.2 Awareness and actual investments held
172
ix
LIST OF ABBREVIATIONS
AMC Asset Management Company
BSE Bombay Stock Exchange
CAPM Capital Asset Pricing Model
D’Mat Dematerialization
ELSS Equity Linked Saving Scheme
EMH Efficient Market Hypothesis
EPF Employee Provident Fund
ETF Exchange Traded Funds
FMC Forward Market Commission
IPO Initial Public Offer
IRDA Insurance Regulatory and Development Authority
MIS Monthly Income Scheme
MRPP Moderately Risky Portfolio Pattern
NAV Net Asset Value
NCD Non-Convertible Debenture
NCAER National Centre for Applied Economic Research
NFO New Fund Offer
NHB National Housing Board
Nifty Index of National Stock Exchange
NPS National Pension Scheme
NRPP Non Risky Portfolio Pattern
NSC National Savings Certificate
x
LIST OF ABBREVIATIONS
NSE National Stock Exchange
NSS National Saving Scheme
OTC Over the Counter
PFRDA Pension Fund Regulatory Development Authority
PPF Public Provident Fund
RBI Reserve Bank of India
RD Recurring Deposit
REIT Real Estate Investment Trust
RPP Risky Portfolio Pattern
SCF Survey of Consumer Finance
SEBI Securities Exchange Board of India
Sensex Equity Index of BSE
ULIP Unit Linked Insurance Plan
1
CHAPTER – I
INTRODUCTION
1.0 Introduction to Investments
Economy of any country is driven by investments leading to
capital formation. Savings lead to investments. In India, the
household sector occupies the prime place as far as savings is
concerned in comparison to institutional sectors,whether it is
private or public. Every government in the world would like
households to save, as personal saving constitutes the largest
segment of national saving in most of the countries. This is
followed by savings of the corporate sector, with government
savings being least or negligible in most of the countries.
According to the economists and central bankers, for sustained
economic growth of a country, rise in domestic savings is
necessary.As per 2013 RBI annual report, household saving for
2012-13 is 22.3 percent of theGDP.
Every individual earning money, spends it to meet his or her
ownpersonal needs or to fulfil the basic needs of his or her family.
Individuals use money for various purposes including funding their
2
daily house hold expenses and expenses incurred for buying
luxuries for a better life. Moneyearned is generally used to fund
some immediate expenses or saved to meet some future needs.
Those who spend less than what they earn end up with savings.
These savings can be accumulated and grown to fund various
goals, such as, for education, marriage, vehicle purchase, house
purchase or for acquiring any other asset, for medical
emergencies and for meeting the post retirement financial needs.
In general, the entire amount saved is not held in cash, but is
invested in different asset classes or investment avenues in order
to get areturn, which can be in the form of regular income orcapital
appreciation or sometimes both.
Women, in general are saversaccording to the Association of
Bankers 2013 report. Even in India, under the recently launched
Janadhan Scheme,a large number of new bank accounts were
opened. In rural areas, major part of the new accounts was
opened in the names of women according to the report released in
2014 by Punjab National Bank, resulting in a greater contribution
by women. This scheme provided an opportunity for women to
open bank accounts thereby increasing the percentage of the
population under financial inclusion program of the government.
3
Successive governments in India have stressed on providing and
improving the educational opportunities for children, especially girl
children. The efforts of the government have led to an increase in
the number of educated women, who are well qualified and have
the necessary skills to gain employment. With the opening up of
the economy and the progress and investment made in the
banking, financial services, insurance, software and educational
sector, job opportunities have increased for women in India. The
increase in the number of employed women has led to rise in the
number of savers as well as the quantum of savings by women.
As per Census 2011, the population of India is 1210.19 million
comprising 586.47 million (48.5%) females and 623.72 million
(51.5%) males. Females have a share of 48.1% in the urban
population and of 48.6% in the rural population. Women find more
opportunities to work in urban cities. According to the NCAER
survey of 2004 -05, the main source of income is through salary,
for people living in urban areas is 36.9 percent and 81.4 percent of
households at the all-India level save a part of their earnings. The
figure is 88% for urban India and 78.5 % for rural India. The work
force participation by women in urban sector was 13.8% for
females and 54.3% for males. Employment to population ratio for
4
female in India was last measured at 27.50 % in 2011. Table 1.1
helps us understand the avenues of investment according to the
NCAER survey.This table gives the distribution of investment in
percentage of the total investment made by households.Avenues
of investment in this table are us as part of investment
classification in the current study.
Table 1.1
Distribution of Investment (as% of Total Investment)
Avenue of investment Urban Rural
Stock Market 7.5 6.3
Small savings 5.4 6.7
Life Insurance 26.6 16.7
Jewellery 12.8 16.6
Consumer goods 32.3 39.1
Others 15.4 14.6
Total 100.0 100.0 Source: NCAER Survey 2004-05
Table 1.2 displays the findings of the survey based on the
population of the city. This helped in further refining of the asset
classes available for people living in cities taken up for the current
study having population of more than 50 lakhs. Investment in stock
market is higher in cities compared to a town with population of
less than 50 lakhs. This information indicates the prevalence of
investment in stock market in cities which are taken for the study
and stock market investment related questions are added in the
survey questionnaire.
5
Table1.2
Preferred form of saving based on thepopulation of cities
Population 5 – 10 lakhs
10 – 50 lakhs
Over 50 lakhs
Stock Market 3.7 2.1 11.4
Small savings 3.2 2.0 6.4
Life Insurance 20.6 11.0 24.2
Jewellery 16.4 15.6 11.0
Consumer goods 40.6 42.6 30.3
Others 15.5 26.7 16.7
Total 100.0 100.0 100.0 Source: NCAER Survey 2004-05
Financial Marketers are increasingly looking towards women
investors for growing their sales. The range of products is
multiplying manifold due to globalizationand interconnectivity of
financial and commodity markets across the world.There is general
notion that, men are more comfortable in managing money in
comparison to women. However, with the increase in the number
of women having an independent source of income, there is an
increase in the participation of women in the area of
investments.Financial products liked by and suitable for men may
not meet the needs of a women as they may have their own
yardstick for taking investment decisions.
Majority of the studies carried out compare the investment pattern
of men and women. Very few institutions and asset management
companies have tried to understand the investment pattern and
6
behaviour of women towards financial products.As India is a
patriarchal society, investment decisions are taken by the male
members of the family. This reduces the interest of women to
understand financial investments. Women are consulted regarding
investments in real asset investment like property and precious
metals such as gold and silver are concerned. There is dearth of
studies related to investment by women. Details about various
studies carried out are covered in chapter two under Literature
Review. Based on past studies and the research gap identified
about the investments by women in chapter two, it will be
illuminating to know how the savings made by employed women
are channelled into different investment avenues and the reason
for the same. It is in this background,that a detailed study and
analysis of the investment pattern among employed women has
been carried out.
To have a better understanding about different investment asset
classes and their features, a brief, starting from classification of
investments and their specific features related to risk and return is
covered in this section. Product wise details are provided in
Chapter III for understanding the salient features of individual
products under each asset class.
7
1.1 Classification of Investments
Investments by individuals are made with an objective of
generating capital appreciation, regular income or both. There are
various assets which offer investors a combination of capital
appreciation and income. There is a wide range of product choices
available for investors to meet their needs. All assets available for
investment for individuals are broadly classified into two types:
1. Real Assets
2. Financial assets
Real Assets
Real assets are tangible in nature and contribute towards the
growth of an economy directly. Investment in land, building and
machinery are considered as investments in real assets. Gold,
silver and other precious metals are tangible in nature but are not
considered as real assets, as they do not directly contribute in the
growth of an economy. Investment in precious metal is considered
as investment in commodities. The predominant investments by
individuals under real assets are in residential properties.
Investment in residential property could be in an empty site, an
independent house, flat or a rent yielding commercial or residential
property. If not self-occupied, a residential building can fetch an
investor regular income by way of rent as well as capital
8
appreciation in case if there isan increase in the price of the
realestate. Investment in residential property by individuals is for
own use and also provides an individual a place to stay post
retirement and if required can be monetized using reverse
mortgage. Studies covered under literature review show that
women prefer investment in gold and real estate. Classification of
investment in gold and real estate has been broadened in the
current study
Financial Assets
The major investment opportunity for individuals is available in this
asset class.Financial assets are indirect claims on real assets.
They are intangible in nature and are available in different forms
like bonds,equities, mutual funds, exchange traded funds, real
estate investment trusts or a combination of debt and equity in
various proportions. Indirect claim on precious metals like gold and
silver are also classified as financial assets. Financial assetsbased
on their features and characteristics are broadly classified into:
Debt
Equity
Hybrid instruments
9
Debt
This category of assets or securities provide regularreturn over the
life span of the instrument. The return is inthe formof interest and,
the rate of interest payable is specified at the time of making the
investment in the instrument. Interest is paid on the face value of
the security and the most common frequency of payment of
interest is semi-annual. The rate of interest payable is also known
as coupon rate. Interest is paid till the maturity date of the
debtinstrument.
Debt instrument having a life of less than a year is traded on the
money market. Popular instruments traded onthe money market
are, treasurybills, commercial papers and certificate of deposit.
Debt instrument having maturity period of one year or more
istraded on stock exchanges as well as on the over the counter
(OTC) market. India government dated securities having a
maximum maturity period of 30 years are available for investors
looking for risk free long term debt instruments. There are cases
where more than 30years‟ bonds are issued including perpetual
bonds, which do not have any maturity period.
Investments in debt instrument carry default risk. Companies
issuing any form of debt instrument should obtain credit rating from
approved rating agencies. The rating assigned indicate the
10
financial ability of the company to fulfil the obligations as per
provisions of the bond indenture, which include timely payment of
interest and the ability to pay back bond value as per the terms of
issue at the time of maturity of bonds.
Government issued bonds are considered to be the safest among
the debt instruments. As far as Indian markets are concerned,
liquidity is a major challenge for investors.Hence, Investors looking
for stable and regular income are the major investors in this
category of asset class. There is limited scope for capital
appreciation in these instruments. Past studies covered in chapter
II indicate that women prefer to invest in debt instruments issued
by postal department and bank deposits. An attempt is made in the
current study to add a broad range of debt instruments available in
the market including the debt mutual funds.
Equity
In simple words, investment in the equity of any company makes
the investor ashareholder of the company. Investors in equity
market focus mainly on capital appreciation rather than regular
income. Many profitable companies declare and pay dividend to
the equity shareholders. Not all equity shares are liquid. Equity
shares of a listed company get traded on the stock exchanges,
11
providing a high level of liquidity in comparison to debt
instruments. The perceived risk associatedwith equity shares is
much higherin comparison to many financial products available in
the market. The two major stock exchanges in India where equity
shares are actively traded are National Stock Exchange (NSE) and
Bombay Stock Exchange (BSE). Review of literature carried out in
chapter II, indicates the increase in the number of women investing
in equity directly or through mutual funds. An attempt is made in
the current study to understand the source of information and
influencers leading to investment in equity by women.
Hybrid instruments
There are financial instruments thathave characteristics of a debt
instrument for a certain period and then acquire the features of an
equity. Such instruments are called as hybrid instruments.
Common example of hybrid instruments are preference shares,
convertible debentures, where the debenture is converted into
equity shares, foreign currency convertible bonds and warrants.
As discussed earlier, House hold savings contribute significantly in
capital building. Table 1.3 gives the details of house hold saving in
India,as percentage of GDP for the period 2009 – 2013. Savings
are sub classified under physical assets and financial assets.
12
Table 1.3
House hold saving as percentage of GDP
Financial
Year
Financial
Assets
Physical
Assets
2009 – 10 12% 13.2%
2010 – 11 9.9 % 13.2%
2011 – 12 7.0 % 15.8%
2012 – 13 7.1 % 14.8% Source: The Economic Times dated 15/4/14
Table 1.4
Asset break up
Source:CMIE, Mint datedMay 28, 2014
It can be observed from Table 1.4 that from 2008 to 2013, there is
a gradual reduction of investmentsin financial assets. It has
dropped from 51.88 percent to 32.41 percent in the financial year
2013, indicating that individuals preferredinvesting in physical
assets in comparison to financial assets. In this period, the major
investment in physical assets consisted of investments in gold.
During the period from 2008 till 2012 gold price was on continuous
Financial Year Physical
Assets%
Financial
2008 48.12 51.88
2009 57.09 42.91
2010 52.49 47.51
2011 57.01 42.99
2012 69.23 30.77
20 13 67.59 32.41
13
rise giving handsome return for investors in gold. Table 1.5
provides the return on gold and equity represented by Sensex.
Table 1.5
Returns on Sensex and Gold
Source:CMIE, Mint dated May 28, 2014
Year Sensex
return in %
MCX Gold
return in %
FY 08 19.68 29.38
FY 09 -37.94 24.41
FY 10 80.54 8.19
FY 11 10.94 27.36
FY 12 -10.50 35.24
FY 13 8.23 4.81
FY 14 18.85 -2.74
14
1.2 Investment Concepts
Millions of investors buy bonds, mutualfunds, equity, gold or similar
investment products,for different purposes. The decision to invest
in a specific assets class or classes of assets is primarily driven by
the risk and the return associated with the product.
Any investment made carries certain amount of risk, which isthe
uncertainty of return on the investment made or even losing the
capital invested. There is no uniformity of opinion about the risk
associated with a particular investment product across investors.
What may seem to be highly riskyto one investor may be
considered to be average risk product by another investor.
Evaluation of risk associated with a financialinstrument may
depend on the past experience of the investor, financial expertise
or dependence on others for investment. These factors may drive
an individual‟s opinion about the risk level of a certainfinancial
product. The perception of investors about the risk associated with
a financial instrument ranges from no risk tovery high risk in
relative terms. The perception of investors towards different asset
classes is captured in the currentresearch using suitable
questions. The findings are discussed in later chapters
15
Return and Risk
Return on investment can vary depending on the type of
investments held by the investor. Government securities can give
a pre specified rate of return based on the coupon rate, whereas
return from equity or equity related instrument isunpredictable.
Return on investment on assets held over a period of time is
calculated as:
CMVA – IVA Holding Period Return = ------------------ -------- Eq– 1 IVA where CMVA: Current Market Value of Assets IVA: Investment Value of Assets
Theabove equation gives the notional holding period return,if the
assets are not soldbut held on the date of return calculation. If the
assets are sold then we get the realized holding period return
using the above equations, where in the ending value is the value
at which the asset was sold.
For comparison of returns across assets, holding period return is
converted into annual return by using equation given below.
Holding Period return Annual Return = ---------------------------------- -------- Eq– 2 Time period of investments
16
The time period of investment is in terms of number of years to
calculate annualized return.
It is easy to measurethe return, but it is difficult to measure the
riskin quantitative terms acceptable to all market participants. One
of the most common accepted methods to measure andquantify
risk is, the variance of the rates of returnsover the period of
investment. Standard deviation, which is the square root of
variance is another popular measure of risk. However,the
interpretation of both variance and standard deviation remains the
same. Mathematically for a single asset, Risk (Variance)is
calculated using the formula given below
Variance = σ2 = 1
𝑛−1 (𝑥 − 𝑥 𝑛𝑖=1 )2 -------- Eq – 3
where
𝑥= return in percentage for a particular period
𝑥 = average of rate of return
σ= standard deviation Higher the variance or standard deviation, higher the risk
associated with the financial instrument in comparison to a
financial product having lower variance or standard deviation.
17
For debt instrument issued by the central government, the
standard deviation is zero. There is no deviation observed in the
returns on a government security and because of this investor feel
that government securities carry no risk. All the risk elements are
not captured by variance or standard deviation. Risks like business
risk, political risk, default risk, currency risk etc. are not captured
by standard deviation.
Comparing products based only on return or only based on risk
may mislead investors in taking investment decisions. It becomes
difficult totake investment decisions when we would like to
compare two investments with different levels of return and risk
(standard deviation). In such situations, Coefficient of variation is
found to be useful.Coefficient of variation is calculated as
σ Coefficient of Variation = ------ -------- Eq – 4
𝑥 where σ = standard deviation
𝑥 = mean rate of return
Investments are ranked based on the fact that lower is the
coefficient of variation better is the risk reward relationship.
Every investor is risk averse bynature as far as investment
preference is concerned. For a given level of risk, investors will
18
look for investmentsthat provides the highest return and carries the
least risk, among the assets available for investment. To reduce
the risk, investors make investments in more than one asset or
asset classes. A collection or holding of various combinations of
different classes of assets isknown as investment portfolio of an
individual. The basic assumption made by the investor while
making investments in multiple classes of assetsis, that the overall
portfolio risks is reduced, as investments are spread across
different classes ofassets.Investor assumes that, all asset classes
may not perform equally all the times. This process of investing in
more than one security is also called as principle of
diversification.Till the early 60s there was always debate on
portfolio risk reduction because of diversification. There were
methods to calculate the portfolio return, but there was lack of
understanding on how the risk of a portfolio, consisting of more
than one security is measured quantitatively.
Portfolio Risk and Return
Harry Markowitz derived the model to measure the expected return
and risk of a portfolio. According to Markowitz variance of the rate
of returns is a meaningful way of measuring the risk of a portfolio.
He proved that diversification of investments by investors is a
19
method of reducing the total risk. If security weights, which is the
proportion of investments, and returns are available for the
constituents of the portfolio, then the portfolio return is calculated
as
R port = ∑ wiri-------Eq – 5
where
wi = weight of the individual asset i in the portfolio
ri= rates of return for asset i
The formula for calculating the variance of a portfolio is
Variance = 𝜎𝑝𝑜𝑟𝑡2 = 𝑤𝑖
2𝑛𝑖=1 𝜎𝑖
2 +
𝑤𝑖𝑛𝑗=1
𝑛𝑖=1 𝐶𝑜𝑣𝑖𝑗 ------ Eq – 6
where
σport= Standard deviation of the portfolio wi= Weight of the individual asset i in the portfolio σI = Standard deviation of rates of return for asset i Cov ij = Covariance between assets i and j Markowitz portfolio theory suggested that, to effectively diversify,
investors should study the coefficient of correlation among the
assets constituting the portfolio. The model suggests to select
assets that are negatively correlated.
This model explains the importance of correlation between the
constituents of assets forming the portfolio. If the assets within the
portfolio are positively correlated,then, the value of the portfolio
standard deviation will go up and if they are negatively correlated
i≠j
20
the portfolio standard deviation will go down. If the assets have
positive correlation among themselves then the risk of the portfolio
is increased rather than decreasing.
1.3 Investment Theories
Efficient Frontier Markowitz plotted risk and return for all possible portfolios
consisting of various combination of assets. Out of the plotted
values, he created an envelope of the most efficient
portfolios,called the efficient frontier. The portfolios lying on the
efficient frontier offered the maximum return for a given level of risk
and the least risk for a given level of return.
Capital Market Theory
Capital market theory took forward the Markowitz portfolio theory
and led to the development of Capital Asset Pricing Model (CAPM)
by William Sharpe. It was observed that the total risk of portfolio
consisted of systematic (non-diversifiable) andnon-
systematic(diversifiable) risk. Unsystematic risk could be reduced
by adding more securities to aportfolio, but the systematic risk
associated with a portfolio could not be reduced, exceptional case
being international diversification. Remained, it may not possible to
21
reduce the systematic risk associated with a portfolio. For a well-
diversifiedportfolio, the systematic risk is represented by beta (β).
Beta value indicates the percentage change in the equity value, for
one percent change in the market index value. Higher is thebeta,
higher is the systematic risk. CAPM takes into account the
combination of a non-risky portfolio (σ=0 and β=0) with a portfolio
of risky assets and helps in finding the expected or required rate of
return for a risky asset under the assumption made by William
Sharpe for the capital asset pricing model.
The expected rate of return is calculated as
E (r) = Rrfr + β (RM – Rrfr) ------- Eq – 7
where
Rrfr= Risk free rate of return
RM= Marketreturn
β = beta of the portfolio
σM = Standard deviation of the market index
22
CAPM is not only used in the field of investment, but also
extensively in the world of corporate finance to set the minimum
return expected from a risky project.
23
Efficient Market Hypothesis
It is always a difficult proposition for investors to understand the
price behaviour of securities. In an efficient capital market, the
current price of securities reflects all the information available to
the market. It is found that some investors or portfolio managers
generate above market returnsconsistently. Fama carried lot of
research to study the efficiency of the market and came out with
three forms of Efficient Market Hypothesis (EMH)
1. Weak Form of EMH: According to this form, the security price
reflects all historical information like the past price history,
trading volume, number of trades and all other information
provided by the stock exchanges. Investors cannot generate
abnormal returns based on the historical information.
2. Semi Strong Form of EMH: Accordingto thisform,the price
reflects all historical data and public data like the price to
earningsratio, price to book value, stock split, and all such
information‟s. Investors cannot generate abnormal returns
based on the historical and public information.
3.Strong Form of EMH: According to this form,security price
reflects not only the historical and public data but also the
24
private information or data. There is no scope to generate
abnormal return by any investor.
The debate still continues about the forms of EMH,as technical
analysts disagree with the weak form,whereas fundamental
analysts support it.
There is continuous research going on in the field of investment
including the valuation of securities, pricing of initial public offers
andinvestment style management. Many researchersare focussing
on behavioural finance, which studies the behaviour of investors
under different market conditions and the factors affecting
investment decisions. Very few studies related to investment by
women have been conducted especially on employed women as
far as the field of investments is concerned. This study makes an
attempt to identify the investments held by employed women and
the factors which could influence their investment decisions. This
may help financial product creators to keep these factors in mind
while developing women centric investment products.
25
1.4 IndianInvestment Scenario
Over the last 25 years the world of investments in India has
undergone a sea change. The change is in terms of the variety of
products, alteration in the market participants, rules and
regulations, grievance redressal mechanisms and the functioning
of the markets. This change was due to the growth of the Indian
economy and the opening of the economy to foreign investors.
Foreign investments in the Indian securities markets were
restricted till late 80s. There was restriction on foreign direct
investment and portfolio investments by foreigners. Indians were
not free to invest in markets abroad. Investors had very limited
investment options and products to choose from. Investment
opportunities were limited to bank deposits, postal department
savings schemes, national savings certificates (NSC) of different
maturity periods, monthly incomes schemes(MIS), traditionallife
insurance products offered by the life insurance corporation, unit
trust of India (UTI) operatedunit -64 mutual fund scheme,
employee provident fund, public provident fund, equities and
debentures. Due to the large reach of postal department, investors
wereinvesting in most of the small savings schemes offered
through postal department and where ever stock exchanges were
26
there,investors had the opportunity to invest in equity shares of
listed companies.For urban investors opportunities wereavailable
for investing in equity,bonds, debentures and other instruments
available in the capital market. For rural populations there were
chit funds in addition to postal schemes. There is possibility that,
due to lack of investment opportunities, rural India focussed on
buying gold, other precious metals and stones along with
agricultural land and other real estate assets. At one point of time
people invested in gold bonds. Due to the presence of Life
Insurance Corporations of India in smaller towns and district
headquarters, life insurance had popularity with some investors.
Till mid-90s, Life Insurance Corporation of India was synonymous
with life Insurance. Banks had limited presence, and options
available to investors were recurring deposits and fixed deposits.
Unlike the present scenario, banks were not marketing any third
party products.
27
1.5Types of Financial Markets
Based on the types of instruments and the tenor of the instrument,
financial Markets are divided into two broad categories:
1. Money market
2. Capital market
Money Market
This market deals with short term instruments. Short term
instruments have a maturity period of less than one year. Popular
instruments traded are treasury bills issued by Reserve Bank of
India (RBI), commercial papers issued by private sector,and
certificate of deposit issued by banks. This market is a wholesale
market where the major participants are banks, insurance
companies, mutual funds and other institutions. Retail
investorshave limited presence. Small investors can take part in
this market through primary dealers or mutual fund houses, that
offer schemes investing in instruments traded on the money
market. Reserve Bank of India is the regulator for this market.
28
Capital Market
In this market financial instruments with life spans of more than a
year are traded. The instruments available in this market are equity
shares, debenturesbonds, mutual funds including exchange traded
funds (ETF‟s).Capital market is regulated in India by Securities
Exchange Board of India (SEBI). This market is further divided into
primary and secondary market
Primary Market
In this market companies raise capital by offeringsecurities to
public. The instruments offered are equity shares, bonds,
debentures or any other security approved by the capital market
regulator. The offer made to the public is also called as Initial
Public Offer (IPO). If any firm approaches the market for further
issue of capital, then such issues are called as further public offer
or Follow on Public Offer (FPO). There is reservation of 35 % for
retail investors in all IPOs. In spite of reservation the subscription
by retail investors are not very encouraging. Mutual funds also
approach investors through new fund offer (NFO) and private and
government companies take the premarket route for raising capital
by issuing bonds and debentures.
29
Secondary Market
In this market,all the securities issued in the primary market are
dealt. This market offers liquidity for the securities offered in the
primary market. The transaction in securities in the secondary
market are done through the stock exchanges and over the
counter (OTC) market. Major investment opportunity for retail
investors exists in this market. Securities to be traded on the stock
exchanges have to follow all the rules and regulations of the stock
exchanges and SEBI. BSE and NSE are the two major exchanges
of India. More than 5500 companies‟ securities are listed on BSE,
but active trade takes place in about 3000 company shares. Many
fly by night companies delisted from exchanges for not conforming
to the rules and regulations of exchanges and SEBI.
With the opening of the mutual fund sector for entities other than
Unit Trust of India(UTI) in mid 80s, there was a rapid growth in the
mutual fund schemes offered by Indian banks and foreign mutual
fund houses. This brought in product innovation due to the
expertise of the foreign fund houses as well as due to the
competition. Investors were able to get a wider range of mutual
fund schemes meeting their requirements. As of today the market
30
size of mutual funds in India is close to Rs 10 lakh crores, and
many investors enter the securities market through mutual fund
investing.
Till the creation of SEBI,retail investors suffered in the hands of
brokers and other financial intermediaries due to lack of
transparency in the execution of the trade and pricing of securities.
Investors in stock market were at the mercy of stock brokers. In
early 90s many investors lost money and faith in the capital market
due to various scams led by Harshad Mehta‟s stock market scam,
which exposed the weakness in regulation of the stock market.
Investors lost money due to lack of transparency in brokers,
manipulative promoters and fly by night companies that entered
the capital market,as well as due to lack of regulatory control.
Stock exchanges were controlled by brokers which resulted in
further sufferings for theretail investors, as exchangeauthorities
were not bothered about the resolution of investor complaints and
grievances. Investors were plagued with defective documents
including fake share certificates, damaged transfer deeds,
signature mismatching transfer deeds, delay in transferring of
shares, non-receipt of dividends and many more issues which
weakened the confidence of the investors.
31
A major change in the Indian market took place with the setting up
of Securities Exchange Board of India (SEBI), the regulator for the
securities market. Major objective of SEBI is investor protection
and investor grievances resolution
Major reforms in the market started with the formation of SEBI,
which was given sufficient powers to prosecute and penalise errant
brokers, stock exchanges, companies and manipulators. Opening
of National Stock Exchange (NSE) in a demutualised form, where
the owners of the exchange were different from the members
having trading rights brought in the transparency in the trades and
prices. NSE embraced technology from inception and brokers
could set up office in any part of the country due to the screen
based trading on NSE. Foreign investors were allowed to
participate in the Indian capital market in mid 90s which led to
further growth in the Indian capital market. Further impetus to the
market was provided by the passing of Depositaries Act 1996,
which paved the way for holding the securities in the electronic
form by investors. This reduced the investor‟s complaints
regarding delay in transfer of shares, removal of duplicate and fake
shares from the market and all other problems faced when the
securities are held in physical form. Participation by foreign
investors and holding of securities in electronic form brought in the
32
demand for derivatives marketwhich was opened for Indian
investors in the year 2000,that again led to the surge in the capital
market investment.With the growth in the capital market the mutual
fund industry started to grow and isnow offering a very wide range
of products meeting the needs of various types of investors. As of
today more than 40 asset management companies offer more than
1400 types of mutual fund schemes including systematic
investment plans index funds,ETF‟s and manage assets close to
Rs.10 lakh cores. In the year 2008 NSE and BSE have started
offering foreign currency trades. With the rapid penetration of
internet and the mobile phone services along with the online
money transfer facility, trading in securities is different from what it
used to be a decade back.
Table 1.6
Proportion of household investment in Equity (in %)
Year Investment in equity
1981 3.0
1985 4.5
1991 8.0
1993 11.0
1995 9.0
2001 6.0
2005 4.5
2011 4.0
House hold savings since 1981 is displayed in the above table. It is
observed that equity investment had peaked in 1993 and has been
33
consistently falling since then indicating the lowering of interest in
equities by investors.
Insurance sector also grew along with the capital market. Life
insurance and general insurance were controlled by government
owned companies till the mid-90s. Life Insurance Corporation (LIC)
was synonymous with Life Insurance in India. The Insurance
landscape has changed when government opened up the
insurance sector to private player‟s. A new regulator for this sector
was formed to regulate the Insurance market. Insurance regulatory
development authority (IRDA) is the regulator of the insurance
sector in India.
Due to the intense competition the service level increased and
many new products were launched. Increase in product range
allowed people to buy products meeting theirrequirements. One of
the revolutionary products launched in this sector was the
UnitLinked Insurance Plans (ULIP) that allowed insured people to
participate in the growth of the capital market. Under this scheme
part of the premium paid,goes towards the term insurance cover
and the balance amount is invested through fund houses into
various schemes, including liquid funds, bond funds and equity
funds. There was rampant mis-selling of insurance productsduring
the initial days of ULIP product availability, due to higher
34
commissions offered to the insurance agents and other
intermediaries. IRDA stepped in and put restriction on the
commission level. This step from IRDA has reduced mis-selling of
ULIP schemes. Marketing of insurance schemes has increased
the penetration level, but still India is an under insured country.
Withdrawal of pension by government led to increase in demand
for annuity funds and insurance linked annuity products. We have
reached a stage where IRDA is taking necessary steps to offer
holding of Insurance policies in electronic form, which is likely to
help an investor consolidate all his financial holdings.
In spite of a wide range of products,gold is a preferred investment
for Indian investors for historical reasons. The primary demand is
for gold is in form of jewellery followed by gold coins and bars of
different weights. There is change in the way gold investment
opportunity is availabletoday. Investors have the option to invest in
gold through commodity exchanges. Commodity exchanges allow
investors to hold gold in electronic form. There is a choice for
investors to invest in gold through mutual fund houses,that offer
gold linked schemes as well as gold linked exchange traded funds.
Boom in real estate and its attraction for Indians, serve dual
purpose of investment as well as consumption. The increase in the
35
income level and the increase in nuclear families, haveaided the
growth of the real estate investments. Many investors buy second
and third home from an investment angle and look for capital
appreciation as well for regular income by way of rental.Real
estate investment is a big ticket investment. Real estate as an
investment product is out of the reach of small investors, due to
the lack of availability of suitable products. As of now there is no
product available in the market for small investors to participate in
the real estate sector, for small investors.Government is working
on allowing real estate companies to offer retails participation by
way of Real Estate Investment Trusts(REITS).
Despite regulators and the use of technology, there are still some
grey areas. Chit fund industry, though for many years is
considered to be highlyunregulated, is still popular with small
investors in certain pockets of the country. Chit funds act as an
investment avenue for many investors, as participation in chit
funds has dual option of investment as well as a source of
borrowing money. In the semi urban and rural areas, chit fund is
still considered as a primary source of savings.
In the current scenario,Indian financial markets are robust and well
regulated by the respective regulators. There is a need for banks
to come out with more products for their customers. Investors have
36
limited choice of fixed deposits or recurring deposits. Banks are
allowed to sell mutual funds, pension schemes and insurance
products which has increased products availability across India.
There is an urgent need for creating investor awareness among
retail investors. According to some studies carried out by mutual
fund houses,lack of knowledge and awareness about various
financial products is one of the factors for the slow growth of the
financial sector. Lot of effort is put by regulators, stock exchanges,
insurance companies and mutual fund houses to spread the
financial literacy level in last five years. Financial literacy has
improved during the last five years,due to increase in the
internetusage and portals offering financial education workshops.
All regulators involved with the financial sector conduct investor
awareness programs and workshops in order to help investors in
taking informed investment decisions. There are special
workshops held for women by many companies as percentage of
women taking their own investment decisions is seeing a rise.
37
Chapter – II
REVIEW OF LITERATURE 2.0 Introduction
Literature review is the process of going through the articles
related to the topic of research topic, which are published in
journals, online databases, magazines, newspapers, books or any
other source of information including online sources. Literature
review helps researcher to know and understand the findings and
views of earlier researches who have carried out research in an
area similar or related to topic of study. It also helps in
understanding the data collection methods and the statistical tools
used for analysing the data. The key findings and the conclusion
drawn by researchers are of great help for any new researcher. It
helps us the researcher to find research gaps, which could be
taken up for further studies.
A large body of literature is available in the area of investments
related to institutional investment pattern, portfolio construction
methods, portfolio performance evaluation, retirement planning,
product preferences and many more associated topics. Studies
have been carried out by researchers on the gender differences in
allocation of assets, constituents of domestic savings, saving
38
behaviour of household, gender differences in knowledge about
financial investments, investors risk tolerance, investors perception
of various financial products. Some of the most insightful studies
carried out in India and outside are given below.
1. Nupur Gupta and Vijay Agarwal (2013) looked at the
constituents of domestic savings and investments by investors,
from the cities of Mumbai and Delhi. A total of 251 respondents
were administered a structured questionnaire in person and with
the help of online survey portal. The type of sampling chosen for
the study was convenience and snowball sampling. Respondents
from different age groups and professions were contacted for the
study. Data was collected from April to November 2011. The
reliability of the questionnaire was ascertained by Cronbach‟s
alpha value. Important variables for the study were extracted using
factor analysis. The three factors identified were stock market
factor, savings factor and interest rate factor. For discrete data like,
investment in stock market and city of dwelling, Chi square test
was used to establish the presence or absence of association. For
finding the relationship between discrete independent variables
like income level and the investment pattern, one-way ANOVA test
was used. The investment patterns were categorized as, Non
39
Risky, Risky and Combination. Classification was based on the
composition of the investment held by the respondents. It was
found that bank deposit was the most preferred form of investment
followed by mutual funds, real estate and gold. Significant
differences were found in the investment patterns of households
between the cities of Mumbai and Delhi. Stock market investment
was third most preferred investment avenue in Mumbai whereas it
was not so with the respondents from Delhi. There was significant
dependence of investment pattern on household income only in
the age group of 40 to 49years. Interest rate did not have any
relation with the investment patterns.This is in contrast to the study
by Kabra (2010) where one of the factor influencing investment
decision was the prevailing interest rate.
2. Geetha. N and Ramesh M, (2012), studied the role of
demographic factors in investment decisions. Response received
from 475 respondents from Nagapattinam district of Tamil Nadu
was used for analysis. The sampling method used was convenient
sampling. A well-structured questionnaire was used to collect the
data from the respondents. Statistical inference was drawn using
ANOVA and Chi square tests. The demographic attributes
included age, gender, education, occupation, income, savings size
40
and family size. The investment avenue considered for the study
were gold, provident fund,life insurance, real estate, bank deposits,
postal savings, mutual funds and equities.
According to the study, riskprotection, safety of investment, rate of
return and liquidity were main factors which influenced investment
decisions. This is in line with the findings of Elder & Rudolph
(2003).
Graduates and post graduates were more likely to invest in long
term investment products. This is in contrast to the study by Al-
Tammie (2009), who found no relationship between educational
background and investments. People in the age group of 31 to 40
years preferred investing in long term investment products. People
with a family size of four and above preferred short term
investments. Self-analysis and advice from friends and relatives
were the major source of investment information. This study found
that most of the respondents preferred monthly investments.
Further it was found that majority of the respondents were driven
by technical analysis and newspaper reports while taking
investment decisions.
The most preferred investment was life insurance followed by real
estate, provident fund, gold and silver respectively. The
researchers concluded that preference for real estate and gold
41
was may be due to the boom in the prices of gold and silver during
their period of study.
3. P. Parmashivivaiah, Puttaswamy and Ramya (2013) conducted
a study in the city of Mysore, to understand he factors influencing
investment decisions. The sample size for the study was 120
respondents. They used judgment and snow ball sampling to
collect the data. The study was conducted in the first half of 2013
in the city of Mysore. Statistical tools used for analysing the data
were Percentage, mean, standard deviation, Chi square test, F
test, ANOVA and regression. Data was classified based on the
demographic profile of the respondents. It was found that liquidity
was the most important factor while choosing an investment
portfolio as far as government employees and entrepreneurs were
concerned.This is similar to the findings of Geetha. N and Ramesh
M, (2012). Private employees and professionals gave equal priority
to growth and liquidity. Women did not select investments on the
basis of safety of the principal. This is in line with studies
conducted by Annika, Sunden and Surrette (2009) and Bernasek
(2002).
Based on the correlation between occupation and investment
objective, it was found that investment objective had no relation to
42
the occupation of the respondent. Liquidity and tax reduction were
found to be the two important criteria for the selection of the
investment portfolio in this study.
4. Ravi Vyas and Suresh C Moonat (2012) carried out a study on
the perception and behaviour of mutual fund investors. The study
was carried out to understand the preference of investors
investment avenues, mode and form of investment preferred by
investors at Indore with a sample size of 500 respondents out of
which 363 respondents were investing in mutual funds, and these
363 respondent‟s data was analysed to come out with conclusions.
A structured questionnaire was used to collect the data during
personal interviews. To understand the nature of holding by the
respondents, chi square test was used along with the calculation of
median and mode. After analysis of data, it was found that Gold
was the most preferred investment option followed by bank
deposits and fixed deposits. Mutual fund investment got average
score in parameters like safety,liquidity, reliability and tax benefits.
Majority of the investors were aware about the risk involved with
mutual funds. Direct equity investment was not the most preferred
investment avenue. Respondents preferred less risk products in
comparison to the risky financial products.
43
5. Giridhari Mohanta and S S Debasish (2011), conducted a study
on the investor preferences among the investors from the city
Cuttack and Khurda in Orissa. Sample size used for the study was
210 respondents, consisting of men and women residing in the
geographical area of the study. They used a structured
questionnaire consisting of 35 question for collecting the data. The
questionnaire had 12 questions regarding the demographic
attributes and 23 questions related to the various factors
influencing the investment avenue. A total of five investment
avenues were considered for the study, namely, equity shares,
mutual funds,insurance, bank recurring deposits and postal
schemes. Data was analysed using mean and percentage. Equity
investment was considered to be risky. The study found that
respondents having an annual income of rupees 10 lakhs and
above were willing to invest in equity market, whereas lower
income respondents preferred bank deposits and postal
savings.This is in line with the findings of Raja ram (2010) and
Ravi Vyas and Muoonat (2012) Further the study found a
relationship between occupation and Investment Avenue.
Business class respondents were willing to invest in equity and
mutual funds, whereas government employees preferred mutual
44
funds, insurance and bank deposits. Investors considered safety of
investment as a major criterion.
6. Umamaheshwari.S, Ashok Kumar (2011) carried out a study to
understand the investment pattern and awareness level of
individuals belonging to the salaried class from the city of
Coimbatore. A structured questionnaire was used to collect the
data during December 2010 to July 2011. Responses from 1000
respondents were collected over a period of eight months from the
areas of Valparai, Pollachi, Metupalayam and Coimbatore.
Statistical tools used for analysis were Chi Square test and
ANOVA along with mean value calculation. The awareness level
was divided into three types:low, medium and high. Classification
was based on the mean score obtained for the respondent. It was
found that the most preferred avenue of investment was provident
fund followed by insurance gold and Jewellery. The financial
product awareness level among men and women was low. Married
people had better awareness compared to the unmarried ones.
Savings and investment pattern were influenced by the education
level of the respondents. A strong correlation was found between
monthly income level and the number of dependents.
45
7. Gaurav Kabra, Prashant KMishra and Manoj Kumar Dash
(2010) carried out a study in order to identify the factors that could
influence investment decisions of individual investors. The sample
frame chosen for the study was the investors who had invested
regularly. Data was collected using a four-page questionnaire
containing questions related to demographic details and their
investments. A total of 196 completed questionnaires, found
complete in all respects were used for data analysis. The
consistency of the questionnaire was tested by calculating the
Cronbach Alpha. The statistical test used were standard deviation,
percentage, Kaiser-Meyer-Olkin measure, factor analysis and
regression. A total of 18 statements were identified to understand
the investment pattern of individuals. Using factor analysis six
component factors were identified. The factors were security,
opinion, awareness, hedging, duration and benefits. It was found
that there were no significant differences of opinion, security and
hedging among different age groups. There was significant
difference in the awareness level, benefit and duration among
different age groups. Women preferred investment product
carrying higher level of security in comparison to men. This is in
contrast to the findings of P. Parmashivivaiah, Puttaswamy and
46
Ramya (2013) where women did not consider security as a main
factor.
8. Sunita Bishnoi (2013) carried out a study consisting of 200
respondents from Faridabad, part of national capital region. It was
found that most preferred source of saving was life insurance
followed by deposits with banks, PPF and postal savings. This is in
contrast to Nupur Gupta and Vijay Agarwal (2013), who found
Bank deposits to be the most preferred investment avenue.
Occupational group and gender did not have impact on investment
objective. This is in similar to the findings of P. Parmashivivaiah ,
Puttaswamy and Ramya (2013).
Newspapers and magazines were the most preferred source of
information. Most of the investors preferred the investment horizon
of five years and more. Main investment objectives were safety of
capital followed by tax savings. Age, income and education were
found to have association with the investment objectives.
Respondents for the study were picked using convenience
sampling. A structured questionnaire containing questions related
to demographic details and the investment objective along with
investment preference was administered to the respondents.
Simple percentage calculations along with Chi square test was
47
used to analyse the data. This study reconfirms the association
between
9. Pandian L and Aranganathan T (2012) carried out a study in the
district of Cuddalore, to assess the attitude of the salaried people
towards savings and investments. To collect the data, a structured
questionnaire was used. Sample size for the study was 520
respondents. The respondents covered different age groups of
salaried class. The sampling technique followed was multi stage
sampling. To measure the attitude of investor towards savings and
investments, a five-point rating scale was used. To identify the
major aspects of savings and investments, factor analysis was
used. ANOVA was used to find the relationship among variables.
Major aspects of savings and investments were found to be to
have a secured life and good future. There is lack of push from
government to create savings habit. Past wrong investments also
had influence over investments and savings decisions.
10. Parimal Kanthi and Ashok Kumar (2013) carried out a study
in order tounderstand the investment holding behaviour of
investors from the city of Coimbatore. The sample size for the
study was 600, and the sampling plan used was convenience
sampling. A structured questionnaire was used to collect the data
48
from the respondents. Cluster analysis, and chi square test was
used for classification of the investors and to find the association
between the personality type and the investments held. Based on
the personality profile of respondents, they wereclassified as
Innovative, moderate and conservative investors. Most of the
investors were in the category of innovative and moderate. Most
preferred investment avenue for moderate investors was Post
office saving schemes followed by bank deposits and pension
schemes. This is in contrast to the findings Nupur Gupta and Vijay
Agarwal (2013) and P. Parmashivivaiah , Puttaswamy and Ramya
(2013) ofConservative investors preferred National Savings
Schemes (NSS) and were averse to chit funds. Innovative
investors were willing to invest in mutual funds and endowment
policies, bank deposits, postal savings,life insurance policies and
mutual funds. It was found that mutual fund and endowment policy
were independent of the personality type, whereas other
investment avenues under study were dependent on the
personality of the investors.
11. Buchaiah M. (2014) carried out a study to in order to
understand the perception of individual investors from the city of
Hyderabad, towards mutual fund investment. Sample size of the
49
study was 300. Data was collected from the respondents using a
questionnaire. Convenience sampling was used for picking up the
respondents for the study. Questionnaire contained questions
related to the demographic details and their perception about
mutual funds. Weighted mean value and percentage calculation
were used to analyse the data. The study found that investors
below the age of 40 years were more conscious about savings and
investments. Growth fund was the most preferred mutual fund
scheme followed by balance fund and income fund.
12. Karthikeyan K, Bharta S and Ranjit Kumar K (2012) carried
out a study to understand the perception of those investors who
were sold the mutual fund products by banks. The survey was
conducted in the city of Tiruchirappalli city in Tamil Nadu. The
sample size for this study was 108 and the method of sampling
used was convenience sampling. A five-point rating scale was
used to capture the response of the respondents. In the rating
scale, one stood for strongly disagree and five for strongly agree.
Questionnaires were distributed to only those respondents who
had prior experience in mutual fund investments. The statistical
tool used for the analysis were, factoranalysis, multiple regression,
correlation and reliability statistics. It was found that, before taking
50
investment decision investors take into account competitive
product offerings, quality of service offered, past return on
investment,safety, communication from fund house and
emergency need fulfilment.
13.Rajarajan (2000), conducted a study on investor demographics
and risk bearing capacity, using a sample size of 405 investors
from the city of Chennai. The variables used for the study were
age, occupation, family size, income and the current investments
made. The respondents were classified into four risk bearing
capacity categories R-I, R-II, R-III andR-IV based on the
percentageof investments in high risk assets to total financial
investments made by the respondent. High risk assets included
equity shares, mutual funds and convertible debentures. R-I had
no investments in risky assets, R-II and R-III had high risk
investment below 40 % and R-IV had more than 40% investment
in high risk assets. To analyse the association between the risk
bearing capacity and the independent variables viz. age,
occupation, family size and income, Chi square test was used. The
study found a strong relationship between the four independent
variables namely age, occupation, family size and income and the
risk bearing capacity of the investor. It also supported the earlier
51
studies carried out confirming the relationship between age and
income and investment pattern.
14. Tirupathi.T (2012) in his study to understand the tax planning
by individuals from Vellore district of Tamil Nadu found that, there
was lack of association between the age, marital status and
gender of the respondents as far as tax planning is concerned. A
Sample size of 750respondents was used for the study.
Convenience sampling was used for the selection of the
respondents. A structured questionnaire was used for collecting
the data. The study period was from July to December 2010. The
data collected were analysedusing, mean and standard deviation
along with simple percentage analysis, ANOVA and Chi square
test was used to find the association and relationship between the
variables under study. To measure the attitude a five point Likert
scale was used.
15. Aparna Samudra and Bhurghate (2012) carried out a study to
understand the investment behaviour among the middle class
investors from Nagpur. The study was carried out to examinethe
preference of the investment instruments and investment pattern
of the middle class households along with the objective of
52
investment. The investment options considered for the study were
Bank deposits,shares, mutual funds, real estate, Kisan Vikas
Patrika and post office deposits. A sample size of 300 households
was used for the study. Statistical tools like percentage and mean
were used for carrying out the analysis.
The study found that bank deposit was the most preferred
investment option followed by life insurance Investment in
provident fund and post office deposit were at the third and fourth
place.This is similar to the findings of Nupur Gupta and Vijay
Agarwal (2013).Real estate was found to be the least preferred
investment avenue. Investment in equity was not figuring in the
preferred investment avenue across all age categories.
16. Ramanujam.V and Chitra Devi K (2012) conducted a study to
analyse the impact of socio economic variables on the attitude of
investors towards investments. The sample size for the study was
100 respondents from the city of Coimbatore. The sample
consisted of respondents from different age group, educational
back ground income level and with varied level of awareness
about the financial products. A structured questionnaire was
administered for collecting the responses of the respondent.
Convenient sampling method was used for picking up the
53
respondents. To analyse the data,ANOVA, mean and Chi square
tests were used. It was found that the occupation of the
respondent and the frequency of making investment were not
significantly associated. The study did not find any relation
between annual savings of respondent and purpose of investment.
It was also found that, there was no difference in the investment
patterns of respondent‟s form government, public and private class
of investors.The findings of this study were different from most of
the other studies that found association between the nature of jobs
and income levels with the investment pattern.
17. Suyam Prabha R, (2011) carried out a study to understand the
Decision making process and pattern of investments by investors
from the city of Coimbatore. The sample size for the study was 109
respondents. Data was collected using a well-
designedquestionnaire. Data was collected during September –
October 2009. Respondents were selected among those who were
working in Bank,Non-Banking Financial Company (NBFC) in an
Information Technology (IT) company. Statistical tools used were
simple percentage analysis, weighted average score and Chi
square test. It was found that the selection process of a suitable
financial product depended on the,age,gender, marital status and
54
educational background, annual income and quantum of amount
saved annually.The main purpose of saving by married
respondents were towards child education. Employees of NBFC
firms were moderate risk takers and were investing in mutual fund
schemes. Bank deposit was the most preferred investment
avenue.
18.Kathrivel. N and Mekala.A (2009) carried out a study in
Coimbatore district to understand the women investors perception
towards on line trading. The sample size for the study was 150.
Convenience sampling was used for the selection of the
respondents. A well-structured questionnaire was used to collect
data from the respondents.Chi square test was used to find if there
is association between the desired variables and women investors
perception. Investment related variables included age,income,
educational qualification, occupation and number of dependents. It
was found that there was a significant association between age,
education qualification and time taken for investment
decisions.This similar to the findings of Umamaheshwari.S, Ashok
Kumar (2011). No significant association was found between
marital status and investment decision. This is similar to the
55
findings of Tirupathi.T (2012) but in contrast to the findings of
Suyam Prabha R ,(2011)
19. Vrushali Shah, Priyanka Zanwar and Pratibha Deshmukh
(2011) carried out a study to find, if there is any association
between the investment pattern and life cycle of rural investors.
The sample size for the study was 403 respondents from 13
villages from two taluka regions of Satara district from the state of
Maharashtra. Convenience sampling was used for the selection of
respondents. Classified data was processed using weighted
average, percentages and the hypothesis testing was done using
the Chi square test. Life stage of a respondent was divided into
eight stages of life and were classified as Bachelor stage, Newly
Married Couples, FN1, FN2, FN3, EN1, EN2 and Solitary.Where
FN means full nest and EN means empty nest. Classification was
based on the age, marital status and number of children. The data
was collected using a questionnaire during May to July 2008. The
questionnaire had questions regarding demographic
details,avenues of investment, objectives behind investments,
guiding factors to investment and source of information. It was
found that there was association between life cycle stage and
investment avenues and guiding factors. No significant association
was found between the life cycle stage and tax savings, safety and
56
future personal obligations. Post office savings and bank deposits
were the most preferred avenues of investments. Mutual funds,
equity were the most neglected financial instruments. Real estate
was of interest only in the early stages of life and weaned away
with age.
20. Patti Fischer (2010), used the Survey of Consumer Finance
(SCF), 2007 data to understand the gender differences in personal
saving behaviour. Sample size was 1171. Sampling frame for the
study were persons who were single and not married. This
criterion wasset to have clear understanding about the investment
decision maker. Statistical tools used were Likelihood ratio test
and Logistic regression analysis. The independent variables
included age,income, risk tolerance, preferences and consumption
needs. The respondents were classified as low risk tolerance and
average risk tolerance. Men and women differed significantly as far
as risk tolerance distribution was concerned. Over half of the
women were not willing to take financial risk. Difference between
men and women was found in short term and regular saving
behaviour. Women with poor health were likely to save less in
short term, whereas poor health condition did not play any role in
short term saving of men. Women had low risk tolerance.
57
Education level had positive relationship with the savings habit of
men.
21. Syed Tabaasum Sultana (2010) in her research work, studied
the Indian investors behaviour to understand the relationship
between the risk tolerance level, age and gender of an
individual.Researcherfound that investors were well educated and
earned well, but were poor risk takers. A negative correlation was
found between risk tolerance level and age. This supports the
findings of Srinivasan , Sakyhi K and Lakshmidevi S (2006).
Among all the sources of information, television was found to be
the most influencing source of information to make investment
decision for an investor. Over all investors have low level of risk
tolerance.
58
22.Lewlllen, W.G, Leas, R.C and Schlarbaum G.G (1972)
conducted a study to understand the investment strategy and
behaviour of American investors. The sample for the study was
collected from the client base of large retail brokerage houses. The
sample size was 972. Data was collected using a questionnaire
which solicited information on demographic characteristics, market
attitudes, investment objectives, portfolio strategies and asset
holdings. The dominant elements of the study were age, income
level, gender, marital status, family size and educational back
ground. Statistical tools used was regression analysis. It was
found that age influences investment behaviour. Older people
relied less on advice compared to younger respondents. Females
were more broker reliant. Higher income people are pre occupied
with professionals.
23. Clark and Strauss, (2008) found that women were more risk
averse in comparison to men. Based on age as a factor, the young
are willing to take a higher risk in comparison to the old.
Wealthier individuals were willing to invest in equity market in
comparison to poor who preferred risk averse securities.
59
24. Daniela Beckmann and Lukas Menkhoff (2008) conducted a
survey among the professional fundmanagers from USA,Germany,
Italy and Thailand. Questionnaires were sent to fund managers
through the respective investment associations. The questionnaire
contained questions related to the respondent‟s version of risk
behaviour, overconfidence along with demographic data. A total of
649 respondents filled the questionnaires and among them 125
were women. Mann-Whitney U test,mean,percentage were used
for analysis of data. It was found that women fund managers
showed risk averse behaviour. Women fund managers were found
to be overconfident and shied away from competition.
25. Srinivasan, Sakyhi K and Lakshmi Devi S (2006) in their
studies covering 13 villages with a sample size of 291 rural
investors, found significant relationship between percentage of
income saved and the gender. Study found no significant
association between the percentage of saving and age. It was also
found that, majority of rural investors invest in post office savings
followed by insurance and bank savings. Rural investor looks for
the safety of the capital.
60
26. Gnana Desigan C, Kaliselvi. S and Anusuya L., (2006) studied
the perception of women towards investment. The study focused
on the investment pattern of women investors. Their empirical
study found no association between age and level of investment
awareness. They did find significant association between
education level and level of awareness. The study found no
association between marital status and awareness.
27. Bajtelsmit, V.L, V.L, V.L and Jianakoplos.N.A. A (2001) carried
out a study to investigate the stock investing propensities of US
households. They used the data as reported in Survey of
consumer Finance, 1998 released by Federalreserve. The sample
size was 4305 households. For their analysis, the allocation by
household in financial assets only were considered. This brought
down the sample size to 3070 households.Investment in stock in
their study meant holding the stocks directly or indirectly through
mutual funds. Linear regression, and probity model were used for
analysing the data. Majority of the households holding defined
contribution plan held investments in stocks.On anaverage, those
households with stock holding are likely to be older, more
educated and more affluent.
61
28. Sundden and Surette (1998) with the help of data collected
from 1992 and 1995 Surveys of Consumer Finances, tried to study
whether demographic variables influence investments. The survey
sample size was 3906 in 1992 and 4299 in 1995. The
demographic variables used for the study were age, gender,
marital status, education level and the defined contribution plan
towards retirement savings plan of the respondent. The defined
contribution of the respondents was classified into three categories
1) Invested mostly in stocks 2) invested mostly in interest bearing
assets(bonds)and 3) invested with a split between stocks and
bonds(diversified). Descriptive statistics and multinomial logit
model were used to analyse the investment behaviour. The results
demonstrated that it is not gender alone that determines
investment choice, rather investment decision in asset classes
seems to be drawn more by a combination of gender and marital
status.
29. Somasundaram (1998) in his studies found Bank deposits to
be the most preferred investment choice followed by the chit funds.
Even though mutual funds gained popularity, Unit trust of India
schemes were out of favour with investors.Primary concern of
most of the respondents was about their children. Most of the
62
investors had invested in gold and silver. The main features
investors were looking in an investment product was safety and
regular income.
30. William Warren (1990) used demographics and life style
attributes to segment individual investors. The sample size for the
study was 152 respondents. Data was collected using
questionnaires which were mailed to households located in
southern metropolitan area in USA. The questionnaire captured
the details about the types of investments held, and the proportion
of investments between stocks and bonds. Other data gathered
were gender, marital status, education, number of children. Life
style measures were gathered by asking 29 life style statements.
Life style questions were based on agreement level on a scale of
one to five. Based on the amount invested, respondents were
classified as light (investment of $30,000 and less) and heavy
(investment above $30,000) investors. Statistical tool used was
Multiple Discriminant Analysis (MDA) to determine the relationship
between investment pattern and demographic and lifestyle
dimensions. His analysis showed that there was a strong
relationship between the marital status, number of children, age
and education level. He additionally found a relationship between
63
the life style characteristics of the respondents and the investment
pattern.
31. Suriya Murithi S, Narayanan B and Arivazhagan B (2012)
carried out a study to understand the investors preference towards
different investment alternatives available in the Indian market.
Sample size was 100 respondents. Sampling method used was
convenience sampling. Questionnaire was used to collect the data
from respondents belonging to the city of Trichy. Simple
percentage calculation, correlation andchi square test was used to
analyse the data. The two main reasons for saving was for
purchasing house and children‟s education. Bank deposits was
the most preferred investment avenue followed by mutualfunds,
gold and post office savings. Equity was the most avoided avenue
of investment. Safety of the principal was the top most priority for
most of the investors followed by low risk. Women investors were
found to prefer low risk products irrespective of their educational
background. Before taking an investment decision, investors
invariably consulted their family and friends.
32. Reshma Arora (2003), Gallop poll among male and female
investor in 2001, found that based on the UBS/Gallup index of
64
investor optimism, there was no difference in aggressiveness
between Male and female investors as far as future return on their
overall investment is concerned. Her findings are different from
many research studies which suggest that women are more risk
averse in comparison to men. In the UBS/Gallup
survey,respondents were asked to give details of the actual return
they earned on their investments in the past one year. In 2001, on
an average, female investors did better than their male
counterparts. The sample size for the survey was 1000 investors
from US and the age of respondents was above 18 years and the
survey was conducted during January 2000 to September 2003.
33. TamilKodi (1983) in her study found that small savings was
preferred by investors as it provided an opportunity for not only
men and women but for children to accumulate their savings.
During her study period the geographical reach for other savings
product was limited. With the current trends the small savings may
not find the appeal it had earlier.
65
2.1 Conclusion of Literature survey
Past research works reviewed were in the area of investments by
individuals. Barring few, majority of the research work taken up for
review were carried out in the south Indian cities and towns.
Literature review helped in understanding the investment pattern of
individuals, financial products preferred, risk tolerance capability of
individuals and the variables used for the study. It also helped in
identifying the sampling techniques used for collecting data and
the statistical tests used for testing the hypotheses. It was
illuminating to know findings of past researchers.
Influence of demographic variable on investment decision,
investment pattern, financial product preference, risk tolerance
was the focus area of researchers. Barring four researchers,
Majority of the researchers considered both women and men in
their studies.
It was observed that, studies related to women were focussed on
finding the Association between demographic attributes and risk
tolerance, liquidity,safety, product awareness along with the
identification of the most preferred investment avenue. Majority of
the Indian studies carried out used primarydata. Use of a
structured questionnaire was the most common method for
66
collecting data. Convenience sampling was used by most of the
researchers as far as Indian studies are concerned whereas
studies carried out in USA used the data of Survey of Consumer
Finance (SCF), released by Federal reserve periodically.
Demographic details collected by most of the researchers were
gender, age, marital status, educational background, income level
and family size.
Data was collected about the Sector of employment, nature of
employment, frequency of investment, savings percentage.
The investment avenues covered in the questionnaires in most of
the studies included Bank deposits, Postal schemes, Life
Insurance, Gold, Mutual funds, Equity and Real estate. Studies
conducted prior to 1995 had National savings schemes and Unit
trust of India Units as investment options. Chit fund as a savings
instrument was there only in two studies. Questionnaire used in
the current study covers all the above mentioned avenues of
investments. There were different ways in which investors were
classified by researchers based on the focus of their research
study. This knowledge was used in creating a method of
classifying investment pattern into three broad categories in the
current study.
67
Chi square and ANOVA were the statistical tests used by most of
the Indian researchers in testing hypotheses followed by
correlation,percentage and regression. Based on the above
findings and considering the type data collected , Chi Square test
and ANOVA test were found to be the most suitable tests to be
used for testing of hypothesis as far as the current study is
concerned.
For measuring the risk tolerance of individuals Likert scale was
used by most of the researchers. For the current study, to capture
the response of the respondentsfive point Likert is used to
measure the risk associated with different financial products.
Weighted average mean score is used to arrive at the overall risk
score by researchers . To measure the overall risk tolerance of
individuals, Weighted average mean score was found appropriate
for the current study.
Percentage calculation is usedfor identifying the most popular
avenues of investments in the current study.
Some common findings of the studies covered under literature
review are:
Investors preferred bank deposits in comparison to other mode of
savings.
68
In rural areas, investment in postal savings was common.
Gold and property were the most preferred physical assets.
The major purpose of saving is Children‟s education.
Investors were risk averse and were not willing to take risk.
Investor although being educated were not preferring to invest in
equities.
Mutual fund investment was popular only in major cities and
awareness level was poor in semi urban and rural areas.
Newspapers and Magazines were the main source of information.
Investors consulted their family and friends before taking
investment decisions.
It was found that most of the studies covered both male and
female respondents as well as households in general.
There was significant association between few demographic
attributes like age, marital status, educational back ground and
income level and investment pattern.
Findings of many studies were comparable where as some studies
contradicted the findings of earlier studies.
69
Literature review helped in identifying the popular financial
products to be used in the questionnaire along with the use of
different risk measurement techniques and statistical tests.
2.2 Research Gap
On the basis of the literature survey carried out, appropriate gaps
were identified which are discussed below.
There is lack of study related to investments held by employed
women and their classification based on risk tolerance.
Earlier studies missed out internet as source of information.
There was no clear demarcation between Jewellery and alternate
form of gold investment. Identifying the form in which gold
investment is made will help in identifying if Gold purchase is for
consumption or investment.
No attempt was made in earlier studies to capture the financial
literacy level of women investors.
The appropriate gaps identified based on the literature review are
taken up in the current research study. Appropriate questionnaire
was created to capture additional parameters not covered in earlier
studies.
70
Necessary changes if required were made in the research
methodology in comparison to the past studies, so as to meet the
objectives of the study.
71
Chapter – III
INVESTMENT AVENUES
Everywhere people talk about money. Every individual, corporate
or government will be earning and spending money. It is difficult for
these entities to match their earning and spending that is earning
and spending will not be equalalways. The difference between
earning and spending creates imbalance, which leads to either
saving or borrowing. Spending more than earning will lead to
borrowing and spending less than the earning will lead to saving.
What someone does with the savings could differ from person to
person. Someone may keep the excess money at home,
whilesomeone may invest the savings. The main purpose of
saving is to meet the need of money in future. Some needs could
be anticipated like buying a vehicle,house, education needs of self
or children, whereas medical emergencies are unpredictable. This
trade off of between present use of money against a future
anticipated or unanticipated requirement of money is the reason
for savings. Every individual expects the savings to grow to a
higher value in future in comparison to the present value of the
savings. To attain this objective, savers look for avenues where
72
their savings could be parked or invested. This process of
committing the money currently available, for a certain period of
time to derive higher future value is called investments. There
could be difference in the way an individual handles his savings in
comparison to how it is handled by a corporates or a government.
How an individual handlesmoney, could depend on multiple
factors, including his or her demographicprofile? There are many
avenues available for investment for an investor. Chapter one
contained details about different asset classes and their features.
Here a brief description of common investment products available
under different asset classes are given. This will help in
understanding the features available in each product which could
influence the investment decision of investors. Financial world
offers a very wide range of products. Brief on products identified
as per literature survey and the surveys by government
agenciesnamely:NCAER,IRDA,SEBI, PFRDA andRBI are given in
the sections below. These products are used for classification of
investment holding of the respondents.Additional sub classification
of products is also done in the research questionnaire for better
understanding.
73
Various products under different Asset Classes
3.1 Banking Products
Banks offer multiple products for their customers. In the present
market scenario, banks not only offer their own products, but also
distribute third party products. The most common banks own
products offered to anindividuals are:
3.1.1 Savings Bank Account
Most employed individuals receive their salary through bank
accounts maintained by them. The most common type of account
held by individuals with banks is savings bank (SB) account. The
account holder can deposit and withdraw money from his or her
account at any time. The balance remaining in the savings bank
account earns a nominal interest. Majority of the banks offered
around four percent per annum interest during the period of the
study. The surplus money of an employed person gets
accumulated in the savings bank account. In general people prefer
to have account with a Government owned public sector bank
assuming that they are highly secured. Private banks are also
popular due to the quality of service offered and the variety of
services offered by them. Cooperative banks are popular in semi
urban and rural areas.Due to the interlinking of the branch
74
networks, it is easy for an individual to operate the account without
geographical restrictions.
3.1.2 Bank Fixed Deposits
Banks offer individuals to open fixed deposits (F D) also called as
term deposit. This is one of the popular form of investment, by
individuals. Fixed deposits can be opened by any person by
depositing the minimum amount specified by the bank. The deposit
holders have to specify the time period of the deposit, with the
minimum period of deposit being 15 days by most of the banks.
Bank fixed deposits offer a higher interest rate than the savings
bank account. Banks offer different interest payment options
starting from monthly,quarterly, semi-annually or annually. There is
an option for cumulative deposits, where in, at the time of maturity
of the deposit the principle and the accrued interest is paid. Fixed
deposits with the bank are popular among investors due to the
flexibility of choosing the amount and the term period of the
deposit. The amount of interest earned in a fixed deposit is taxable
in the hands of the deposit holder. Government allows certain tax
benefits for the notified five year deposits with the banks. To
compare the returns across different asset classes and to evaluate
the risk premium in comparison to bank deposits and the influence
75
of interest rates on the investment decision the State Bank of India
(SBI) fixed deposit rates for the period 2010 to 2014is provided in
table below.
Table 3.1
Fixed Deposit rates
Year 2010 2011 2012 2013 2014
Rate in % 6.0 7.8 9.3 8.5 9.0
Banks alter the fixed deposit rates based on therepo rate
announced by Reserve bank of India (RBI).
3.1.3 Recurring Deposits
Banks offer to its customer, an option to deposit a pre specified
sum of money periodically for a specific time period under
recurring deposit (RD) schemes. The most popular period of
regular deposit is monthly. At the end of the recurring deposit
period the amount accumulated along with the interest earned is
paid to the depositor. Recurring deposit account is very popular
among small investors who want to accumulate a large amount
after a specific time period to meet their financial goals. Many
customers open the recurring deposit in the name of their children
76
to meet their educational needs.Recurring deposit is one of the
methods to inculcate the saving habit in children.
Banking products are not negotiable. They do offer nomination
facility. Interest rate offered for fixed deposit is announced in
advance and changes from time to time based, on the monetary
policy announced by Reserve Bank of India. For many investor,
the investment activity starts with banking products.
3.2 Company Deposits
Indian companies raise money from public through term deposits
to meet their financial needs. Term deposits are offered by
companies for various term periods starting from one to three
years with an option to pay the interest on semi-annual basis,
annual basis or on cumulative basis. The interest rate offered for
such term deposits are higher than the interest rate offered by
banks. These deposits carry a higher risk than bank deposits as
there is always a possibility of the companies defaulting in the
payment of interest on time as well as if the companies financial
deteriorate, then, there is a risk of losing even the principal
amount.
77
3.3 Postal Department products
Postal department has a very large presence in India across all
cities and villages. Postal department in addition to postal
collection and delivery of post offers a wide range of services. To
cater to the needs of the individuals, post offices offer savings
accounts in a restricted way, like a regular bank account holder.
Interest is paid to the postal savings account holder at a pre
specified rate.
.
3.3.1 Postal Deposits
Like a bank, post offices offer fixed and recurring deposit facility.
These are very popular among young and elderly investors. With
the increase in the internet penetration and limited investment
products offered by postal department, there is gradual decline in
their business as far as savings products are concerned.
3.3.2 National Savings Certificate
Popularly known as NSC. Investor has an option to buy National
Savings Certificate (NSC) from post offices, which allows an
investor the tax benefit under section 80C. Encashment of the
savings certificate before the due date is not allowed.
78
The two important form of investment that attracts the interest of
employed persons due to the tax benefits are contribution to
provident fund and Life Insurance policies. These are long term
investment products. National pension scheme (NPS) offered by
government is also available for individuals, NPS has not seen the
desired level of participation by individuals due to lack of
awareness and knowledge about the product.
3.4 Provident Fund
There are two ways to participate in the provident fund schemesfor
an individual.
3.4.1 Employee Provident Fund (EPF)
Contributions to provident fund of an employee by the employer
arecompulsory, if the number of employees in a firm are 20 or
more. Employers come under the Employees Provident Funds &
Miscellaneous Provision Act, 1952. As per the Act, the
employer‟sstatutory rate of contribution is 12% of emoluments
(basic wages, dearness allowance, cash value of food concession
and retaining allowances if any,) of the employee. A matching
contribution from the employee is mandatory. In case the member
wants to contribute more the minimum prescribed amount, then
he can do so at any rate he desires. i.e. up to 100% of basic and
79
D.A. But the employer is not bound to contribute at the enhanced
rate. At present the different schemes available are Employees
Provident Fund Scheme, 1952, Employee Deposit Linked
Insurance Scheme,1976 and Employee Pension Scheme, 1995.
The rate of interest for such contributions are fixed by
government. This rate of interest applicable for provident fund is
announced every year and changes based on the prevailing
economic conditions. The prevailing interest rate (2013 – 14) is
8.75 %
3.4.2 Public Provident Fund
Individuals who are not eligible to open EPF account can open a
public provident fund account (PPF). Every year, an individual can
deposit a maximum of Rupees one lakh fifty thousand in this
account. The public provident fund is one of the top choices for
many to save tax. The interest offered under PPF are monitored
and maintained by the Government. The interest rate is linked to
the bond yield in the secondary market. Currently savings in PPF
earn 8.75 percent interest. The PPF offers investors a lot of
flexibility regarding the amount of investments, it can be as low as
Rs. 500 and can be as high as rupees one lakh fifty thousand.
This is a long term product.The account can be closed only at the
80
end of fifteen years from the date of the deposit made into the
account.
Interest earned under provident fund schemes are not taxable and
can be opened in the name of spouse and minors, but the total
contribution cannot exceed the limit set by the government.
Table 3.2 provides a comparison among the PPF, EPF and 5-year
deposit with banks qualifying for tax benefits.
Table 3.2
Tax saving products returns
Financial
year
SBI 5 year
deposit
PPF EPF
2005 – 06 6.50 % 8.0 % 8.50 %
2006 – 07 7.21 % 8.0 % 8.50 %
2007 – 08 8.33 % 8.0 % 8.50 %
2008 – 09 8.80 % 8.0 % 8.50 %
2009 – 10 7.67 % 8.0 % 8.50 %
2010 – 11 7.87 % 8.0 % 9.50 %
2011 – 12 9.11 % 8.6 % 8.25 %
2012 – 13 8.65 % 8.8 % 8.50 %
2013 – 14 8.83 % 8.7 % 8.75 % Source: Bloomberg, RBI,EPFO, Economic Survey 2013 – 14
3.5 National Pension Scheme
Every individual is in need of financial stability and security during
old age. Not all citizens are covered under pension schemes. To
meet the needs of citizens, Government of India launched the
National Pension System (NPS) on 1st January, 2004 with the
81
objective of providing retirement income to all the citizens. NPS
was initially launched for government employees not eligible for
pension. From May 2009, it is open for subscription to all. Main
aim of the NPS isto inculcate the habit of saving for retirement
amongst the citizens. The fund collected under NPS is managed
by pension fund managers shortlisted by the government.
The return on investment under NPS is based on the performance
of the pension fund managers. This product is still not very popular
among individuals due to lack of awareness and being a new
product has its own challenges of acceptability.
3.6 Bonds
A bond is an instrument of debt and resembles a promissory note.
The issuer of the bond pays a specified amount to the holder of the
bond at specified future dates as mentioned in the bond indenture
at the time of issue. The payments which are made to the bond
holder are the periodic interest payments and the redemption of
the principal amount at the time of maturity. Interest is payable half
yearly once or annually once, depending on the terms specified.
Payment once in six months is the most common periodicity of
payment of interest followed by the bond issuers. Bonds are
issued by central or state Government, financial Institutions, utility
82
companies (like electricity boards, railways etc.) and by private
sector companies.
In India we use the word „Debentures‟ for the long term debt
instruments issued by non-government corporates and use the
word „Bond‟ for these securities if it is issued by government or
government assisted entities. Basic features of a bond are
Par value or the face value
A bond has a par value that is given on the face of the bond.
This is the amount the firm promises to pay at the termination of
the bond. It is similar to the face value of an equity. Generally,
bonds traded on the exchanges are of face value of Rs.100 or
Rs. 1000. For private placements, the bonds could be of higher par
value.
Coupon Rate
Coupon rate means the interest rate that the bond carries. The
bond holder gets this interest on the pre specified dates at the time
of the issue. The most common being the semiannual coupon
payment.
Tenor
Tenor or the maturity period as it is called popularly, is the time
period till when the bond holder receives the interest. At the end of
the tenor, the par value with or without premium is paid back by
83
the issuer of such bonds to the bond holders. Tenor of the bond is
one of the important criteria while taking a decision to make
investment in bonds.
Bonds are classified into different categories based on the term to
maturity.
1. Long term Bonds: When the maturity period of the bond is more
than 10 years.
2. Medium term Bonds: When the maturity period is 5 to 10 years.
3. Short term Bonds:When the maturity period is less than 5 years.
Bonds are also classified based on the embedded options if any,
available for the bond holder. Various types of bonds available in
the market are:
Straight Bond (Plain vanilla bond) that pays a fixed periodic
coupon over its life and is not convertible. Popularly called as Non-
Convertible Debentures (NCDs), if issued by Corporates.
Zero Coupon Bond: These bonds do not pay any interest till the
maturity date. They redeem the bond on face value at the end of
the term. To compensate for the nonpayment of interest, these
bonds are issued at a deep discount to their face value.
84
Floating Rate Bond: These bond do not offer a fixed rate of
interest but the coupon rate is linked to the prevailing market rate
of interest. The benchmark interest rate is specified at the time of
the issue.
Convertible bonds: These are special types of bondsthat convert
part or total face value of the bond into equity after a certain period
of time as mentioned at the time of issue. Interest is paid till the
date of conversion. Based on the proportion of the face value
converted into equity shares, they are classified as partly
convertible debentures (PCDs) or Fully ConvertibleDebentures
(FCD).
3.6.1 Infrastructure bonds
To give boost to the infrastructure of the country, Government
allowed infrastructure companies to issue long term bonds with tax
benefits for a limited period. These bonds were launched in 2009
and were discontinued in 2012. These bonds are regular bonds
and have all the features of any conventional bond except that up
to an investment of Rs. 20000 tax benefit was available, over and
above the 80 C benefit of Rs. 1 lakh.
85
3.6.2 Inflation Index Bonds
To encourage the retail investors into the bond market,
Government launched the inflation adjusted bonds that paid
interest to the bond holders based on the inflation level. Market for
inflation index bonds in India is in a nascent stage as far as India is
concerned.
Bonds are exposed to interest rate risk that is, interest rate
variationduring the life time of the bond. Credit risk is another
source that is important in determining the expected returns for
bonds as there is a possibility of failure of payment of interest and
the face value, if the financials of the companies become weak
before the maturity of the bonds.
Due to the lack of product knowledge and awareness level about
the functioning of the bond market. It is not very popular among
retail investors in India. This market is dominated by banks and
financial institutions including, Foreign Institutional Investors (FIIs).
Table 3.3 gives details about the 10-year government bond returns
for the last five years. As of now not much data is available about
inflation index bonds as it‟s a new product launched recently.
86
Table 3.3
Return on government bonds
Year 2010 2011 2012 2013 2014
Return 7.6% 7.9% 8.6% 8.1% 8.8% Source; RBI bulletin and Bloomberg
87
3.7 Insurance
Insurance offers protection against pure risk. Pure risks are
accidental and unintentional. All pure risk is considered by
insurance companies for providing insurance cover. It is possible
to estimate the loss in case of pure risk, and the original status of
the asset could be restored in case of non-life covers. Speculative
risk that has chance of either gain or loss cannot be insured. There
are different types of insurance products available in the market.
To provide the insurance cover, individuals have to pay premium
to the insurance company.
All types of pure risk Insurance covers are classified broadly into
two categories:
i) Non-Life or General Insurance products
ii) Life Insurance products
88
3.7.1 Non-Life Insurance products
This type of insurance covers all assets other than the human life.
Non-life insurance covers are annual contracts that have to be
renewed every year by paying the requisite insurance premium.
The most popular insurance covers for assets owned by
individuals are:
Motor Vehicle Insurance
This type of insurance covers the motor vehicles owned by an
individual against theft and accidental damages. The motor vehicle
owned could be two wheelers, cars or any other vehicles eligible
for cover including trucks and busses. In case of accidents, if the
vehicle is in a repairable condition then the cost of restoring the
vehicle to its pre accident condition is borne by the Insurance
company. In case of total damage or theft of the vehicle, the
Insured declared value is paid to the owner of the vehicle. In India
motor vehicle insurance is mandatory for all vehicles plying on the
road.
Home Insurance
In this type of Insurance, the contents of the house and if required
the building itself can be insured against damage caused by third
party or due to the fury of the nature. The contents in the house
are covered for accidental damages and theft.
89
There are insurance policies available to cover housing loans
which are of great importance for individuals, if there is an
outstanding loan against the residential property and in the
eventually of the death of the borrower, insurance company pays
to the bank the outstanding amount and the dependents have the
secure ownership of the residential property.
Health Insurance
This types of policy covers the medical expenses incurred by
insured person in case of hospitalization due to medical problems.
This is one of the most important cover an individual should
consider during financial planning. Most of the employers provide
health insurance to the employees under group health insurance
cover. As long the individual is employed with the company, the
cover is in force, but once a person leaves the job the insurance
cover lapses. Any expense above the insurance cover amount
has to be borne by the insured person.
3.7.2 Life Insurance
Life Insurance is a protection product which forms an integral part
of an individual‟s financial plan. Life insurance provides monetary
cover against the life of the insured. Since the value of the human
90
life cannot be assessed, Insurance companies provide the
monetary cover is in terms of sum assured by the insured at the
time of taking the policy. Life insurance substitutes for the loss of
income in the event of the death of the wage earner. In case of the
death of the insured person, the sum assured is paid to the
dependent of the deceased.
The sum assured depends on many parameters like age of the
insured, current earnings, health condition of the persons and
many other parameters as specified by the insurance companies.
Based on the information provided by the individual, insurance
companies will calculate the premium payable by the insured. Life
insurance contract are a long term contract and the contract period
depend on the age of the insured. Regular payment of the
premium till the contract period is mandatory. In case of the default
in payment of the premium by due date, the insurance cover
ceases to exist. The person defaulting in the payment of premium
will get only the surrender value as per the terms and conditions of
the policy.
There are many types of life insurance products which are offered
by the insurancecompanies. They all provide life cover, but have
91
different conditions and maturity benefits. The types of polices
which are popular are
92
Term Insurance
Term Insurance provides protection against death in monetary
terms for a specific period of time, also called as policy period. It
has no maturity value in case the insured person survives after the
term period of the insurance. The sum assured is payable only in
case of the death of the insured during the period covered by the
policy. The premiums charged by the insurance companies are the
least for term insurancepolicies.The premium amount remains
same throughout the policy period. It is appropriate for young
people who need large amount of insurance and those who are
need of only life protection and whose insurance needs will
decrease over time.Many housing loan providers insist the
borrower, to take term insurance matching the housing loan term
and the sum assured is equivalent to the housing loan amount.
Being the cheapest form of life insurance, the premium also is less
for the borrower. The only disadvantage of term insurance is that
at the end of the policy period the insured does not get anything.
Whole Life Insurance
This kind of insurance policy not only provides life cover but also
has some savings element inbuilt, wherein at the end of the policy
period some cash payment the insured person in case of
93
survival.The premium charged is higher than the term insurance
policies. The Insurance premium amount remains same
throughout the policy period. The amount received at the end of
the policy period is not taxable. The policy period generally ends
when the insured is close to retirement age. This amount received
at the end of the term period helps at the time of retirement.
Money back policies
Another important type of policy available in the market is the
money back policy. This policy provides life cover as well as cash
payment during the term period of the insurance. A fixed amount of
premium is paid every year to enjoy the life protection and at
specified intervals as mentioned in the insurance policy, a certain
percentage of the sum assured is paid.For example, if some on
takes a rupees one lakh cover for a period of 15 years, then under
money back policy, the policy holder mayreceive 25% of sum
assures at the end of 5 years, 25% at the end of 10 years and at
the end of the period receives the balance of 50% (Rs. 50,000).
94
3.7.3 Unit Linked Insurance Plans
There is always a debate from individuals about the poor return
they get from traditional insurance plans, forgetting that it is a
protection product rather than an income generating product. To
meet the market demand for an investment product, insurance
companies came out with a unique plan which combined the life
cover along with the market return. Such a product offering dual
benefit is known as Unit Linked Insurance Plans (ULIPs). ULIP is
actually a bundled product, that not only provides life insurance
cover, but also allows the policy holder to participate in the capital
market. They put insurance and investments together.Like any
other insurance product, you have to pay insurance premium. The
premium collected is split into twoparts, one part going for
providing the term insurance cover and the second part is invested
in the units of debt, equity or liquid funds. The choice of funds
where investment has to made is given to the policy holder.
The amount going towards the term insurance cover depends on
the sum assured. Generally,only a small portion of the premium
goes towards the term insurance coverage as it is the cheapest
policy,whereas the major part of the premium is invested in the
investment schemes participating in the capital market. Since the
95
major part is invested in capital market products, the return on
investment for this amount could be higher than the return on
traditional insurance products depending on the market conditions.
The Net Asset Value (NAV) ofunits of each fund is made available
to the investor periodically. The value of investments in each fund
is calculated by multiplying the NAV of the scheme by the number
of units held by the policy holder. ULIPs come with a lock in period
of 5 years, which means that for the first five years you cannot
withdraw your money. Insurance companies allows the policy
holder to switch between funds as and when required. In case of
the demise of the policy holder during the policy term, the sum
assured under term insurance is payable along with the fund value
as on the date of the claim.
3.7.4 InsurancePension Plans
With the demand for new products, many insurance companies
are offering pension plans. This product is created to meet the
retirement plans of people. Like any other whole life policy, regular
premium has to be paid till the policy term ends. During the policy
term, life cover is provided by the insurance company. The
insurance cover ceases at the end of the policy term and the
amount due to the policy holder is invested that gives regular
96
income by way of dividends, and the income generated from such
investment is paid to the policy holder periodically. The periodic
sum paid amount acts like a pension a for the policy holder. This
product does face competition from other non-insurancepension
schemes available in the market.
All insurance products get the income tax benefit under section
80 C. The amount received on maturity is not taken into account
while calculating the taxable income of an individual.
Insurance companies do provide riders where in by paying
additional premium on top of the regular premium, the sum
assured under specific situation increases and added benefits are
provided to the dependents. The popular riders in the market are
double accident cover, premium waivers cover, family pension
cover and critical illness cover.
Insurance companies provide a variety of options like monthly
payment, quarterly payment, semi-annual payment, annual
payment and for some product onetime payment is also allowed.
In onetime payment or a single premium policy, the amount
involved is high. Most of the single premium products start with
rupees fifty thousand onwards and is a very useful product for
individuals whose earnings are high for a shorter duration, like film
actors and sports persons.
97
3.8 Mutual Funds
In India, the Mutual Fund industry started with the setting up of
Unit Trust of India in 1964. Public sector banks and financial
institutions began to establish Mutual Funds in 1987. The private
sector and foreign institutions were allowed to set up Mutual Funds
in 1993.
Mutual funds are collective investment schemes, where a large
number of investors having a common investment objective pool
their money for investments. Mutual funds are sponsored by
investment institutions which act as investment conduit. The
sponsoring company appoints an Asset Management company
(AMC) to invest the money collected from the investors. The
amount pooled in by the investors is invested in asset classes as
per the investment objective of the mutual fund scheme under
which the money iscollected.The amount is handled by a fund
manager designated by the asset management company. The
fund manager invests this pool of money in securities, ranging
from shares and debentures to money market instruments or in a
mix of equity and debt, depending upon the objectives of the
scheme to ensure good returns from the fund for the investors
There are many reasons why people invest in mutual funds.
98
The common reason cited are
Professional expertise
Diversification
Cost
Liquidity
Transparency
Flexibility:
Tax-saving.
Well regulated market
3.8.1 Mutual funds Classification
Based on the structure, mutual funds are classified as:
a) Open - Ended Schemes
An open-end fund is one that allows for subscription and
redemption all through the year. There is fixed maturity period.
Investors can buy and sell units at Net Asset Value announced on
daily basis. Liquidity is a key feature of open-end schemes.
b) Close - Ended Schemes:
A closed-end fund has a pre specified maturity period which
ranges form from 3 years onwards. Investors can subscribe for the
units at the time of New Fund Offer (NFO). Subsequently the
99
buying selling of units take place through the stock exchanges
where they are traded. At the end of the maturity period, the units
are redeemed based on the net asset value. These kind of
schemes are prescribed for long term investors. Many fund hoses
convert the close ended schemes to open ended schemes after
the lock in period to provide liquidity for the investors.
c) Interval Schemes:
These are a combination of open ended and close ended
schemes. After the initial issue of units during the public offer, the
units are traded on the exchanges like a close ended fund and are
open for issue and redemption at pre specified intervals. Liquidity
is a major concern for such schemes.
Mutual funds are also classified based on the investment objective
of the schemes as:
Equity Funds
In this kind of funds, a major corpus of the amount collected from
investors is invested in equity shares. The type of companies in
which investment is made is very important, as based on their
market capitalization (Cap), equity funds are classified as
Large Cap Fund
Mid Cap Fund
Small Cap Funds
100
Debt Funds
The major part of the corpus under these schemes are invested in
fixed income securities like debentures and bonds issued by
corporates and government. The major objective is to have
regular income by way of interest from these investments. These
funds carry a lower risk in comparison to equity oriented risk.
There is some amount of risk as corporates could default in
payment of interest or repayment of principal. These funds offer a
lower rate of return due to reduced risk. Schemes that invest only
in government securities are also called as gilt funds. The amount
received as interest from their investments by fund houses is
distributed as dividends to the unit holders. This feature of regular
income by way of dividend attracts many investors towards debt
funds. Debt funds are taxed differently in comparison to equity
funds.
Liquid Funds
These funds invest in money market instruments which have a
shorter term of maturity and are highly liquid. The fund charges
are very low in comparison to other mutual fund schemes. The
major portion of investment goes into treasury bills, commercial
101
papers, certificate of deposits and short term debt instruments.
The interest received from these investments are distributed as
dividend on monthly basis by most of the schemes. This scheme
is very popular among banks and corporates for temporary
parking of funds. These are low yielding funds carrying the least
risk among all mutual fund schemes. Retail participation is poor
due to lower returns.
Balanced funds
To capture the return of equity funds and the lower risk of debt
funds, fund houses offer balanced funds. These funds invest in
both equity and debt market instruments. The investment in debt
goes upto 40 -60% depending upon the market conditions. Tax
treatment of these funds depends on the percentage of corpus
invested in equity. if the amount of investment is 65 % and above
in equity, then all tax laws applicable to equity schemes is
applicable. These schemes are suitable for investors who do not
want to take excessive risk and are looking for moderate returns.
Index funds
The investment objective of such funds is to replicate the
performance of bench mark indices available in the market. The
102
corpus collected under the scheme is invested in the equities of
companies constituting the index. The investment in each
constituent stock is in proportion to its weight in the index. The
most popular benchmark index replicated is Bombay stock
exchange index,Sensex, consisting of 30 companiesshares and
National stock exchange index,Nifty, consisting of 50 shares.
These funds have low operating expenses and charge a lower
management fees for running the scheme. These schemes offer
returns closer to the index or market returns. This carries the
market risk and is found suitable for those who would like to
generate the market return for any given year. These funds are
still not very popular due to the lack of awareness and the
knowledge about the product.
3.8.2 Exchange Traded Funds (ETF)
Popularly known as ETF, these funds are traded on the
exchanges like any other share.
The basic objective of an ETF is to track a specific asset class. If it
is equity then, it tracks the performance of the specified index,
exactly like an index fund. If it is gold, then it tracks the price
movement of gold. The most popular ETF‟s are that of
Nifty,Sensex and gold.
103
The biggest advantage of ETF over the regular mutual funds is
that traders can go long and short on these ETFs during the
market trading hours. Investors cannot go short on Mutual funds.
Gold ETF is one of the most popular form of investment in gold
world over as it has many advantages over buying physical gold.
Some benefits are that it can be held in electronic form, while
selling you pay only the brokerage and no wastage is charged as
in the case of physical gold and are highly liquid.
3.8.3 Equity Linked Saving Schemes
To give an alternative choice to the tax payers, Government of
India has given tax benefit under section 80C to certain types of
mutual funds schemes,that are called as Equity linked savings
scheme (ELSS).
There are many schemes which are created to meet the growing
demands of investors and are named based on the objective of the
schemes like thematic funds, international funds, hybrid funds,
multi asset funds.
3.9 Equities
Equity investment also known as investments in shares, which
means investing one‟s money in a companyshare to become its
104
shareholder. Since running a business involves risk, investing in
equity shares carries a higher level of risk with a potential of higher
returns when compared to investment in debt instruments. Shares
of listed companies are traded on stock exchanges.
Some of the benefits of owning shares are
Possibility of increase in market price (Capitalappreciation)
Entitlement for any corporate action announced by the company
Tax benefit under long term capital tax
Historically stocks have given better inflation adjusted returns
compared to other asset class
Transparency in the information about the stock price
Highly regulated by Securities Exchange Board of India
The return from equities could be in form of appreciation in the
share price,dividends orboth. In spite of all the benefits of stock
investing, there are some drawbacks of stock investing like
Possible decline in stock prices
Manipulation in stock prices
Company going into liquidation
Poor liquidity in the stock market
105
Investments in equity is very poor in India due to lack of
awareness about the equity market and its functioning. Mutual
funds do provide an opportunity for participating in the equity
market in an indirect way. Many investors first invest in mutual
fund before investing in the equity market directly. Stock
investment is popular among the investors from major cities in
India.As the current study covers major cities of south, it will be
useful to look at the stock returns over last few years. Proxy to the
stockor return on equity investment is the return on stock index.
CAPM model discussed earlier uses NSE Niftyor BSE Sensex
returns as RM. Mutual funds use benchmark index set during the
launch of various schemes for performance evaluation. Return on
popular stock indices used by investors is given below.
Table 3. 4
Stock Indicesreturns (in %)
Index 2010 2011 2012 2013 2014
BSE Sensex 17.4 -24.6 25.7 9.0 28.7
BSE 100 15.7 -25.7 30.0 5.9 30.7
BSE 200 16.2 -27.0 31.0 4.4 33.6
BSE 500 16.4 -27.4 31.2 3.3 34.9
NSE Nifty 17.9 -24.6 27.7 6.8 30.1
BSE mid cap 16.1 -34.2 38.5 -5.7 50.9
106
BSE Small cap 15.7 -42.6 33.0 -11.2 66.3
Source: Business standard 29/12/14, BSE and NSE websites
3.10 Derivatives Market
India was a late starter in offering derivative products. Instruments
traded on this market are basically leveraged. These instruments
derive their value from the underlying assets. The main
participants in this market are hedgers, speculators and
arbitragers. There is a tremendous growth in the volume of trade
in the derivative segment of NSE and BSE, but Speculative trading
in derivative markets is very risky as the deals are highly
leveraged. Various derivatives available on NSE and BSE are
Futures for single stocks and Index
Call and Put Options for single stocks and Index
This market is popularly called as F&O market standing for Futures
and Options market
3.11 Chit Funds
Chit funds are an avenue of saving for many individuals.
Individuals keen on investing in chit funds have to become
member of a group formed by the chit fund company. Group
107
members pool in their money with through the chit fund companies
who conduct an auction once the contributions are collected from
members of the specified group. Bids are called from the members
for taking the chit amount, which is the collected pool of money.
Whoever makes the most attractive bid is handed over the pooled
money after deducting the commission payable to the participating
members. For example, if there are ten members in a chit group of
1 lakh, and if in the auction, the best bid is at Rs. 85,000, then the
bidder gets tis amount and the remaining amount of Rs. 15,000 is
divided among the members, that is Rs. 1000 per member. There
may be slight variations in the way chit auctions are conducted run
by registered and unregistered chit fund companies. Most of the
chit fund companies are small and medium enterprises. Despite
scores of scandals and bad publicity, chit fund continues to be well
accepted by investors. According to some investors, chit funds
provide better returnsthan many other instruments available for
investments. The biggest advantage of this product is the it
provides a lump sum whenever needed, and the amount received
could be paid back in smaller contributions to the chit group The
funds are available at better interest rate in case of chit funds
when compared to micro financial institutions. The unorganised
chit fund market is large and growing. In many rural and semi
108
urban areas, chit fund is the most popular mode of saving as well
as borrowing. Small traders and businessmen participate
extensively in chit funds. It is very popular among the southern
states of Tamil Nadu, Andhra and Kerala. In Karnataka, one of the
state organisation itself runs chit fund schemes.
3.12 Gold
Gold and Indian savings habit go hand in hand. Importance and
significance of gold in India starts from the birth of child, where
gifting of gold jewellery is a must for most of the families. Indian
are obsessed with gold. Irrespective of the financial and social
status, gold is held by most of the Indian families. Investment in
gold is considered to be a safe haven world over. Physical gold
canhave purchasedin variousforms, starting from gold coins,bars,
jewellery. Today investors have the option to buy gold either in
paper form or in electronic form.
E-Gold can be purchased from National spot exchange, that allows
you to purchase gold in smaller denominations such as 1, 2 or 3
grams. The purchases can he held in electronic form in an
individual‟s D‟Mataccount.
Gold can be purchased in electronic form as gold ETF‟s either
through the fund houses that creates these ETF‟s or from the stock
109
exchanges where they are traded like any other ordinary share.
ETF‟s require you to hold a D‟Mat account as the ETFs are
credited always into your D‟Mataccount.
Gold if purchased could be considered for consumption purpose or
could be considered for investment. Return on gold investment is
only in form of appreciation in the price. Return on gold
investments is given in table 3.5
Table 3.5
Return on Physical gold(10grams’ coin)
Year 2010 2011 2012 2013 2014
Return (in%) 23.3 32.1 12.1 -4.1 -7.3 Source: Business standard 29/12/14, MCX website
3.13 Real estate
Every one dreams of owning a house.A house where one lives is
considered a personal asset. When there is purchase of second
house or any other form of real estate, then it could be considered
as an investment. From the view point of an investor, real estate is
broadly classified as
Residential Property
Commercial Property
110
Agricultural land
Time share in a holiday resort
Residential property and Commercial property are investments
that provide returns in form of rent and capital appreciation
because of the price change.
Ticket size of Real estate investments is on a higher side when
compared to other forms of investment. Legal process involving
the authentication of the title of the property and the cost of
registering it are the two major issues which sometimes makes it a
poor choice among the middle class investors. Liquidity is a
challenge, which can deter an investor from going ahead with real
estate investment.
Real Estate Investment Trusts (REITs) is a concept that is
prevalent in other countries and is likely to be launched in the
Indian market to allow investors to make investments in the real
estate sector with nominal amount. Securities Exchange Board of
India has come out with the guidelines for the launch of REITS in
India. Purchase of REITS is always considered as investment.
table 3. 6 gives details of the real estate index created by National
Housing Board (NHB) for major cities since 2013.
111
Table 3.6
Return on residential property index(in %)
Cities 2013 2014
Mumbai 2.3 5
Delhi 0.5 -1.5
Bengaluru 4.7 -2.7
Kolkata -6.2 7.7
Chennai 5.1 7.6
Pune 14.6 2.6
Hyderabad 3.3 2.2 Source: NHB Data,Bloomberg, Business standard
3.14 Commodity market
With the opening of commodity exchanges in India, investors are
in a position to in commodities. Commodities are classified as
i) Agricultural commodities
ii)Non-agricultural commodities
Products traded under agricultural commodities are primary
products and not manufactured and finished goods. Some of the
important agricultural commodities traded are spices like
cardamom,jeer,turmeric,coriander,soybean,castor seed,mustard
seed,Chana,sugar,cotton, wheat,maize and menthe oil.
In India commodity market is regulated by Forward Market
Commission (FMC)
112
Non-agricultural commodities traded are classified under two
categories
i) Crude oil, Natural gas, Heating oil
ii) Precious metals consisting of Gold, Silver and Platinum
Lack of knowledge about commodities and the functioning of the
commodities market keeps investors away from the market. It is
perceived to be a high risk investment
3.15 Operational Definitions of Concepts
Employed women
For this study, employed women comprised those women, who
were employed outside their residence and were drawing salary
from their employees. Practicing professionals, business women
and self-employed women were considered as employed women
for this study.
Savings
The amount remaining with an individual after meeting all
expenses from the income earned.
113
Current Investments
The portfolio of financial and Physical assets held by an individual
at the time of survey.
Financial Assets
Assets held by individuals which are not tangible in nature.
Common financial assets held by investors are equity
shares,bonds,debentures, fixed deposits, mutual funds and other
similar products.
Physical Assets
Assets held by individuals which are tangible in nature like real
estate, motor vehicles, gold silver and other precious metals.
Investment pattern
Classification of the investment portfolio held by an individual is
based on the type and the riskiness of the assets constituting the
portfolio.
Risk Level
Relative measure of risk associated with an asset. This was
measured on a five-point rating scale.
114
Financial literacy level
A relative measure of one‟s knowledge about financial markets
and the financial products available in the market along with basics
of finance like return calculation and tracking of market.
Tax saving Product
All those investments qualifying for 80 C tax benefit under the
Indian Income tax act.
115
Chapter – IV
RESEARCH METHODOLOGY
4.1 Introduction
Any discussion on financial Investments attracts attention of
individuals. The discussion can be between individuals or it can be
an expert‟s advice on the television channel or internet or any
other media of interest. It has been assumed that investment is an
area of men. Historically due to the culture prevalent in India and
most of the wage earners being the male members of the family,
women were not involved in investment related discussions and
were not participating in the investment decision making process.
Every government coming to power in India is promoting girl child
education. With the increase in the education level of women and
job opportunities available, women are finding more job
opportunities in different sectors. Women by nature are savers and
with a continuous increase in the number of working women, the
number of women investors is on a rise. A study on the investment
behaviour and savings pattern of employed women will of great
interest to all those who are involved in research, financial
intermediaries and product creators. Findings of the research
116
could help product developers to create products meeting the
needs of women especially the employed women.
4.2 Statement of the Problem
This study aims at understanding the current investment pattern of
employed women based on the types of investment products held
by them currently. Classification of the investment pattern is based
on the portfolio risk associated with the current investments.
Further the study will make an attempt to identify the association
between demographic attributes and the investment pattern of
employed women. Additionally, attempt will be made to understand
the risk return perception of different investment products and the
financial literacy level of employed women.
4.3 Need for the Study
Many research studies have been conducted in the area of
investments and savings habits of individuals and their preference
for investment products based on the risk, return and demographic
attributes. A large body of literature is available on investment
pattern of individuals and comparisons have been made between
the investment pattern and preferences of men and women. In
most of the studies, the major respondents were male and the
117
participation by women was low. Most of the studies concentrated
on men dominated world of investments. However, there is dearth
of research studies on the investment pattern of women especially
those who are employed and have their own source of income. An
attempt is made to fill this research gap and an attempt is made to
fulfil the need for a study on the investment pattern of employed
women. As an extension of research, attempt will be made to
understand the nature of gold purchase and to ascertain if gold
purchase is for consumption or is for investment purpose. It will be
interesting to know what women do with their saving and where
they invest the amount saved. Job opportunities for women are on
rise in the knowledge driven sectors. Women find better
opportunities in urban areas, especially in the metropolitan cities.
There is a gradual rise in the number of women who take
investment seriously and if required engage professional money
managers. It will be of interest to studythe investment pattern of
employed women based on the current investments held by them.
4.4 Scope of the study
With the increase in the number of women investors and
governments plan to push savings for girl children, there is going
to be a substantial increase in investments by women.
118
Government has opened all women banks to bring more women
into the banking network, indicating the importance of savings by
women. The study will be helpful to find out the ideal investment
options for women. These findings could be useful to the financial
product creators like banks, mutual fund houses, insurance
companies, portfolio managers and other market intermediaries, to
understand what an employed woman may be looking for, in a
financial productwhile taking investment decisions. Further
research can be carried out to compare the investment pattern of
rural women, as well as a comparison could be made between the
investment pattern of women from urban and rural areas.
4.5 Objectives of the study
This research study tries to cover the following objectives
1. To study the investment pattern of employed women.
2. To identify attributes that influence the investment pattern.
3. To study the financial literacy level and risk profiling of financial
products.
4. To identify the type of financial products preferred by employed
women.
119
4.6Hypotheses
This research study will test thefollowing hypotheses given below
using the suitable statistical tests.
H1: There is a significant association between the investment
pattern and the city of residence of the respondent.
H2: There is a significant association between the investment
pattern and the age of the respondent.
H3: There is a significant association between the investment
pattern and the educational background of the respondent.
H4: Investment pattern is dependent on the annual income of
the respondent.
H5: There is a significant association between the investment
pattern and the sector of employment of the respondent.
H6: There is an association between the Investment pattern and
nature of job
H7: There is an association between the Investment pattern and
themarital status
120
H8: There is an association between the Investment pattern and
the family size
H9: There is an association between the Investment pattern and
thefinancial literacy level.
H10:There is an association between the investment pattern and
investment consultant.
H11: There is an association between the investment pattern and thereview period.
H12: There is an association between the investment pattern and
theinvestment purpose.
4.7 Research Methodology
The study carried out is a descriptive research study. Descriptive
research studies (Kothari ,2000) are concerned with describing the
characteristics of a particular individual or of a group or
phenomena. The source of data for the study is the primary data
collected from the respondents using a structured questionnaire.
4.7.1 Sampling plan
Considering the time factor and the cost involved in going for
random sampling, convenience sampling was used for selecting
121
the respondents for the study. Due to a large population of working
women in the cities of Bangalore, Chennai and Cochin,
respondents were chosen from these cities. The sample
framework for the study included all employed women and
practicing professional and self-employed women from the cities
chosen for drawing the samples. Convenience sampling was used
for drawing samples from the three cities chosen for the study.
In order to have a wider group of respondents suitable for the
study, the respondents were chosen from those employed in
different sectors and belonging to different age groups and
educational back ground. The investment options provided for the
respondents to choose were Bank deposits, Postal savings,
bonds, mutual funds, insurance, Gold, real estate, equity
shares,commodities.
4.7.2 Tools of Data collection
Personal survey method with the help of a self-constructed
questionnaire was administered to collect primary data from the
respondents. The questionnaire composed of two sections.
Section A dealt with questions related to the demographic profile of
the respondents, while section Bcontained questions related to the
122
product awareness and the current investments held by the
respondent, risk assessment of various financial products and all
other questions related to the study.
The questionnaire was prepared after the review of literature using
online and off line resources. Researcher held discussions with
subject matter experts and other researchers and academicians
before finalizing the questionnaire. The questionnaire was so
structured that, factual questions were asked before the opinion
questions.
Dichotomous questions were used to capture the product
awareness related questions as well as those related to tax
savings.Multiple response questions were used to collect
information about the current investments held by the respondents
and their awareness about the commonly available financial
products. To ascertain the risk perception of respondents with
respect to a financial product, a five-point rating scale was used.
Most of the questions were close ended.
To evaluate the effectiveness of the questionnaire, a pilot study
was carried out. The pilot study consisted of administering the
questionnaire to 32 employed women. During the pilot study it was
found that many terminologies used in the initial questionnaire
123
were not understood and interpreted correctly by many
respondents. It was observed that respondents were restraining
from disclosing monthly income, but were comfortable to indicate
the range in which their annual income fell. Among the government
employees, there was hesitancy to disclose their investment
details as they felt it was too confidential. Based on the feedback
received and queries raised by the respondents during the pilot
study, few questions and phrases used were restructured, so that
the respondents interpreted the questions in totality. Questionnaire
was modified three times before finalizing the questionnaire for the
commencement of the main study. The final questionnaire
contained 24 questions.
4.7.3 Methodsof Data Collection
Respondents of various age groups with different educational
background and employed in various sectors with varied
experience level were approached to fill up the questionnaire. The
respondents were primarily employed in private, public and
government ownedcompanies. Some business women and
professionals were also approached for the survey. Questionnaire
was electronically mailed to those who could not be personally
124
reached and those who preferred the questionnaire in electronic
form.
IT industry respondents were fine with electronic form but other
category respondents were not comfortable with the electronic
form. It was found during the data collection that respondents were
not comfortable disclosing details about their investments, which to
some extent increased the number of incompletequestionnaires.
Theseincomplete questionnaires could not be used for data
processing.
A total of 720 questionnaires were used to collect the data. but at
the end of the survey period only 377 questionnaires were found
suitable for analysis, resulting in a response rate of 52.53%. One
of the deterrent for getting a better response rate was the
hesitation on part of the respondents to fill in details related to
current investments held, which respondents felt were confidential.
There was less response from business women, as the researcher
could not get positive response from them, in spite of repeated
attempts for a meeting. Among the professional women, getting
response from medical professionals was a daunting task due to
their busy schedule and lack of awareness about investment
products. Many were investing with the help of investment
consultants and were not keen to participate in the survey.
125
126
Period of Study
The period of study was from April 2012 to June2013, and the
cities covered for the study were Bangalore, Chennai and Cochin.
Respondents from Chennai were contacted from April 2012 till
August 2012. During this period a total of 111 completed
questionnaires were collected. Respondents from Cochin were
contacted from September 2012 till November 2012. During this
period a total of83 completed questionnaires were collected.
Respondents from Bangalore were contacted from December
2012 till June 2013. During this period a total of 183 completed
questionnaires were received. Over the study period, repeated
reminders made to respondents over telephone and by email.
Pilot study was carried out during February and March 2012.
Investment pattern of the respondents were classified into three
distinct categories based on the response to the question
regarding the existing investments held them and their perception
towards the risk associated with financial products.
The three distinct investment pattern classification are:
1. Non Risky Portfolio Pattern (NRPP): If the current
investments held by the respondents consistedof bank fixed
127
deposits, provident fund or any other asset carrying low level of
risk according to the respondent, then it was classified as a NRPP.
2. Moderately Risky Portfolio Pattern (MRPP): If the current
investments held by the respondent consistedof a combination of
low risk assets and mutual funds, then it was classified as MRPP.
3. Risky Portfolio Pattern (RPP): If the current investments held
by the respondent consisted low risk assets along with equity
shares or commodities or any asset perceived to carry high risk by
the respondent, then it was classified as RPP.
4.7.4 Plan of Analysis
The data collected was coded and enteredinto Microsoft excel and
was checked for the accurateness of the data entry. The final data
from Microsoft excel was imported into SPSS, version 19 for
processing and analysis.
The data was processed and analysed keeping in mind the
objectives of the study. Weighted means were used to quantify the
qualitative data.
To measure the perception of risk five-point rating scale was used.
128
To test the association between variables, chi square test was
carried out.
Standard deviation is used to analyse and understand the
variability of the data and coefficient of correlation is used to find
the strength of the relationship between variables
4.8 Limitation of the Study
In personal survey, chances of respondent‟s bias are there.
Chances of researcher‟s bias might have crept in during
collection of data and while handling incomplete questionnaires.
Thestudy wasrestrictedtotheemployed women from the
southerncitiesof Bangalore, Chennai and Cochin. The findings
ofthe study may not be generalized to the entire population
ofemployed women.
The study is restricted to only employed women.
Enough care has been taken while processing,cleaning, editing
and analysing the data, to minimize the impact of these limitations
on the findings of the study.
129
4.09 Chapter Scheme
The research work carried out has been presented in the following
chapters.
Chapter – I Introduction
This chapter givesdetails about investments and
the various theories of investments along with past
and prevailing Indian investment scenario.
Chapter – II Review of Literature
Thischapterdeals with the past research studies
carried out by other researchersand their findings
in the area related to the area of study
Chapter – III Investment avenues
Thischapter gives a briefonthe varioustypes of
financial products available for investments in the
Indianmarket along with their features.
Chapter – IV Research Methodology
Thischaptergives abriefon the methods and
procedures of data collection. It givesa brief on
the tools used for analysis of data.
Chapter – V Analysis of Data
The data is analysed according to the research
objectives and is presented in this chapter. This
130
chapter consists offour sub chapters each for
every objective taken up for the study.
Chapter – VI Findings and Conclusion
Thischapterprovides the findings of the study
along with conclusion and suggestions.
Bibliography
Annexure Survey Questionnaire
131
CHAPTER – V
ANALYSIS OF DATA
5.1 Profile of respondents
Any research is authenticated by the nature of its
sample.Respondents profile gives a micro view of sample
distribution for the study. It also acts as a basis of linking variables
for the study. The analysis given below gives a detailed profile of
the respondents both demographic and economic.
Respondents are categorized based on the demographic
attributes and other variables which could help in understanding
and identifying patterns and relationships as per the objectives of
the study.
One of the main objectives of the study is to classify the
investment pattern of the respondents from the cities of Bangalore,
Chennai and Cochin.
132
Table 5.1.1
Citi wise distribution of respondents
City No. of Respondents Percent
Bangalore 183 48.5
Chennai 111 29.4
Cochin 83 22.0
Total 377 100.0
The above table gives a brief on the composition of the
respondents and it can be observed that majority of the
respondents (48.5%) were from Bangalore(48.5%) followed by
Chennai (29.4%) and Cochin (22.0%). Women from Bangalore
were more forthcoming in participating in the study comparedto
women from Chennai and Cochin.Bangalore being the IT capital of
India, provides better job opportunities for qualified women
resulting in higher number of respondents from the city for the
study.
133
Table 5.1.2
Age wise distribution of respondents
Age ( in Years) No. of Respondents Percent
Below 25 79 21.0
26 – 35 160 42.4
36 – 45 79 21.0
46 – 55 42 11.1
Above 55 years 17 4.5
Total 377 100.0
Investment preference and decision making process could change
as an individual grows older. Respondents were classified in terms
of age, which is presented in table 5.1.2.Majority of the
respondents (42.4%) were form the age group of 26 – 35 years,
followed by those who were below 25 years. Respondents of 55
years and above were less in number. Respondents from the
lower age groups were more willing to participate in the survey in
comparison to women aged above 45 years.
134
Table 5.1.3
Marital status of respondents
Marital Status No. of Respondents Percent
Single 110 29.2
Married 252 66.8
Widow 11 2.9
Others 4 1.1
Total 377 100.0
Aftera woman is married there is a change in the decision making
process. Post marriage unilateral decisions become syncretic with
the present system of nuclear family. Marital status of respondents
is tabulated in table 5.1.3 for better understanding. It can be
observed from the above table that; majority of the respondents
were married (66.8%).
135
Table 5.1.4
Education profile of respondents
Highest Education No. of Respondents Percent
Below Graduation 3 00.8
Graduates 130 34.5
Professionals 122 32.4
Post-Graduation and Above 121 32.1
Others 1 00.2
Total 377 100.0
As an individual acquires higher educational qualification, the
ability to understand various aspects associated with investments
could change and may show preference towards specific financial
products. Higher education leads to better rationality while taking
decisions. Table 5.1.4 provides the classification of the
respondents based on their educational background.
Most of the respondents are well qualified. Majority of the
respondents completed their graduation (34.5%) followed by
professionals(32.4%). A substantial number among the
respondents have completed theirpost-graduation studies (32.1%).
136
Table 5.1.5
Sector wise distribution of respondents
Sector of Employment No. of Respondents Percent
Education 71 18.8
BFSI 128 34.0
IT/KPO/BPO 131 34.7
Medical 6 1.6
Others 41 10.9
Total 377 100.0
It will be interesting to know about the sector and nature of
employment of the respondents. The above table gives the
distribution of the respondents based on their sector of
employment.It can be observed that majority of the respondents
are from IT / KPO / BPO sector (34.7%) followed by the BFSI
sector (34.0%) and Education sector (18%).
IT,BPO, KPO and BFSI sectors provide job opportunities in large
numbers for educated women. The growth of the above mentioned
sectors is likely to continue and in future it will provide more job
opportunities for women Response from women carrying out their
own business and those having their own professional practice
were less.
137
Table 5.1.6
Nature of the job of respondents
Occupation No. of Respondents Percent
Salaried Government 64 17.0
Salaried Private 302 80.1
Self Employed (Business) 4 1.1
Self Employed (Professionals) 4 1.1
Others 3 0.8
Total 377 100.0
It can be observed from the above table that most ofthe
respondentswere fromIT,KPO, BPO and BFSI sectorbelonging to
theprivate firms(80.1%) followedby governmentemployees
(17.0%). The percentage of self-employed and practicing
professions was miniscule.
138
Table 5.1.7
Sector and Nature of employment
Sector Nature of employment Total
Government Private Self employed
Education 23 (35.9%) 46 (15.2%) 2 (18.2%) 71
BFSI 28 (43.8%) 97 (32.1%) 3 (27.2%) 128
IT/BPO/KPO 1 (1.6%) 128 (42.4%) 2 (18.2%) 131
Medical 2 (3.1%) 2 (0.70%) 2 (18.2%) 6
Others 10 (15.6%) 29 (9.6 %) 2 (18.2%) 41
Total 64 (100 %) 302 (100 %) 11 (100%) 377
It can be observed from the above table that majority of the
respondents working in government offices, are from BFSI (43.8%)
sector followed by Education (35.9%) department employees.
Whereas among those employed in the private sector, majority
were from IT / BPO / KPO (42.4%) sector followed by BFSI
(32.1%) sector and educational sector (15.2%). As Private sector
has a major share of the IT business in India, the respondents
were also on a higher side from privately owned IT companies.
139
Table 5.1.8
Family size of respondents
Family Size No. of Respondents Percent
1 2 0.6
2 22 5.8
3 138 36.6
4 188 49.9
5 27 7.2
Total 377 100.0
Most of the time it is possible that the family size could alter the
investment pattern. Table 5.1.8 gives details about the family size
of the respondents.
The mean family size was found to be four, which reflects the
spread of nuclear families in cities. It is observed that, majority of
the respondents had a family size of four (49.9%) followed by a
family size of three (36.6%). A small number of respondents had a
family size of five (7.2%).
140
Respondents were classified based on their work experience
which is shown in table below.
Table 5.1.9
Work experience of respondents
Work Experience No. of Respondents Percent
Less than 5 years 134 35.5
5 to 10 years 137 36.3
11 to 15 years 45 11.9
16 – 20 years 34 9.0
Above 20 years 27 7.2
Total 377 100.0
It can be observed from the above table that;majority of the
respondents are with 5 to 10 years (36.3%) of work experience
followed by less than 5 years (35.5%) of work experience.
141
Table 5.1.10
Income profile of respondents
Annual Income (in Rs) No. of Respondents Percent
Less than 5 lakhs 131 34.7
5 – 10 Lakhs 197 52.3
10 – 15 Lakhs 43 11.4
Above 15 Lakhs 6 1.6
Total 377 100.0
Respondents are classified based on their income level in the
above table. Income plays an important role in studies related to
Investments.
Majority of the respondents were earning an annual salary in the
range of Rupees 5 to 10 lakhs (52.3%), followed by those who
were earning less than rupees 5 lakhs (34.7%) of annual salary.
142
5.2 Analysis of Investment Pattern of Respondents
5.2.1Analysis of investment pattern based on the city of
residence.
The investment pattern based on the investments held by the
respondents from the three cities taken up for the study is provided
in tablebelowand figure 5.2.1 whichprovides the investment pattern
across cities graphicallyfor easy understanding and comparison.
Table 5.2.1
City wise investment Pattern
NRPP MRPP RPP Total
Bangalore 60
(32.8%)
100
(54.6%)
23 (12.6%) 183
(100%) Chennai 26
(23.4%)
58
(52.3%)
27 (24.3%) 111
(100%) Cochin 32
(38.5%)
39
(47.0%)
12 (14.5%) 83
(100%)
Figure 5.2.1
City wise investment pattern
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Bangalore Chennai Cochin
NRP MRP RP
143
Majority among respondents hold moderately risky (52.3%)
portfolio followed by non-risky portfolio. It can be observed from
the above figure that, higher percentage of women from Chennai
(24.3%) were holding investments carrying higher risk in
comparison to women from Bangalore (12.6%) and Cochin
(14.5%). Higher percentage of women from Cochin (38.6%)
preferred holding non risky portfolio of investments in comparison
to women from Chennai (23.4%). Percentage of women holding
moderately risky portfolio was closer across all the three cities.
This shows that women from Cochin prefer low risk products
where as women from Chennai were willing to invest in financial
products carrying higher risk. This indicates that the city of
residence could influence the investment pattern. To test this
inference, researcher tested the following hypothesis to ascertain
the association between city of residence and investment pattern.
144
5.2.1.1 Testing of Association between Investment pattern and
City of residence
H0: There is no significant association between the investment pattern and city of residence. H1: There is a significant association between the investment
pattern and city of residence.
Table 5.2.1.1 Chi Square test for Association between investment pattern and city of residence
Inference
It is observed from the abovethat, there is significant difference in
the investment pattern of employed women from different cities
with chi square value of 10.428, p=0.034 (<0.05), hence at 5%
significance level, alternate hypothesis is accepted, i.e. there is an
association between the city of residence and the investment
pattern.
Value do Asp. Sig (2 –sided)
Pearson Chi-Square 10.428 4 .034
Likelihood Ratio 10.168 4 .038
Linear –by-Linear association 0.042 1 .837
N of Valid Cases 377
145
City of residence alone need not be the only reason for difference
in the investment pattern across cities. There could be other
variable like age, marital status, qualification, income level,
availability of the product and other attributes which also could
influence the investment pattern. May be Equity and Mutual fund
investments were better marketed by the financial intermediaries in
Chennai and Bangalore in comparison to Cochin. Marital status of
the respondent‟s city wise could be looked into, asspouse‟s advice
regarding investments also could have a bearing on the
investment pattern.
146
5.2.2Analysis of investment pattern based on the age of the
respondent
Table 5.2.2
Age wise investment Pattern
Age (in years) NRPP MRPP RPP Total
Less than 25 53 (67.1%) 21
(26.2%)
5 (6.30%) 79
(100%) 26 – 35 31 (19.4%) 103 (64.4%) 26 (16.2%) 160
(100%) 36 – 45 25 (31.6%) 37 (46.8%) 17 (21.6%) 79
(100%) 46 - 55 5 (11.9%) 23 (54.8%) 14 (33.3%) 42
(100%) More than 55 4 (23.5%) 13 (76.5%) 0 17
(100%)
Figure 5.2.2
Age wise investment pattern(in %)
The investment pattern based on the age of the respondents is
provided in the above table and for ease of understanding and
147
comparison Figure 5.2.2 provides the investment pattern across
different age groups graphically.
It can be observed from the above figure that a higher percentage
of women who are aged below 25 years (67.1%) were holding a
portfolio of low risk investments in comparison to women from the
age group of 26 to 35 years (19.4%) and 36 to 45 years (31.6%). It
can be observed that percentage of women holding risky portfolio
is increasing with increase in age till the age of 55 years. This
observation is in contrast to the general investment philosophy that
as you age you should reduce your exposure to risky assets held.
One possible reason could be that majority of women above 25
years were married and their investment decision could be
influenced by spouse. Also there is a possibility that with the
increase in age, the work experience increase resulting in higher
income and savings, which could be influencing the investment
pattern.
148
To test this inference following hypothesis was tested:
H0: There is no significant association between the investment
pattern andthe age of the employed women.
H2: There is a significant association between the investment
pattern and the age of the employed women.
Table 5.2.2.1
Chi Square test for Association between investment
pattern and age
Value df Asymp. Sig
( 2 sided)
Pearson Chi-Square 78.076 8 .000
Likelihood Ratio 76.968 8 .000
Linear – by – Linear Association 22.188 1 .000
N of Valid cases 377
Inference
It can be observed from the above table, that the chi square value
is 78.076, p <0.05, which implies that there is an association
between age and investment pattern. Hence, the hypothesis that
investment pattern is dependent of the age of the respondent is
accepted at 5% significance level.
Variable like marital status also could influence the investment
pattern.
149
5.2.3Analysis of investment pattern based on the education
level of the respondent
Table 5.2.3
Investment Pattern and Education
Qualification NRPP MRPP RPP Total
Below
Graduation
1 (33.3%) 2 (66.7%) 0 3
(100%) Graduates 43 (33.1%) 67 (51.5%) 20 (15.4%)
((((((15.4%)
130 (100%)
Professionals 30 (24.6%) 70 (57.4%) 22 (18.0%) 122 (100%)
Post Graduates 43 (35.5%) 58 (47.9%) 20 (16.5%) 121 (100%)
Others 1 (100%) 0 0 1 (100%)
Figure 5.2.3
Education wise investment pattern
Data related to the investment pattern of respondents with their
educational background is provided in theabove tableand the
150
graphical representation is made in figure 5.2.3.
It can be observed that, most of the respondents were well
qualified. Irrespective of the education, moderately risky portfolio
was held by the respondents. This inference is after taking out
those respondents who did not complete their graduation or did
other courses like diplomas. It is inferred that other things being
equal, educational qualification of the respondents alonemay not
significantly influence the investment pattern. To test this
inference, researcher tested the following hypothesis to ascertain
the association between the education level and investment
pattern.
151
H0: There is no significant association between the investment
patternand the educational background of the respondent.
H3:There is a significant association between the investment
pattern and theeducational background of the respondent.
Table 5.2.3.1
Chi Square test for Association between investment pattern and educational background
Value df Asymp. Sig
( 2 sided)
Pearson Chi-Square 6.726 8 .567
Likelihood Ratio 7.436 8 .490
Linear – by – Linear Association 0.031 1 .861
N of Valid cases 377
Inference Chi square value calculated was found to be 6.726,p >0.05, which
was not significant at 5% significance level, indicating that there is
no significant association between the investment pattern and the
educational background of the respondent.
152
5.2.4 Analysis of investment pattern based on the income of
the respondent
Table 5.2.4
Investment Pattern and Income
Income
(in Lakhs)
NRPP MRPP RPP Total
Less than
5
73 (55.7%) 47 (35.9%) 11 ( 8.4%) 131 (100%)
5 – 10 41 (20.8%) 128 (65.0%) 28 (14.2%) 197 (100%)
10 – 15 4 (9.3%) 21 (48.8%) 18 (41.9%) 43 (100%)
Above 15 0 1 (16.7%) 5 (83.3%) 6 (100%)
Figure 5.2.4
Investment Pattern and Annual Income (in Rs.Lakhs)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Less than 5 5 -1 10 L 11 - 15 l Above 15
NRPP MRPP RPP
153
Earnings of an individual affects many aspects of life, including the
way investments are made. Table 5.2.4 gives details about the
investment pattern against the annual income earned by the
respondent. Graphic representation of the same is shown in figure
5.2.4. It can be observed that among woman earning a salary of
less than Rs. 5 lakhs, majority were holding a low risk portfolio of
investments (55.7%) compared to other income group
respondents. Women earning salary above 5 lakhs preferred
moderately risky portfolio.
With the increase in income, there is always a possibility of the
saving percentage going up, which results in investing a small part
of the savings into risky assets with an expectation to generate
higher returns. To test this inference, researcher tested the
following hypothesis to ascertain the dependence between annual
income and investment pattern.
154
H0: Investment pattern is independent of the annual income.
H4: Investment pattern is dependent on the annual income.
Table 5.2.4.1
ANOVA for investment pattern and annual income
Sum of Squares
df Mean Square
F Sig.
Between Groups Within Groups Total
30.608
141.074
171.682
3
373
376
10.203
.378
26.976 .000
Inference
The results are depicted in the above table which and it is
observed that the F value is 10.203, which is significant at 5%
level of significance. Hence alternate hypothesis is accepted and it
can be concluded that the investment pattern is dependent on the
income level of the respondent.
155
5.2.5Analysis of investment pattern based on the sector
and nature of the job of the respondent
Table 5.2.5.1
Investment Pattern and Sector of employment
Sector of
employment
NRPP MRPP RPP Total
Education 23 (32.4%) 43 (60.6%) 5 (7.0%) 71
(100%) BFSI 34 (26.6%) 68 (53.1%) 26 (20.3%) 128 (100%)
IT / BPO / KPO 33 (25.2%) 70 (53.4%) 28 (21.4%) 131 (100%)
Medical 6 (100%) 0 0 6 (100%)
Others 22 (53.7%) 16 (39.0%) 3 (7.3%) 41 (100%)
The distribution of data based on the sector of employment and
the investment patter is displayed in the above table. To gain more
insight, the nature of the job of the respondent and investment
pattern is displayed in table below.
Table 5.2.5.2
Investment Pattern and nature of Job
Nature of
Job
NRPP MRPP RPP Total
Government 22 (34.4%) 38 (59.4%) 4 (6.3%) 64 (100%)
(100(100%)((
(100(((100%)
Private 92 (30.5%) 153(50.7%) 57(18.9%) 302 (100%)
Business 1 (25%) 3 (75%) 0 4 (100%)
Professional 2 (50%) 2 (50%) 0 4 (100%)
Others 1 (33.3%) 1 (33.3%) 1 (33.3%) 3 (100%)
Total 118 197 62 377
156
Figure 5.2.5.1
Sector wise investment pattern
For ease of understanding, data pertaining to the sector of
employment and investment pattern is graphically represented in
the above figure.
It can be observed that education sector (32.4%) employees were
holding investments carrying less risk in comparison to women
from the IT/BPO/KPO (25.2%) sector and the BFSI (26.6%) sector.
Majority of women from various sectors were holding investments
portfolios having moderate or low risk.
To test if there is any association between the sector of
employment and investment, following hypothesis was tested.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Education BFSI IT / BPO/KPO Medical Others
NRPP MRPP RPP
157
H0: There is no association between the Investment pattern and Sector of employment. H5: There is an association between the Investment pattern and Sector of employment.
Table 5.2.5.3
Chi Square test for Association between investment
pattern and sector of employment
Value df Asymp. Sig
( 2 sided)
Pearson Chi-Square 33.583 8 .000
Likelihood Ratio 34.789 8 .000
Linear – by – Linear Association 3.239 1 .072
N of Valid cases 377
Inference
It is observedfrom the above table, that the chi square value
calculated was found to be 33.583, p <0.05, which was significant
at 5% significance level. Hence H5 is accepted, i.e. there is an
association between the sector of employment and investment
pattern.
158
Figure 5.2.5.2
Investment pattern and nature of job
It can be observed from the above figure that majority of the
respondents were employed in the private (80.1%) firms or with
the government (17.1%). It is observed that percentage of women
employed with private companies were holding higher risk
portfolios (18.9%) when compared to the government employees
(6.3%). Government employees by nature are very cautious while
dealing with official work and the same is reflected in their
investment pattern. They prefer to invest in low risk category
financial products in comparison to women employed with private
sector, who are willing to take higher risk. To confirm this inference
following hypothesis was tested
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Salaried (Govt) Salaried(Pvt) Business Professional Others
NRPP MRPP RPP
159
H0: There is noassociation between the Investment pattern and
the nature of job.
H6: There is an association between the Investment pattern and
the nature of job
Table 5.2.5.4
Chi Square test for Association between investment
pattern and nature of job
Value df Asymp. Sig
( 2 sided)
Pearson Chi-Square 9.100 8 .334
Likelihood Ratio 11.398 8 .180
Linear – by – Linear Association .903 1 .342
N of Valid cases 377
Inference
The chi square test result reveals that the chi square value
calculated was found to be 9.100, p <0.05, which was not
significant at 5% significance level. Hence H0 is accepted, i.e.
there is no association between the nature of the job and the
investment pattern.
160
5.2.6Analysis of investment pattern based on the marital
status of the respondent
Table 5.2.6
Marital status and investment Pattern
Marital
Status
NRPP MRPP RPP Total
Single 52 (47.3%) 49 (44.5%) 9
(8.2%)
110
(100%) Married 58 (23.0%) 141 (56.0%) 53 (21%) 252
(100%) Widow 6 (54.5%) 5 (45.5%) 0 11
(100%) Others 2 (50.0%) 2 (50.0%) 0 4
(100%)
Figure 5.2.6
Marital status and Investment pattern
The above table provides the information regarding the
investment
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Single Married Widows Others
NRPP MRPP RPP
161
pattern of respondents based on their marital status and figure
5.2.6 gives a graphical view about the of investment pattern for
ease of understanding. It can be observed that married women
(77%) hold investment portfolios which are riskier in comparison to
the ones held by other marital status women. One of the reason for
married women holding higher risk portfolio could be due to higher
savings and influence of their spouse in taking investment
decisions. To test if there is any association between the marital
status and the investment pattern, the following hypothesis was
tested
H0: There is no association between the Investment pattern and the Marital status. H7: There is an association between the Investment pattern and TheMarital status
Table 5.2.6.1
Chi Square test for Association between investment
pattern and marital status
Value df Asymp. Sig
( 2 sided)
Pearson Chi-Square 29.107 6 .000
162
Likelihood Ratio 31.333 6 .000
Linear – by – Linear Association 7.227 1 .007
N of Valid cases 377
Inference
Chi square value calculated was found to be 29.107, p <0.05,
which was significant at 5% significance level. Hence H7 is
accepted, i.e. there is association between the marital status of
the respondent and investment pattern.
163
5.2.7Analysis of investment pattern based on family size
Table 5.2.7
Investment Pattern and family size
Family
Size
NRPP MRPP RPP Total
1 2 (66.7%) 0 1 (33.3%) 3 (100%)
2 4 (18.2%) 17 (77.3%) 1 (4.5%) 22 (100%)
3 43 (31.2%) 72 (52.2%) 23 (16.7%) 138 (100%)
4 56 (29.8%) 95 (50.5%) 37 (19.7%) 188 ( 100%)
5 13 (50.0%) 13 (50.0%) 0 26 (100%)
It is believed that family size could impact the way investment is
made. Respondents investment pattern with respect to the family
size is shown in the table above and the investment pattern of
women with different family size is displayed in the figure below for
ease of understanding.
Fig 5.2.7
Investment pattern and family size
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1 2 3 4 5
NRPP MRPP RPP
164
It can be observed that women who are married and do not have
children, hold a higher percentage of moderately risky portfolio
(77.3%) in comparison to other family sizes. As the family size
increases, women moved towards less risky portfolio. That is there
seems to be an inverse relationship between size of family and
riskiness of the portfolio of investments. To confirm this inference,
the following hypothesis was tested
H0: There is no association between the Investment pattern and the family size. H8: There is an association between the Investment pattern and the family size. Table 5.2.7.1
Chi Square test for Association between investment
pattern and family size
Value df Asymp. Sig
( 2 sided)
Pearson Chi-Square 16.776 6 .079
Likelihood Ratio 18.496 6 .047
Linear – by – Linear Association .099 1 .753
N of Valid cases 377
It is observed that the chi square value calculated was found to be
16.776, p <0.05, which was notsignificant at 5% significance level.
Hence H8 is accepted, i.e. there is no association between the
family size and investment pattern.
165
5.2.8Analysis of investment pattern based on work
experience of the respondent
Table 5.2.8
Investment Pattern and Work Experience
Work
Experience
(in years)
NRPP MRPP RPP Total
Less than
5
68 (50.7%) 55 (41.0%) 11 (8.3%) 134 (100%)
5 – 10 30 (21.9%) 80 (58.4%) 27 (19.7%) 137
(100%) 11 – 15 12 (26.7%) 27 (60%) 6 (13.2%) 45 (100%)
16 – 20 6 (17.6%) 16 (47.1%) 12 (35.3%) 34 (100%)
Above 20 2 (7.4%)
19 (70.4%) 6 (22.4%) 27 (100%)
Figure 5.2.8
Investment Pattern and Work Experience
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Less than 5 5 - 10 yrs 11 - 15 yrs 16 - 20 yrs more than 20 yrs
NRPP MRPP RPP
166
Investment decision of an individual can change, as the
experience level changes. Table 5.2.8 gives details of the
investment pattern among respondents with work experience.
Graphically it is shown in figure 5.2.8 for ease of understanding.
It is observed from figure 5.2.8 that among women having a work
experience of less than 5 years, majority were holding were
holding non risky portfolio (50.7%), indicating that women are risk
averse in the initial stages of their career. Women having a work
experience of 5 to 15 years were holding investments, which were
moderately risky.
As the work experience level goes up, it is associated with higher
income and the individual gains some investment experience,
which leads to investment of a portion of their savings into risky
products.
167
5.3Analysis of Financial Literacy level and investment
pattern of Respondents
Investments by individuals depends on the basic understanding
about various financial products available in the market. Further
knowledge about basic financial calculations is likely to help an
individual take informed investment decisions. Financial literacy
level could be self-estimated or could be based on product
awareness. In this research study, the respondents were asked to
rate their financial literacy level on a scale of 1 to 5, with one being
very low level of financial literacy and 5 being very high level of
financial literacy level. None of the respondents rated themselves
to have a very high financial literacy level and a negligible (0.03%)
number indicated their financial literacy level to be very low.
Frequency of very low financial literacy level were added along
with low financial literacy level respondents for analysis.
168
Table 5.3.1
Financial literacy level of respondents
Financial literacy Low Moderate High Total
No. of respondents 155 211 11 377
Percentage 41.1 56.0 2.9 100
The above table gives the detail about the overall financial literacy
level of the respondents
It can be observed that Majority of the respondents considered
themselves to have a moderate level (56%) of financial literacy
followed by low level (41.1%) of financial literacy.
169
Table 5.3.2
Financial literacy and investment pattern
Financial
Literacy
NRPP MRPP RPP Total
Low 79 (51.0%) 71 (45.8%) 5 (3.2%) 155 (100%)
Moderate 39 (18.5%) 121 (57.3%) 51 (24.2%) 211 (100%)
High 0 5 (45.5%) 6 (54.5%) 11 (100%)
Total 118 (
31.3%)
197 (52.3%) 62 ( 16.4%) 377 (100%)
Fig 5.3.1
Financial literacy and investment pattern
Distribution of investment pattern in percentage within each level
of financial literacy is shown in the above. Graphical representation
of the same is shown in figure 5.3.1 for ease of interpretation.
It is observed from the above tableand figure that among those
with low financial literacylevel, majority were holding non risky
portfolio (51%). While respondents with moderate level of financial
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Very Low Low Moderate High Very High
Financial Literacy wise investment Patern
NRPP MRPP RPP
170
literacy, majority were holding investments with moderate Risk
(57.3%). Those with high level of financial literacy were found to
hold investments which are considered risky or moderately risky.
The above analysis shows that financial literacy could impact the
investment pattern and this association was verified by testing the
following hypothesis.
H0: There is no association between the Investment pattern and the financial literacy level. H9: There is an association between the Investment pattern and the financial literacy level.
Table 5.3.2.1
Chi Square test for Association between investment
pattern and financial literacy level
Value df Asymp. Sig
( 2 sided)
Pearson Chi-Square 70.719 6 .000
Likelihood Ratio 77.186 6 .000
Linear - by - Linear association 60.910 1 .000
N of Valid cases 377
Inference
It is observed that the chi square value calculated was found to be
70.719, p <0.05, which was significant at 5% significance
171
level.Hence H5 is accepted, i.e. there is an association between
financial literacy level and investment pattern.
Increase in financial literacy level brings in knowledge about a
wider range of products and the investor is in a better position to
understand and analyse the risk and return features of the product.
172
5.3.3Analysisof financial literacy level and risk perception of
Respondents
It will be interesting to know if financial literacy level could impact
the respondent‟s perception of risk towards financial products. The
top five products which were perceived to have a moderate to high
level of risk in this study are shown in the tablebelow.
Table 5.3.3
Top five risky products
Product Risk level WMS
Commodities 4.81
Equity 4.55
Chits 2.97
Mutual Funds 2.87
Bonds/ Debentures 2.75
It is observed that commodity and equity shares investments are
considered to be highly risky products. The number of respondents
holding commodities werenegligible, it will be of interest to analyse
the equity risk perception among respondents with different
financial literacy levels.
173
Table 5.3.4
Equity risk perception and financial literacy level
Financial Literacy
Risk perception Total
Low Moderate High Very High
Low 2 (1.3%) 0 ( 0 % ) 41(26.5%) 112 (72.3%) 155
Moderate 1(0.04%) 4 (1.8%) 99(46.9%) 107 (50.7%) 211
High 0 ( 0 %) 1(9.1%) 6(54.5%) 4(36.4%) 11
Total 3(0.8%) 5(1.3%) 146(38.7%) 223(59.2%) 377
Above table gives details about equity risk perception and financial
literacy level. It is observed that, majority (72.3%) among those
with low financial literacy level considered equity to be very highly
risky product. Whereas a lower percentage (50.7%), among those
with moderate financial literacy level considered equity to be very
high risk product.
The above analysis indicates that as the financial literacy level
goes up, risk perception about equity investment changes.
To find the association between financial literacy level and risk
perception of top five risky products chi square test was conducted
and the summary of the results is given below along with the
inference.
174
Table 5.3.4.1
Chi Square test for Association between financial literacy
level and risk perception of financial products
Association between Financial literacy and
Chi Square Value
df Asymp. Sig (2 –sided)
Inference
Commodities 5.663 6 .462 No association
Equity 27.113 9 .001 Association
Chit fund 25.444 6 .003 Association
Mutual Fund 11.537 9 .241 No Association
Bond / Debenture 26.350 9 .002 Association
It can be observed from the above table, financial literacy and risk
perception of equity, chit fund and bonds were found to be
associated where, that is financial literacy level could influence
investment in equity, chit fund and bonds. Whereas no such
association was found for commodities and mutual funds.
175
5.4Analysis of preferred financial products of the
respondents
There could be various reasons for an investor to invest in a
particular type of financialproduct. A study of the current
investments held by the respondents will provide insight on the
various financial products preferred by women investors.
Table 5.4.1
Investments held by respondents
Product Number of respondents
Percent
Bank Deposits 359 95.2
Insurance 354 93.9
Gold Jewellery 343 91.0
Provident Fund 289 76.7
Mutual Fund 255 67.6
Postal Savings 98 26
Equity Shares 62 16.4
Bonds/Debentures 50 13.3
Real Estate 47 12.5
Chit Funds 43 11.4
Gold Funds/ETF 14 3.7
Commodities 2 0.5
176
Figure 5.4.1
Investments held by respondents
It can be observed from table that, majority of the respondents
hold bank deposits (95.2%) followed by Insurance (93.9%), Gold
Jewellery (91.0%), Provident fund (76.7%),Mutual funds (67.6%)
and Postal savings (26.0%). All other financial product holding was
on lower side. Figure 5.4.1 displays the above findings graphically.
The top five investments preferred by the respondents were:
1. Bank Deposits
2. Life Insurance
3. Gold Jewellery
4. Provident Fund
5. Mutual Funds
0 20 40 60 80 100
Bank Deposits
Insurance
Gold Jewellery
Provident Fund
Mutual Fund
Postal Savings
Equity Shares
Bonds/ Debentures
Real Estate
Chit Funds
Gold Funds / ETF
Commodities
Number of respondents
177
There could be many reasons for women to prefer the above
products Awareness level of women about different financial
products against the current investments made is shown in table
below.
Table 5.4.2
Investments held by respondents
Product Awareness Investments held
Number of respondents
Percent Number of respondents
Percent
Bank Deposits 375 99.5 359 95.2
Insurance 371 98.4 354 93.9
Gold Jewellery 377 100.0 343 91.0
Provident Fund 360 95.5 289 76.7
Mutual Fund 355 94.2 255 67.6
Postal Savings 341 90.5 98 26.0
Equity Shares 226 59.9 62 16.4
Bonds/Debentures 205 54.4 50 13.3
Real Estate 285 75.6 47 12.5
Chit Funds 198 52.5 43 11.4
Gold Funds/ETF 84 22.3 14 3.7
Commodities 6 1.6 2 0.5
For ease of understanding the investments held against the
awareness about the product in percentage terms is shown in the
figure below.
178
Figure 5.4.2 Awareness level and actual investments held (in%)
It can be observed from the above figure that, majority of the
respondents were having a high level of awareness about bank
deposits (99.5%), Insurance (98.4%), provident fund (95.5%),
mutual funds (94.2%) and postal savings ((90.5%). Awareness
level for equity shares, bonds and chit funds were moderate
(between 50 to 60%). Awareness level about other products and
schemes was negligible.
Awareness about products alone did not lead to actual
investments. Most of the respondents were aware about postal
savings (90.54%), but actual investment was low (26%). Equity
shares investments (16.4%), chit funds (11.4%) and bonds and
debentures (11%) holding by respondents were low in spite of
awareness level being moderate.
0
20
40
60
80
100
120P
erc
en
tage
Awareness Investment
179
Table 5.4.3
Respondents Awareness, investment and risk
perception of financial products
Product Awareness WMS
Investment WMS
Risk Level WMS
Bank Deposits 1.01 1.05 1
Postal Savings 1.10 1.74 1.03
Insurance 1.02 1.06 2.03
Bonds/Debentures 1.46 1.87 2.75
Mutual Fund 1.06 1.32 2.87
Equity Shares 1.40 1.84 4.55
Gold Funds/ETF 1.78 1.86 3.11
Chit Funds 1.47 1.89 2.97
Real Estate 1.24 1.87 2.21
Commodities 1.98 1.99 4.81
Gold 1.01 1.04 1.48
Provident Fund 1.08 1.04 1.01
WMS: Weighted Mean Score
The above table gives details about the investments held by
respondents along with awareness level and risk perception about
the respective financial products.
It is observed that for top four products in which investment is
currently made by the respondents (bankdeposits, life insurance,
gold jewellery and provident fund), the perceived risk level was
found to be low, with a weighted mean score of less than 2.1.
Mutual fund investment, which figured among the top five preferred
product was perceived to carry moderate level of risk with a
180
weighted mean score of 2.87. Equity with weighted mean score of
4.55 and commodity investment with a weighted mean score of
4.81 were perceived to highly risky and respondents avoided these
two products. This indicates that the products carrying a low to
moderate risk were preferred by the respondents.
181
5.5 Attributes influencing investment decisions
There are many features and attributes based on which investment
decisions are taken by individuals. It will be interesting to know the
attributes which could influence investment decisions.
5.5.1 Criterion for investment
Individuals take investment decision taking into account certain
features of the product. Table below gives details about the top
most feature desirable in a financial product by the respondents.
Table 5.5.1
Criterion for Investment
Criteria No. of respondents
Percent
Liquidity 9 2.4
Safety 255 67.6
High Return 112 29.7
Tax benefit 1 0.3
Total 377 100.0
For majority of the respondents, the main criteria while taking
investment decision are safety (67.6%) of capital invested,
followed by the expectation of high return (29.7%).
182
5.5.2 Purpose of Investment
The ultimate aim of investment by individuals could differ. It will be
of interest, to know the purposes for which respondents made
investments. Table given below gives details about the common
purposes of investment
Table 5.5.2
Purpose of Investment
Women generally keep their children‟s welfare in mind while taking
any decision. This is evident from the above table, which indicates
that for majority of respondents, the main purpose of saving was
Children‟s education and marriage (42.2%) followed by the
expectation of high return (24.7%). Many respondents ticked other
purposes (28.4%) and on compiling the statements made by the
respondent, it was found that the other purpose stated was one‟s
own marriage, purchase of house, purchase of jewellery and for
Purpose No. of respondents
Percent
High Return 93 24.7
Children Education / Marriage 159 42.2
Tax Benefit 2 0.5
Post retirement 16 4.2
Others 107 28.4
Total 377 100.0
183
further studies. It is possible that those respondents who are
single and are earning good salary would like to assist their
parents financially during their marriage. It was observed form the
data collected, that many respondents stayed in rented house and
would like to own a place of dwelling for themselves. Purposes
like, future purchase of gold jewellery shows affinity for physical
assets especiallygold bywomen. It is also possible that young
women would like to pursue further studies with their own savings.
184
5.5.3 Source of information
Individuals rely on different sources of information for investment
analysis and enhancement of knowledge about various financial
products, which helps them in taking informed investment
decisions.
Table given below gives details about the various information
sources referred by the respondents.
Table 5.5.3
Source of Information
Source No. of
respondents
Percent
Internet 116 30.8
Newspaper& Magazines 76 20.2
TV / Radio 1 0.3
Friends & Relatives 128 34.0
Consultants 54 14.3
Others 2 0.5
Total 377 100.0
For Majority of the respondents, the main source of investment
related information are friends and relatives(34.0%) followed by
internet (30.8%),newspapers and Magazines (20.2%). As the
majority of the respondents are employed by IT KPO, BPO and
BFSI sector which uses computers and internet for daily use, the
respondents were comfortable using internet for getting
information on investments through internet.
185
186
5.5.4 Tax implication Every individual earning beyond a certain amount, as specified by
the government, has to pay income tax. Taxable income can be
reduced by investing in certain investment products enjoying tax
breaks, as per the notification by the central government. Popular
tax saving instruments by respondents is given below
Table 5.5.4
Tax saving product preference
Type of Investment No. of respondents
Percent
Tax saving bonds 14 3.7
Life Insurance 173 45.9
Provident Fund 122 32.4
Tax saving mutual Funds 37 9.8
Medical insurance 2 0.5
Others 29 7.7
Total 377 100
It can have observed from table 5.5.4 that majority of the
respondents preferred life insurance (45.9%) as a preferred tax
saving instrument, followed by contribution towards provident fund
(32.4%). Investments in tax saving mutual funds (9.8%) was on
lowers side. This again reiterates the importance of safety of
investments, as provident fund is handled by Government
providing safety of capital along with insurance companies who are
well regulated by the regulator and Life Insurance Corporation
187
(LIC), a government organization is a major participant in the life
insurance business.
The analysis of data indicates that the major attributes influencing
the investment pattern are
Safety
Return Expectation
Children‟s education and marriage
Tax Savings
Friends and relative‟s advice
These are in addition to the product awareness and the perception
about risk attached with a financial instrument.
188
5.6 Hypotheses Testing
Based on the objective of the study, the following additional
hypotheses were tested.
H0:There is no association between the Investment pattern and theInvestment consultant. H10:There is an association between the Investmentpattern and Investment Consultant Table 5.6.1
Type of advisor and investment Pattern
Type of Investment advisor
Type of Investment Pattern Total
NRPP MRPP RPP
Own Analysis 6 24 12 42
Spouse 39 84 20 143
Parents 38 20 6 64
Friends & Relatives 32 47 4 83
Financial Consultants 2 21 20 43
Others 1 1 0 2
Total 118 197 62 377
Table 5.6.1.1
Chi Square test for Association between investment pattern and investment consultant
Value Df Asymp. Sig
( 2 sided)
Pearson Chi-Square 76.280 10 .000
Likelihood Ratio 74.966 10 .000
Linear – by – Linear Association .069 1 .792
N of Valid cases 377
189
Inference
The investment pattern of respondents and the person whom the
respondent consults while taking investment decision is tabulated
in the table5.6.1. Chi square test was conducted to test, if there is
any association between the nature of the consultant and
investment pattern. The results are depicted in the table
5.6.1.1and it is observed that the chi square value calculated was
found to be 76.280, p <0.05, which was significant at 5%
significance level. Hence H10 is accepted, i.e. there is a
association between the person consulted for investment decision
and theinvestment pattern of the respondent.
If the respondent discussed with Spouse or financial consultant
regarding investments, then the investment pattern is likely to be of
higher risk in comparison to the investment pattern, where parents
are consulted while taking investment decisions
190
H0:There is no association between the Investment pattern and the review period. H11: There is an association between the Investment pattern and thereview period Table 5.6.2
Review period and investment Pattern
Review Period of investment
Type of Investment Pattern Total
NRPP MRPP RPP
Once a Year 5 (4.2% ) 1(0.5%) 3(4.8%) 9( 2.4%)
1 – 3 years 40 (33.9%) 68(34.5%) 33(53.2%) 141 (37.4%)
More than 3 years
1 (0.8% ) 0 (0 %) 0 (0 %) 1 (0.3% )
No fixed time period
68 (57.6%) 124(62.9%) 25(40.3%) 217 (57.6%)
Never 4 (3.4% ) 4(2.0%) 1(1.6%) 9 (2.4 %)
Total 118(100%) 197(100%) 62 (100%) 377 (100%)
191
Table 5.6.2.1
Chi Square test for Association between investment pattern and review period
Value df Asymp. Sig
( 2 sided)
Pearson Chi-Square 18.290 8 .019
Likelihood Ratio 18.985 8 .015
Linear – by – Linear association 3.768 1 .052
N of Valid cases 377
Inference
The investment pattern of respondents with different investment
review period is shown inthe table above. Chi square test was
conducted to test, if there is any association between the
investment review period of the respondent and the investment
pattern. The results are depicted in the table 5.6.2.1and it is
observed that the chi square value calculated was found to be
18.290(table value 15.507), p <0.05, which was significant at 5%
significance level. Hence H11 is accepted, i.e. there is association
between the investment review period and the type of investment
pattern held by the respondent.
192
H0:There is no association between the Investment pattern and the purpose of investment. H12: There is an association between the Investment pattern and thepurpose of investment.
Table 5.6.3
Purpose of investment and Investment Pattern
Investment Purpose
Type of Investment Pattern Total
NRPP MRPP RPP
High Return 30 46 17 93 (24.7%)
Children Education and Marriage
41 93 25 159 (42.2%)
Tax Benefit 1 1 0 2 ( 0.5%)
Post Retirement 2 7 7 16 ( 4.2%)
Others 44 50 13 107 (28.4%)
Total 118 197 62 377 (100 %)
The investment pattern of respondents with different purposes of
investment is shown in table above.
Table 5.6.3.1
Chi Square test for Association between investment pattern and purpose of investment
Value df Asymp. Sig
( 2 sided)
Pearson Chi-Square 36.697 14 .001
Likelihood Ratio 36.228 14 .001
Linear – by – Linear association 7.613 1 .006
N of Valid cases 377
193
Chi square test was conducted to test, if there is any association
between purpose of investment and investment pattern. The
results are depicted in the table 5.6.3.1 and it is observed that the
chi square value calculated was found to be 36.697, p <0.05,
which was significant at 5% significance level. Hence H12 is
accepted, i.e. there is association between the purpose of
investment and the type of investment pattern of the respondent.
Respondents with a purpose of earning higher return were holding
riskier portfolios compared to those with other investment
purposes.
194
Table 5.6.4
Summary of Hypotheses test results to find association
betweenidentifiedvariable and investment pattern
No. Hypothesis HA df Calculated Value
Table value
Inference
H1 There is an association between the investment pattern and city of residence.
4 10.428 11.143 HA Accepted
H2 There is an association between the investment pattern and age.
8 78.076 18.475 H0 Accepted
H3 There is an association between the investment pattern and theeducational background of the respondent .
8 6.726 18.475 HA Accepted
H4 Investment pattern is dependent on the annual income. ( ANOVA) F value
3 26.976 9.348 HA Accepted
H5 There is association between the Investment pattern and sector of employment
8 33.583 18.475 HA Accepted
H6 There is association between the Investment pattern and nature of job
8 9.100 18.475 H0 Accepted
H7 There is association between the Investment pattern and the marital status
6 29.107 14.449 HA Accepted
195
Table 5.6.4
Summary of Hypotheses test results to find association
betweenidentifiedvariable and investment pattern
No. Hypothesis HA df Calculated Value
Table value
Inference
H8 There is association between the Investment pattern and the family size.
6 29.107 14.449 HA Accepted
H9 There is association between the Investment pattern and the financial literacy level
6 70.719 14.449 HA Accepted
H10 There is association between the Investment pattern and Investment Consultant
10 76.280 20.483 HA Accepted
H11 There is association between the Investment pattern and the review period
8 18.290 18.475 HA Accepted
H12 There is association between the Investment pattern and the investment purpose
14 36.697 26.119 HA Accepted
196
Table 5.6.5 Identifying relationship between select
variables using correlation coefficient
Investment Pattern
Saving percentage
Annual income
Financial Literacy
Investment criteria
Investment Pattern
1 0.228** 0.422**
0.402** 0.457**
Saving percentage
0.228** 1 0.443**
0.066 0.154**
Annual income
0.422** 0.443** 1 0.168** 0.281**
Financial Literacy
0.402** 0.066 0.168**
1 0.379**
Investment criteria
0.457** 0.154** 0.281**
0.379** 1
** Correlation is significant at the 0.01 level (2 – tailed)
Above table reveals relationship between variables related to the
study carried out.Some of the significant correlations observed are
1. Investment Pattern and Annual Income, this reaffirms the
association between investment pattern and Annual income as
inferred from the chi square test.
2. Saving percentage has a strong correlation with the annual
income, as some individual earnings goup, then he or she ends
up making higher savings, as savings percentage go up, the
investments also go up.
197
3. Significant relationship is observed between investment pattern
And financialliteracy, reaffirming the inference made by the chi
square test results.
4. Significant relationship exists between the investment pattern
and
the investment criteria.
198
CHAPTER - VI
FINDINGS AND CONCLUSION
Introduction
Individuals at some stage of their life get involved in investing their
savings. There is a continuous increase in the number of
educatedemployed women. There is increase in the job
opportunities for qualified women in many sectors led by the
software, banking and financial services and the education sector.
Count of employed women having independent source of income
is increasing year on year, leading to increase in savings by
women. Women by nature are savers and invest their savings into
wide range of financial products and physical assets. Market
participants are also realizing the importance of the rapid increase
in the number of women investors and are gearing up to meet their
demands related to investments and allied services.
It will useful to know about the financial and physical assets held
by employed women in order to assess their needs and
preferences. The present study „A study on investment pattern of
women „is carried out with an aim to find and study the investment
pattern of employed women, based on the current investment held
by them. The study also makes an attempt to know the financial
199
literacy level of employed women and its influence on their
investmentpattern. Further attempt is made to find the financial
products preferred by women and the attributes which influence
their investment decisions. This concluding chapter attempts to
present the important findings and conclusion of the study.
6.1 Profile of respondents
Respondents were chosen from the cities of Bangalore, Chennai
and Cochin. Bangalore being the IT capital of India provides job
opportunities for qualified women in large numbers. Chennai is not
only the manufacturing hub, but also is an emerging IT destination.
Cochin has made rapid progress in promoting IT and financial
sector, who are traditionally providing job opportunities for women.
majority of the respondents (48.5%) were from Bangalore (48.5%)
followed by Chennai (29.4%) and Cochin (22.0%). Women from
Bangalore were more forthcoming in participating in the study in
comparison to the women from Chennai and Cochin. The other
demographic details are presented in the table below.
200
Table 6.1
Demographic profile of Respondents
Measure Value Frequency Percentage
City of residence
Bangalore 183 48.54
Chennai 111 29.44
Cochin 83 22.0
Age below 25 years 79 21.0
26 – 35 160 42.4
36 – 45 79 21.0
46 – 55 42 11.1
Above 55 17 4.5
Educational Qualification
below graduation 3 0.8
Graduate 130 34.5
Professionals 122 32.4
Post-Graduation and above 121 32.1
Others ( Diploma ) 1 00.002
Annual Income
below 5 lakhs 131 34.7
5 – 10 lakhs 197 52.3
Above 10 – 15 lakhs 43 11.4
Above 15 lakhs 6 1.6
Financial Literacy
Very Low 12 3.2
Low 143 37.9
Moderate 211 56.0
High 11 2.9
As an individual grows older, hisInvestment portfolio could get
altered due to change in his maritalstatus,commitments, family
size, work experience, product preference and decision making
process.
It was found that majority of the respondents (42.4%) were form
the age group of 26 – 35 years, followed by those who were below
201
25 years. Lower age group respondents were more willing to
participate in the survey in comparison to women aged above 45
years.
It was found that there was near equal proportion of women who
were graduates, professionals and post graduates, indicating that
the participants were well qualified.
It was found that in spite of being highly qualified, women
considered themselves to be having a low level of financial
literacy. This could be due to the dominance of men in decisions
related to finance. In younger age it is father and brothers who
take investment decisions on their behalf and this leads to lack of
participation by women in financial matters. Post marriage the
spouse dominates or influences the investment decisions. This
domination of male members reduces the enthusiasm of women to
get educated about investment related matters.
Once a woman is married there is change in the decision making
process. It was found that majority of the respondents were
married (66.8%). Majority of the respondents were from the age
group of 26 to 35 years and Indian women in this age group are
generally married. Historically investment decisions are taken by
the male members in spite of women having independent income.
202
Study found that married women consulted their spouse while
taking investment decisions.
It was found that majority of the respondents had an annual
income between rupees five to ten lakhs followed by those earning
less than five lakhs. On further analysis it was found that majority
of those earning an income between 5 to 10 lakhs were belonging
to the age group of 26 to 35 years. Respondents in this age group
were having higher work experience leading to better salaries.
It was found that majority of the respondents were from IT / KPO /
BPO sectors followed by the BFSI and Education sector. Demand
for women work force is higher in the IT and BPO sector which
results in more women working in these sectors to earn a better
salary compared to those from other sector employees.
It was found that majority of the respondents were employed in
private firms followed by government owned companies or
departments.
The Mean family size was found to be close four, which reflects
the spread of nuclear families in cities. It is found that, majority of
the respondents had a family size of four, followed by a family size
of three. This indicates that employed women prefer to have
smaller family size so as to focus on less number of children and
grow in their career as well.
203
6.2 Investment Pattern of employed women Every individual having surplus money invests in different types of
assets including financial and physical assets. Each individual has
his own method of shortlisting financial avenues to invest in. Any
individual‟s investment pattern reflects the type of assets held and
the perceived risk of the portfolio of assets held. Majority of the
respondents considered bank deposits, provident fund, postal
savings, insurance and investment in gold to be low risk products.
Respondents holding a portfolio of investments considered to be
having low risk is considered to have a non-risky portfolio pattern
(NRPP). Mutual fund investment was considered as a moderately
risky financial product. If the respondent‟s portfolio had mutual
fund along with other assets, then such a portfolio was considered
to have a moderately risky portfolio pattern (MRPP). Most of the
respondents considered investment in equity shares and
commodity to be highly risky. If equity or commodity investment
were foundin the portfolio of the respondent, then such a portfolio
was considered to have a risky portfolio pattern. The type of
financial products held by the respondent, reflects the portfolio
pattern of the respondent. Survey results indicate that women
were preferring to invest in financial products perceived to a low
risk, like bank deposits, Insurance and provident fund.
204
Investment pattern could depend on many demographic attributes.
It was found that majority of employed women had moderately
risky investment pattern followed by Non risky portfolio pattern and
risky portfolio pattern.
6.2.1 Influenceof demographic variables on investment pattern Investment pattern of employed women could be influenced by
many independent variables like city of residence,age,educational
background, marital status, family size, annualincome, financial
literacy level, product awareness and risk perception, source of
information and many other variables which were taken up for the
study.
This study made an attempt to find out and verify the impact of the
independent variables on the investment pattern. Findings are
based on the analysis of data and the result of hypothesis testing.
The data reveals that majority of the respondents were holding
moderately risky portfolio followed by low risk portfolio. Investment
pattern was more towards moderately risky portfolio pattern and no
risk portfolio pattern.
205
Result of chi-square test reveals that there is association between
the city of residence and the investment pattern. Indicating that the
investment pattern could be influence by the city where women
work.
Analysis of data revealed that women from Chennai were holding
investments carrying higher risk in comparison to women from
Bangalore and Cochin. Women from Cochin preferred holding non
risky portfolio of investments in comparison to women from
Chennai.
Majority of the respondents held moderately risky portfolio
consisted of investment in a mutual fund or equity along with bank
deposits,insurance, provident fund and jewellery.
Data further reveals that the portfolio of assets was considered
moderately risky as respondents perceived mutual funds to have
moderate risk and majority of the respondents held mutual funds in
their portfolio.
As percentage wise distribution of assets as percentage of total
assets was not collected from respondents, it was not possible to
206
know the weightage of mutual funds in the overall portfolio. Even a
small percentage of investment in mutual fund turned the portfolio
into moderately risky portfolio.
Data revealed that majority of the respondents had a work
experience of 10 years and less, split equally between five to ten
years and less than five years. Participation by women with more
than 20 years‟ work experience was less.
Based on the hypothesis testing result, it was inferred that there is
an association between age and investment pattern. Employed
women in the age group of 26 to 35 years held a moderately risky
portfolio which was much higher in comparison to women in the
age groupof 46 to 55 years, indicating that younger women were
willing to take higher risk in comparison to elder women. As
women grow older, they prefer low risk investments.
To find out, if the educational back ground of the respondent could
influence the investment pattern, Hypothesis testing was carried
out and based on the result it was inferred that there is no
association between the educational qualification and the nature of
207
investment pattern. Women avoided high risk investments
irrespective their educational back ground.
It was found that respondents earning a salary of less than Rupees
five lakhs were holding low risk portfolio of investments compared
to other income group respondents and those earning salary
above 5 lakhs were holding moderately risky portfolio compared to
other income groups. Hypothesis test result indicates an
association between income and investment pattern. Correlation of
coefficient value also reaffirms this dependence investment
patternon income.
6.3 Financial literacy level Majority of the respondents considered themselves to be
financially illiterate. This could be due to lack of interest in
managing money by themselves. From childhood girls, were not
taught to handle money themselves, rather, money was handled
on their behalf by parents and post marriage by their spouse. This
leads to women not giving a serious thought towards learning
about financial investments. They restrict themselves towards
buying of gold for self-consumption and at most are involved in
consumer durable purchases and residential properties.
208
It was found that, majority of the respondents with low financial
literacy level held a low risk portfolio. Majority of the respondents
with moderate level of financial literacy held a portfolio of
moderately risky portfolio. Those with high level of financial literacy
were not averse in making investment in risky assets. Hypothesis
test results also indicates that investment pattern has an
association with the financial literacy level of the respondent.
It was found that the risk perception about financial products varied
based on the financial literacy level. Those with higher financial
literacy level made investment in equities as the considered equity
to carry a lower level of risk in comparison to respondents with
lower level of financial literacy.
209
6.4 Types of assets held by employed women Women are familiar with traditional investment products like bank
deposits, insurance and postal savings products.
Awareness about Postal schemes was high but investment by
respondents is low, indicating that urban employed women have
lost interest in postal savings. As most of the women are tech
savvy and use internet for transactions, the lack of such facility by
postal department could be one of the reasons for lack of interest
in postal savings schemes by urban women.
It was found thatawareness level about Bank deposits, Insurance
and postal savings was very high and awareness about
commodities market awareness was verypoor.
Study revealed that the most popular investments held by the
respondents was bankdeposits, insurance, provident fund, gold
jewellery and mutual funds. Employed women avoided
investments in commodities and equities as they considered them
to be highly risky. Women prefer to avoid high risk investments
210
It was found that for majority of the employed women, the main
purpose of investment was for their children‟s education and
Marriage.
This indicates the importance of education among the educated
employed and with the cost of education going up, they prefer to
start savings at the earliest to meet their children‟s future
education cost.
Marriage is an important event in life, and in India, quite a lot of
expenses is incurred during marriages. To meet this future need,
employed women prefer to start saving from the time the children
are young. Some of the respondents who were not married also
indicated that one of the purposes of saving was meeting the
expenses of their own marriage.
Majority of the respondents had invested in gold in form of
jewellery
Investment in alternate form of gold was low. This indicates that
Women purchase gold for consumption purpose rather than for
Investment. One of the reasons could be the usage of gold in
ceremonies starting from the birth of a child till the death of a
person as per Indian customs and rituals. There seems to be no
211
decrease in consumption of physical gold, in spite of government
increasing the import duty on gold.
It was found that Awareness level about alternate form of gold
investment was poor and not much investment is made into these
schemes.
It was found that Internet has replaced newspapers and
magazines as preferred source of investment information. This
indicates that women today are tech savvy and are well versed
with technology. With the increased level of the usage of smart
phone, mobile apps may become preferred source of information
in future.
It was found that friends and relatives continue to be an
importance source for investment information. This trend is likely to
continue till women raise their financial literacy level. Women
would like to use the past experience of their friends and relatives,
before taking an investment decision.
212
It was found that among the married women, husband was the
most preferred investment advisor and for single women it was
their parents
With the increased use of social platforms like Facebook,LinkedIn,
there is a possibility of social website, where people share their
product experience, may play an important role in the world of
investments.
It was found that respondents were aware about the tax benefits
available for certain investment products. Majority preferred to
invest in provident fund and life insurance product to claim the tax
benefit.
Women prefer low risk products about which they are aware of,
and are simple to understand. This makes provident fund and life
insurance to their natural choice. There is added benefit of
employer‟s contribution as far as provident is concerned, which
contributes to its popularity among investors. There is not much
push from the government in promoting alternate schemes. Lack
of product availability with tax benefits also leaves employed
women with limited choice.
There was lack of interest in health insurance among employed
213
women. Possibly the health insurance cover is provided by the
employer. Most of the large sized firms provide health insurance
cover for their employees.
Government has stopped the pension option for state and central
government employees. There is no post retirement support from
private employers.
Study revealed that there is lack of retirement planning among
employed women. This could be due to the traditional, mind-set
that children will take care of them or it is the job of spouse to take
care of post retirement life.
Based on the above findings it can be concluded that employed
women prefer to hold low risk portfolio and are supports earlier
research findings that women are risk averse
Financial literacy of employed women is poor in spite of being
highly educated.
214
Employed women prefer to invest in simple and easy to
understand products like bank deposits,insurance, provident fund,
jewellery and there is interest in mutual fund investing
Purchase of jewellery is for consumption purpose and not with an
investment angle.
Main purpose of investment for employed women is children‟s
education and marriage
Employed women do not take investment decision alone, but
prefer to seek help of parents, friends and relatives or their
spouse.
There is lack of retirement planning among employed women.
Financial product creators can look into the above findings based
on which they can create products meeting the features expected
by employed women.
Financial product marketers can use the above findings to market
their products through the right channel and through right
intermediaries.
Mutual fund industry can use the above findings to create schemes
with objectives in alignment with the above findings about the
purpose with which employed women take investment decisions.
215
6.5 Suggestions
1. Investment decisions of individuals are driven by multiple
factors
Andit was found that the financialliteracy level of employed
Women was low. It is suggested thatthe financialproduct
creators, marketers and regulators should try to increase the
financial literacy level of women by conducting training programs
and workshops on regular basis either independently or through
their employers.
2. Government should make available more tax savings products
in order toreduce concentration of savings in LifeInsurance and
Provident fund.
3. PFRDA should create more awareness about NPS so that more
people will bemotivated to think about retirement planning
among employed women.
4. Mutual fund houses should create products keeping in mind the
investment objectives of employed women through financial
intermediaries who are willing to educate women about financial
216
investments.
6.6 Scope for further research
1. A study on the details related to the type of mutual funds held
by the employed women could further improve the classification
of the portfolio held.
2. Study could be conducted on the retirement planning among
women.
3. A comparative study between semi urban and urban women
Investment pattern could be carried out.
4. A study can be carried to compare the investment pattern of
male
and female mutual fund managers based out of India.
5. A study can be carried out to find out the type of mutual fund
schemes held by employed women .
6. A study can be carried out on the life stage investment pattern
among women.
217
i
Bibliography Agarwal, G.D. (1992) Mutual funds and investors interest, The journal for corporate Professionals, Vol XXII, Issue 1, pp 23-23 Al-Tamimi, H. A. H. (2005), Factors Influencing Individual Investors Behaviour: An Empirical study of the UAE Financial Markets, IBRC Athens, Aryan Hellas Limited. Al-Tamimi, H.A.H., & Kalli A.A.B (2009). Financial Literacy and Investment Decisions of UAE Investors, Journal of Risk Finance, 10(5): pp 500-516
Annika A E Sunden and Brian J Surette, 1998, “Gender differences in the allocation of assets in retirement savings plans”,AEA papers and proceedings, pp207-211 Anthes, William L., Bruce W.and Most (2000) Frozen in the headlights: the dynamics of women and money, FPA Journal, September 2000, pp 47-56 Aparna Samudra and Burghate, M. A, (2012) A study on investment behaviour of middle class households in Nagapur,International Journal of Social sciences and InterdisciplinaryResearch, Vol 1, No5, May 2012, pp 56 -61 Bajtelsmit, V. L., & Bernasek, A. (1996). “Why do women invest differently thanmen?”, Financial Counselling and Planning, 7, pp1-10. Barber, B. M., & Odean, T. (2001). Boys will be boys: Gender, overconfidence and common stock investment. The Quarterly Journal of Economics, 116(1), pp261-292. Bernasek, A., & Bajtelsmit, V. (2002). Predictors of women‟s involvement in household financial decision-making. Financial Counseling and Planning, 13(2), 39-48.
Bernasek, Alexandra and Stephanie Shwiff (2001). Gender, risk, and retirement,Journal of Economic Issues, 116(1), pp 261-292
ii
Browning, M. (2000), “The saving behavior of a two-person household”, Scandinavian Journal of Economics, 102(2), pp235-51
Boyed, W.L, Leonard, M. and White, C. (1994), customer preference for financial services, An analysis. International journal of Bank Marketing, 12(1), pp 9-15
Buchaiah, M., A study on perceptions of investors towards mutual funds in greater Hyderabad and Andhra Pradesh,The IAMS Journal of Business Spectrum, Vol Vii, No 1, 2014, pp 65-71 Chaiubey and Rajat P. Dimri (2009), Investment pattern: A psychographic study of investors of Garwhal region of Uttrakhand,RVM Journal of Management Research, Vol 1, pp 36 - 49 Cohn, Richar.A and Bharat R. Kalluri (2003), Determinants of household saving in the G-7 countries: recent evidence,Applied Economics, 2003,35, pp 1199-1208 Daniela Beckmann and Lukas Menkhoff, (2008), Will women be Women? Analysing the gender difference among financial experts,KYKLOS, Vol 61, No-3, 2008, pp 364-384 Dwyer, P. D., Gilkenson, J. H., & List, J. A. (2002). Gender
differences in revealed risk taking: Evidence from mutual fund
investors. Economic Letters, 76(2), pp151-58.
Elder, H. W., & Rudolph, P. M. (2003). “Who makes the financial
decisions in the households of older Americans?” Financial
Services Review, 12(4), pp 293-308.
Fisher, P.J. (2010) Gender differences in personal saving
behaviours. Journal of financial counsellingand Planning ,21(1), pp
14-24
Gaurav Kabra, Prashant K Mishra and Manoj Kumar Dash (2011), Factors influencing investment decision of generations in India: An econometric study, AsianJournal of Management Research, pp 308-323
iii
Geetha, N. and Ramesh.N, (2012), A study on relevance of
demographic factors in investment decisions,International Journal
of Financial Management (IJFM) Volume 1, Issue 1, 2012, pp 39-
56
Giridhari Mohanta and Satya Swaroop Debassish (2011), A study
on investment preferences among urban investors in Orissa,
Prerana,March 2011, pp1-5
Gnana Desigan C., Kalaiselvi S and Anusuya L, Women investors perception towards investment – An empirical study,Indian Journal of Marketing, Vol XXXVI, No4, April 2006, pp 14-18
Goldsmith, E. B., & Goldsmith, R. E. (1997). “Gender differences in
perceived and real knowledge of financial investments”,
Psychological Reports, 80(11), pp 236-238.
Jain, D., & Mandot, N. (2012). Impact of Demographic Factors on
Investment Decision of Investors in Rajasthan. Journal of Arts,
Science & Commerce, 3(2, 3), pp 81 -92.
Jianakoplos, N. A., & Bernasek, A. (1998). Are women more risk
averse? Economic Inquiry, 36(4), pp 620-630.
Kabra, G., Mishra, P.K and Dash, M.K, (2010), Factors influencing
investment decision of generations in India: an economic
study,Asian Journal of Management, pp 305-326
Karthikeyan, K.,Bharas, S and Ranjit Kumar, K. (2012), An
empirical study on investor‟s perception towards mutual fund
products through Banks with reference to Tiruchirapalli city, Tamil
Nadu,Vision, 16, 2,2012, pp 101-108
Kathrivel N and Mekala A (2009), Women Investor‟s perception towards online trading in Tamil Nadu with special reference to Coimbatore district,Technia Journal of Management Studies, Vol 5, No 1, April 2009, pp 75-88
Krishnamoorthy,.C (2008), A study on investment pattern and tax planning in the Nilgiris district Jan 2008, unpublished
iv
Lewellen, W.G., Lease,R.C., andSchlarabaum, G.G(1977).
Patterns of investment strategy and behaviour among individual
investors,Journal of Business, Vol. 50(3), pp 296-333
Lipe, M.G., (1998). Individual investors risk judgments and
investment decisions: The impact of accounting and market data.
Accounting organizations and Society, 23(7), pp 625-640.
Love, D.A. (2010), The effects of marital status and children on savings and portfolio choice,The Review of financial studies, 23(1), pp 385-431
Lusardi, A., & Mitchell, L. (2007), “Financial literacy and retirement preparedness: Evidence and implications for financial education”, Business Economics, 42(1), pp 35-44.
Max New York Life India (2008), How India earns, spends and saves, A max New York Life – NACER study,Business wire India, Feb 2007
Mittal, M. and Vyas R., 2008. “Personality type and investment Choice: An empirical study”, The ICFAI University Journal of Behavioral Finance, Vol.5(3), pp.7-22
Mukhi M.D, (1989). NSCs, A saving grace,Business world, 6-19 Dec, pp 107-120
Nagy, R.A., & Obenberger, R.W. (1994). Factors influencing Investor Behavior. Financial Analysts Journal, 50(40), pp 63-68
Nupur Gupta and Vijay Agarwal (2013), A study of the constituents of domestic savings in urban cities with special focus on Mumbai and Delhi,Indian Journal of Finance, Feb 2013, pp 17-26 Pandian L and Aranganathan T (2012), Saving and investment attitude of salaried class in Cuddalore district,Journal of Business and Management,Vol (1), Issue 1,May-June 2012, pp 40-49
Paramashivaiah. P. Puttaswamy, Ramya S.K. (2014) Changing risk perception of women investors: An empirical study,Indian Journal of Finance, June 2014, pp 22-33
v
Parimala Kanthi and Ashok Kumar, (2013), Holding Behaviour of individual investors in Coimbatore District,Papirex Indian Journal of Research, Vol (2), Issue9, Sept2013, pp 27-30 Rajarajan (2000), “Investor‟s demographics and risk bearing capacity”,Finance India, vol xvii no 2,June,pp 565 – 576 Ramanujam.V and Chitra Devi.K (2012), A study on impact of Socia-Economic profile on investment pattern of salaried and Business People in Coimbatore City,International Journal of Management and Information Technology, Vol (2), No 1, Nov. 2012, p21 - 27 Ravi Vyas and Suresh C Moonat, Perception and behaviour of mutual fund investors in Indore, Madhya Pradesh,Indian Journal of Finance, August 2012, pp 36-42 Salam Abdus and Kulsum, Umma (2002), Savings behaviour in India: An empirical study,The Indian Economic Journal, Vol 50, Issue 1, pp 77-80 Sashikala P and R Siva Prasad Ravi (2010), “A Study on the Effect of Demographic on the choice of Investments and Ability to take risk”. Review of Business and Technology Research Vol. 3, No. 1, 2010, pp 53 - 59
Schumell, D. (1996) Increased focus on women as financial services customers,Trust and Estate, 135(6), pp 19-20 Shanmugham, R., 2000. Factors influencing investment decisions, Indian capital markets - Trends and dimensions (Ed.) New Delhi: Tata McGraw-Hill
Shaikh, A. R. H., & Kalkundrikar, A. B. (2011). Impact of Demographic Factors on Retail Investors‟ Investment Decisions- An Exploratory Study. Indian Journal of Finance, 5(9), pp 35 – 44.
Shanmugasundaram V and Balakrishnana V (2006) “Behavioral finance for developing winning strategies in investments”,South Asian Journal of Socio Political studies, Vol 10. No 1, pp 99-102.
vi
Shanmugsundaram, V., & Balakrishnan, V. (2011). Investment Decisions – Influence of Behavioural Factors. Indian Journal of Finance, 5(9), pp 25 – 34. Shollapur M R and Kuchanur A B (June 2008) “Identifying perceptions and perceptual gaps: A study of individual investors in selected investment avenues “ICFAIJournal of behaviouralfinance, Vol. V no.2 pp 47-64 Somasundram V. K, (1998) a study on savings and investment pattern of salaried class in Coimbatore district. Unpublished Thesis, Bharathiyar University, Coimbatore Sudalaimuthu, s. and Senthil Kumar, P., 2008. “A study on investors perception towards mutual fund investments”, Journal of ManagementTrends, Vol.5(1), September 2007,pp106-17
Sunden, A. E., & Surrette, B. J. (1998). “Gender differences in the allocation of assets in retirement savings plans”, American Economic Review, 88, pp 207-211.
Sunita Bishnoi (2013), An empirical study on investors behaviour in National Capital region, International Journal of Global Business Management and Research, Vol 1, Issue 2, Mar 2013 pp 14-26
Suriyamurthy S, Narayanan B and Arivazhagan, Investor behaviour in various investment avenues – A study,International Journal of Management and Technology, Vol 2 issue 7, July 2012, pp 33 - 37
Suyam Prabha R., (2011), Investors Decision making process and pattern of investments – A study of individual investors in Coimbatore,SIES Journal of Management, March 2011, Vol 7(2) pp 1-12 Syed TabaasumSultana (2010), An empirical study of Indian investors behaviour,Global Journal of Finance and Management, Vol 2, 1(20), pp 19-33
vii
Tamilkodi A.P.P (1983), Small savings Schemes in Tamil Nadu, A trend study (1970-80), Unpublished Thesis, University of Madras Tirupathi.T (2012), A study on salaried class investors attitude towards Tax planning in Vellore,Global Management Review, Vol 6, Issue 2, Feb 2012, pp 66-81 Vrushali Shah, Priyanka. Z and Pratibha Deshmuk, (2011), Stages in Life cycle and investment pattern of Rural Investors – A Case study,BVIMR Management Edge, Vol4, No. 2(2011), pp 48 – 59 Warren E W (1990),“Using demographic and lifestyle analysis to segment individual investors “,Financial Analysis Journal, Mar-Apr, pp 74 - 77 Books Anderson D R., Sweeney D J and Williams T A,Statistics for Business and Economics. 11/e,Cengage, 2011 Darst,David,The Art of Asset Allocation, 2/e, Tata McGraw Hill, 2008 Fabozzi, Frank J. and F. Modigliani,Capital Markets,PHI, 2008 Field,Andy,Discovering Statistics using SPSS, 2/e, Sage ,2009 Frank K. Reilly and K.C Brown,Investment Analysis and Portfolio Management, 8/e, Cengage, 2006 Jae K Shim,Handbook of Financial Planning ,2/e, Thomson, 2004 John Walkenbach,Microsoft Excel 2010, 1/e, Wiley India, 2010 Ken Black,Applied Business Statistics, 7/e, Wiley India, 2013 Kothari C R,Research Methodology, 2/e, Wishwa Prakashan, 1998 Panneerselvam. R,Research Methodology, 1/e,PHI, 2008
viii
Robert H. Craver,Doing data Analysis with SPSS, 2/e,Cengage, 2012 Shanbhag A.N and Sandeep S,In the wonderland of Investment,
30/e, Popular Prakashan, 2011
William M.K. Trocim,Research Methods, 2/e,Biztantra, 2004
Websites Visited www.amfiindia.com accessed on April 15 , 2013
www.bseindia.comm accessed on March 3 , 2013
www.mutualfundsindia.com accessed on May 6 , 2013
www.india.gov.in/nsso-reports accessed on Feb 12, 2013
www.mcxindia.com accessed on March 3 , 2013
www.mospi.nic.in accessed on 21 June 2013
www.ncaer.org accessed on April 7, 2013
www.nhb.gov.in accessed on March 14 , 2013
www.nism.ac.in accessed on march 4 2013
www.nseindia.com accessed on Jan 5, 2013
www.rbi.org accessed on April 23 , 2013
i
ANNEXURE
Research Survey Questionnaire
No question in the survey asks for your identification . You can write down details in places where ever space is provided . This survey is conducted for academic research . All details given will be kept confidential and will be used only for academic purpose by the researcher . Part A 1. City of residence Bangalore Chennai Cochin 2. Age (in years)Below 25 years 26 – 35 36 – 45 46 – 55 above 55 3. Marital Status Single Married Widow Others , Please Specify………… 4. Highest Education Below Graduation Graduate (Non Professional) Graduate (Professional) Post Graduation and above Others ( please specify) ..…… 5. Occupation Salaried ( Govt.) Salaried ( Private) Self Employed( Business) Self Employed ( professional)
ii
Others ……………… 6.Sector/ Industry of your employment Education BFSI IT / KPO/BPO Medical Others ( please specify) ………… 7. Years of work / professional experience less than 5 years 5 – 10 years 11 – 15 years 16 – 20 more than 20years 8. The current place where you live is Own Rented others 9. How many people live in your house hold including yourself Less than 3 Less than 4 Less than 5 5 and above Answer Q11 only if married and applicable 10. Number of dependent children _____Kindly give the break up Number of daughter(s) _____ Number of Son(s) ____
iii
Part B 11. Mark the products about which you are aware of ( not necessarily that you have invested ) Bank deposits Postal savings Insurance Bonds/Debentures Mutual funds Share market Gold funds / ETF Chit funds Real estate Pension Schemes Commodities Others …. 12. Rate the risk level of each of the investments on a scale from 1 to 5 ( put a √ mark in appropriate box )
No Risk
1
Low Risk
2
Moderate Risk
3
High Risk
4
Very High Risk
5
Bank Deposits
Insurance
Postal Savings
Life Insurance
Bonds / Debentures
Gold
Provident fund
Equity shares
Commodities
Chit funds
Real Estate
Mutual funds
Others ( if filled)
13. Your current investments are in ( tick the appropriate ones)
Bank Deposits Equity (Shares) Mutual Funds
Postal Savings Commodities Others ( specify )
Life Insurance Chit funds
Bonds/Debentures Real Estate
Gold
Provident fund
iv
14.Answer if you have invested in Gold , Your investment in gold is in form of Jewellery Coins Gold Mutual Fund / ETF Other form ( please specify) _____ 15. Investment feature you look into while taking investment decision,in order of importance (1 to 5 ). 1 being the most important aspectand 5 being the least in the order of importance Liquidity Safety of capital High return Tax benefit Any Other feature ( please specify) ____ 16. Main purpose of your investments High Return Children‟s education / marriage Tax benefit For post retirement expenses Other reason ( please specify) ______________________ 17. Planned investment period (Tenure) is Less than 1 year 1-3 years more than 3 years no specific time frame
18. Whom do you consult for taking investment decisions
Own Analysis/ research Spouse Parents Friends & Colleagues Financial consultants
v
Others ( please specify) ………………
vi
19. Your sources of information for investments is Internet News paper & Magazines Television Family, Friends & Colleagues Financial Consultants Others ( please specify) ……………… 20. How often do you review your investments Once a year between 2 – 3 years above 3 years Rarely 21. Do you invest in tax saving investments Yes No 22.If yes for Q 21 , then the most preferred tax saving investment ( tick any one) Tax saving Bonds Life Insurance PPF Tax saving Mutual funds Others (please specify) __
23. Your level of financial literacy according to you ( your knowledge about financial terms , calculations of return
and other simple aspects of investments) Very Low Low Moderate High 24. Your Annual income is in the range of Less than Rs 5 Lakhs 5 – 10 Lakhs 10 – 15 Lakhs above 15 Lakhs Thank you for your patience and time in answering the questions