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Investment behavior of Women Investors

Investment Behaviour of Women Investors A dissertation submitted in partial fulfillment of the requirement of Post Graduate Degree in Master of Business Administration of Bangalore University Submitted by: KIRTANA N KAULIGE Register no. : 03XQCM6048 UNDER THE GUIDANCE OF Dr Nagesh S Mallavalli 2004 2005 MP Birla Institute of Management

Associate Bharatiya Vidya Bhavan BANGAL ORE 560 001.

M. P.Birla Institute of Management, Associate B hartiya Vidya Bhavan 1 Investment behavior of Women Investors

DECLARATION I hereby declare that this research work embodied in this entitled dissertation Investment Behavior of Women Investors has been carried out by me, under the guidance of Dr.Nagesh .S. Mallavalli, Principal, MPBIM, Bangalore I also declare that this dissertation has not been submitted to any University or Institution for the award of any Degree or diploma. PLACE: Bangalore DATE: (Kirtana N Kaulige) M. P.Birla Institute of Management, Associate B hartiya Vidya Bhavan 2 Investment behavior of Women Investors

ACKNOWLEDGEMENT I am grateful to many people whose timely help and guidance has helped me to conduct this research successfully. I hereby wish to express my heart felt gratitude to Dr. Nagesh S Mallavalli, Principal for his guidance and supervision. Finally I would like to extend my grateful thanks to all my friends and faculty members of MPBIM, Bangalore whose assistance has a lot to me personally for the completion of this research. PLACE: Bangalore DATE: (Kirtana N Kaulige)

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M. P.Birla Institute of Management, Associate B hartiya Vidya Bhavan 7 Investment behavior of Women Investors RESEARCH EXTRACT

Womens position in society has been changing over the last few decades. Today women are better educated and earn more money than before, which has increased womens influence on financial decision in families. The interest in investing has been increasing while the households have become more prosperous. The results showed that the investors age, financial situation, attitude towards risks and the phase of life affect investment behavior. This research is carried out primarily t o find out the attitude of women investors towards the risk and return and the process of financial planning process undertaken by these investors. This research also provides an insight into the needs and wants of women investors with respect to the kind of portfolio of investment they are looking for and understand their financial requirements in life. As this research is also provides the information about the financial planning process of women investors it becomes extremely essential to understand the process as a whole. Financial planning is the process of meeting goals of life through proper management of finances of an individual. Financial planning provides direction and meaning to financial decisions. It helps in understanding how each financial decision one makes affects other areas of finances. By viewing each financial decision as part of a whole, short and long-term effects on the life goals can be evaluated. M. P.Birla Institute of Management, Associate B hartiya Vidya Bhavan 8 Investment behavior of Women Investors

Topic Investment Behavior and Financial Planning Process of Women Investors. Statement of the Problem This research is carried out primarily to find out the various options available to the women investors whole doing their financial planning and to find their attitude towards risk and return. Objectives of the study This study foc use s on investment behavior of women investors and the factors that influence their investment decisions. An in depth analysis is made in terms of their financial goals and their investment patterns. It also focuses on the various investment options women invest in and how aggressive they are in terms of investing. Methodology and Data Collection The Primary Data was collected by administering a detailed questionnaire and also by conducting in-depth personal interviews. Secondary data was collected through various sources such as magazines, internet, business journals etc. Findings 70% of the women have invested 10% to 20% of their income followed by women. Most of the women consisting of 60% of th em take their own investment decision. 90% of the women dont have a formal financial plan.


38% of the women have ranked liquidity as the most important consideration while taking investment decisions. 70% of the women had the basic understanding about investing and have made some investments. 78% of the women prefer to invest in safer investments. 54% of the women would transfer their money into more secure sectors if their investments decrease in value. 46% of the women base their decisions on the advice of their family members. 38% of the women base their decisions on the advice of their friends. 58% of the women have a average tolerance level. Conclusion

It can be concluded that generally, women are conservative investors and they feel that safeguarding what they have is top priority. These investors want to avoid risk particularly the risk of losing an y principal that is their original investment even if that means theyll have to sett le for ver y modest returns.


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INTRODUCTION

BACKGROUND

As a woman, and an investor, shaping of financial future is as important as the many ot her roles they play in life. That's why takin g control today is essential i n realizing their dreams for tomorrow. Whether women are just beginning to develop their investment strategy or are refining a current one, it's important to keep in mind that they should build a finan cial legacy for long term. At various stages of your life, you are faced with important investment and financial decisions. Your success in making these decisions with the help of a sound investment strategy can have a major impact on your income, net worth and, ultimately, quality of life in retirement.

Women today ha ve more earnin g potential and more influence over financial decisions than ever before. Women represent almost half of the workforce and many businesses are owned or managed by women. Many women influence or control the majority of all consumer purchase decisions and many of the investment decisions. As a result, it is important for women to focus on finances now more than ever.

Throughout their lives, as a woman, they will be faced with different financial challenges than their male counterparts. If women are going to take control of their financial future, its important that they recognize those differences and empower themselves.

Earning money is only half the equation for achieving financial independence. Effectively putting your money to work for you is equally important. Though the size of household M. P.Birla Institute of Management, Associate B hartiya Vidya Bhavan 12 Investment behavior of Women Investors

income matters, how to manage the money women have to meet short-term obligations as well as long-term goals determines how they live today and in the future. That's why taking control of their finances is so important. The challenges of investing are unique for each individual. In addition, circumstances are frequently different for women and whatever choices you make will be better as a result of greater knowledge of the underlying issues and your options.

Women are more likely to live longer As a woman; the life expectancy is at an all time high. In fact, 90% of women eventually end up living on their own. To help ensure that women will be able to maintain their lifestyle, they should stay involved in investment decisions and consider planning for th e unexpected early on. Women are more likely to have dependents to care for With a growing divorce rate, the number of single mothers is on the rise. Providing for and raising a family, while also saving for college and retirement, can be a daunting task. One way to help ensure that you have enough savings is to invest a small amount regularly through a systematic investment plan. Women are less likely t o take investment risks For whatever reason; many women are less willing than men to take risks. Yet, a certain degree of risk is necessary to build a well-diversified portfolio. By learning all about investing, women can become more comfortable making investment decisions that involve different levels of risk.

Financial Planning Process

For this purpose a thorough understanding of financial planning is important for all investors. Financial planning is the process of meeting ones life goals through the proper


management of his/her finances. Life goals can include buying a home, saving for your child's education or planning for retirement. The financial planning process consists of six steps that help people to take a "big picture" look at where they are financially. Using these six steps, women can work out where they are now, what they may need in the future and what they must do to reach their goals.

The process involves gathering relevant financial information, setting life goals, examining current financial status by women and coming up with a strategy or plan for how they can meet their goals given their current situation and future plans.

Financial and personal satisfaction is the result of an organized process that is commonly referred to as personal money management or personal financial planning.

Personal financial planning is the process of managin g investors money to achieve personal economic satisfaction. This planning process allows him/her to control their financial situation. Every person, family, or household has a unique financial position, and any financial activity therefore must also be carefully planned to meet specific needs and goals.

A comprehensive financial plan can enhance the quality of life and increase investors satisfaction by reducing uncertainty about your future needs and resources. The specific advantages of personal financial planning include

Increased effectiveness in obtaining, using, and protecting your financial resources throughout the lifetime. Increased control of the financial affairs by avoiding excessive debt, bankruptcy, and dependence on others for economic security. Improved personal relationships resulting from well-planned and effectively communicated financial decisions. A sense of freedom from financial worries obtained by looking to the future, anticipating expenses, and achieving the personal economic goals.


We all make hundreds of decisions each day. Most of these decisions are quite simple and have few consequences. Some are complex and have long-term effects on our personal and financial situations. The financial planning process is a logical, six-step procedure:

Determining of current financial situation Development of financial goals Identifying alternative courses of action Evaluating alternatives Creating and implementing a financial action plan, and Evaluating and revising the plan.

Step 1: Determination of Current Financial Situation

In this first step of the financial planning process, investors will determine their current financial situation with regard to income, savings, living expenses, and debts. Preparing a list of current asset and debt balances and amounts spent for various items which give a foundation for financial planning activities.

Step 2: Development of Financial Goals

Investors should periodically analyze their financial values and goals. This involves identifying how they feel about money and why they feel that way. The purpose of this analysis is to differentiate their needs from their wants. Specific financial goals are vital to financial planning. Others can suggest financial goals for investors; however, they must decide which goals to pursue. Their financial goals can range from spending all of their current income to developing an extensive savings and investment program for their future financial security.

Step 3: Identify Alternative Courses of Action

Developing alternatives is crucial for making good decisions. Although many factors will influence the available alternatives, possible courses of action usually fall into these categories:


Continue the same course of action. Expand the current situation. Change the current situation. Take a new course of action.

Not all of these categories will apply to ever y decision situation; however, they do represent possible courses of action. Creativity in decision making is vital to effective choices. Considering all of the possible alternatives will help the investor make more effective and satisfying decisions.

Step 4: Evaluate Alternatives

Investors need to evaluate possible courses of action, taking into consideration life situation, personal values, and current economic conditions. Consequences of Choices. Every decision closes off alternatives. For example, a decision to invest in stock may mean an investor cannot take a vacation. Opportunity cost is what investor gives up by making a choice. This cost, commonly referred to as the trade-off of a decision, cannot always be measured. Decision making will be an ongoing part of personal and financial situation. Thus, investor needs to consider the lost opportunities that will result from their decisions.

Evaluating Risk

Uncertainty is a part of every decision. Selecting a college major and choosing a career field involve risk. Other decisions involve a very low degree of risk, such as putting money in a savings account or purchasing items that cost ver y less. The chances of losin g something of great value are low in these situations. In many financial decisio ns, identifying and evaluating risk is difficult. The best way to consider risk is to gather information based on investors experience and the experiences of others and to use financial planning information sources.


Financial Planning Information Sources

Relevant information is required at each stage of the decision-making process. Changing personal, social, and economic conditions will require that investor continually supplement and update your knowledge.

Step 5: Create and Implement a Financial Action Plan

In this step of the financial planning process, investor will develop an action plan. This requires choosing ways to achieve your goals. As he/she achieves their immediate or short-term goals, the goals next in priority will come into focus. To implement the financial action plan, investors may need assistance from others. For example, investor may use the services of an insurance agent to purchase property insurance or the services of an investment broker to purchase stocks, bonds, or mutual funds.

Step 6: Reevaluate and Revise the Plan

Financial planning is a dynamic process that does not end when investor takes a particular action. They need to regularly assess their financial decisions. Changing personal, social, and economic factors may require more frequent assessments. When life events affect investors financial needs, this financial planning process will provide a vehicle for adapting to those changes. Regularly reviewing this decision-making process will help them to make priority adjustments that will bring their financial goals and activities in line with their current life situation.

To achieve the best results from financial planning engagement the following becomes necessary for women investors:

Set measurable financial goals Set specific targets of what women want to achieve and when they want to achieve results. For example, instead of saying you want to be "comfortable" when you retire or that you


want your children to attend "good" schools, you need to quantify what "comfortable" and "good" mean so that you'll know when you've reached your goals.

Understand the effect of each financial decision Each financial decision women make can affect several other areas of their life. For example a decision about a womans child's education may affect when and how she meets her retirement goals. All the financial decisions are interrelated.

Re-evaluation of financial situation periodically Financial planning is a dynamic process. Financial goals may change over the years due to changes in your lifestyle or circumstances, such as an inheritance, marriage, birth, house purchase or change of job status. Revision of the financial plan to reflect these changes becomes necessary to stay on track with the long-term goals.

Start planning as early as possible People who save or invest small amounts of money early, and often, tend to do better than those who wait until later in life. By dev eloping go od financial planning habits such as saving, budgeting, investing and regularly reviewing finances by women early in their life will help them to meet life changes and handle emergencies.

Be realistic in your expectations. Financial planning is a common sense approach to managing finances to reach your life goals. Events beyond a persons control such as inflation or changes in the stock market or interest rates will affect your financial planning results.

The various factors which will influence a women investor are:

Start early The most important step in any long-term investment plan is to start early. Even if women are only able to set aside a small amount of money monthly, or even quarterly, that money should still grow and generate earnings over time. One highly effective way to make investing a habit is by pa ying you rself first. Setting aside


a portion of income before paying other expenses can ensure that women have the money they need to stick to an investment plan.

Stay Ahead of Inflation

Day-to-day inflationary price increases are often barely noticeable. Yet, over the lon g term, a small increase in average yearly inflation can add up to a serious drain on investors buying power. Women should focus on educated investment choices which may offset inflation's daily climb. Invest Routinely The widely heard mantra of "buy low, sell high" is something many investors strive for but few achieve. Since n o one can really predict the markets' ups and downs, even extensive research and analysis can't guarantee you a "low" price when you decide to invest. Risk Tolerance Risk is not something many people seek in their daily lives, but when it comes to investing, some degree of risk can be potentially rewarding. The investments usually involve some degree of risk. As a general rule of thumb, the higher the risk associated with an investment, the higher the potential return.

What is the best saving and investing products should be ascertained. This depends on when women will need the mo ney, their goals

For instance, if women are saving for retirement, and they have 35 years before they retire, they may want to consider riskier investment products, knowing that if you stick to only the "savings" products or to less risky investment products, their money will grow too slowlyor given inflation or taxes, they may lose the purchasing power of their money. A frequent mistake people make is putting money they will not need for a very long time in investments that pay a low amount of interest.

On the other hand, if women are saving for a short-term goal, five years or less, they don't want to choose risky inv estments, because when it's time to sell, they may have to take a


loss. Since investments often move up and down in value rapidly, they want to make sure that they can wait and sell at the best possible time.

The primary risks in fund investing include the following:

Systematic Risk - A risk that influences a large number of assets. An example is political events. It is virtually impossible to protect yourself against this type of risk.

Unsystematic Risk - Sometimes referred to as "specific risk". It's risk that affects a very small number of assets. An example is news that affects a specific stock such as a sudden strike by employees.

Credit or Default Risk - This is the risk that a company or individual will be unable to pay the contractu al interest or principal on its debt obligations. This type of risk is of particular concern to investors who hold bond's within their portfolio. Government bonds, especially those issued by the Federal government, have the least amount of default risk and least amount of returns while corporate bonds tend to have the highest amount of default risk but also the higher interest rates. Bonds with lower chances of default are considered to be investment grade, and bonds with higher chances are considered to be junk bonds. Bond rating services, such as Moody's, allows investors to determine which bonds are investment-grade, and which bonds are junk.

Country Risk This refers to the risk that a country won't be able to honor its financial commitments. When a country defaults it can harm the performance of all other financial instruments in that country as well as other countries it has relations with. Countr y risk applies to stocks, bonds, mutual funds, options and futur es that are issued within a particular country. This type of risk is most often seen in emerging markets or countries that have a sev ere deficit.


markets or countries that have a sev ere deficit.

Foreign Exchange Risk When investing in foreign countries you must consider the fact that currency exchange rates can change the price of the asset as well. Foreign exchange risk applies to all financial instruments that are in a currency other than your domestic currency. As an example, if you are a resident of America and invest in some Canadian stock in Canadian dollars, even if the share value appreciates, you may lose money if the Canadian dollar depreciates in relation to the American dollar.

Interest Rate Risk - A rise in interest rates during the term of your debt securities hurts the performance of stocks and bonds.

Political Risk - This represents the financial risk that a countr y's government will suddenly ch ange its policies. This is a major reason that second and third world countries lack foreign investment.

Market Risk - This is the most familiar of all risks. It's the day to day fluctuations in a stocks price. Also referred to as volatility. Market risk applies mainly to stocks and options. As a whole, stocks tend to perform well during a bull market and poorly during a bear market volatility is not so much a cause but an effect of certain market forces. Volatility is a measure of risk because it refers to the behavior, or temperament, of your investment rather than the reason for this behavior. Because market movement is the reason why people can make money from stocks, volatility is essential for returns, and the more unstable the investment the more chance it can go dramatically either way. The risk/return tradeoff is the balance an investor must decide on between the desires for the lowest possible risk for the highest possible returns. Remember to keep in mind that low levels of uncertainty (low risk) are associated with low potential returns and high levels of uncertainty (high risk) are associated with high potential returns.


Diversif ication of the Assets Limiting the investments to a single type or style can be a potentially dangerous situation. The success of investment strategy depends more on the combination of asset classes chosen, and less on the individual securities themselves. Diversifying the assets, or spreading them across a variety of investment types and styles, is a more effective way to manage portfolio's risk level. Because different investments respond differently to changing market conditions, diversification may provide protection in the event that one or more investments experience a downturn. Applying the concept of asset allocation helps ensure that you adequately diversif y your assets. Asset allocation means spreading your money across different asset classes, such as stocks, bonds and cash. Asset classes usually do not move in tandem. Therefore, at any given risk level, there is an allocation of stock; bond and cash investments that may help you realize your return potential while minimizing your risk exposure.

Alleviate Tax Burdens

It sounds easy enough identify investments with strong fundamentals and good growth prospects, purchase the most promising, and sit back and wait. This strategy, known as "buy and hold" investing, is known to be a highly effective way of riding out the markets' short -term fluctuations. In contrast, some investors try to time the market by anticipating the markets' movements and investing accordingly. While this may seem like a proactive way of investing, pinpointing th e exact highs and lows is a difficult thing to do even for investment professionals.

Investment Alternatives

Today's investor is faced with an overwhelming number of choices when it comes to implementing an investment strategy. Since the right combination of investments in the right types of accounts can mean reaching your goals sooner rather than later, it is important to know your alternatives. Below is a list of the major building blocks of any successful strategy. Stocks M. P.Birla Institute of Management, Associate B hartiya Vidya Bhavan 22 Investment behavior of Women Investors

A share of stock represents partial ownership in a company. Initially sold by the company itself to raise money, the shares are then bought and sold by investors in the secondary market. Shareholders can vote on the company's major decisions, and receive dividends as their share of profits. As a company's stock price rises or falls, so does the shareholder s' investment. Bonds Like stocks, bonds are issued by companies and governments to raise money to fund a variety of projects and operations. Unlike stocks, a bond is a loan that the issuer promises to pay back, usually at a set interest rate. Bonds are then bought and sold by investors in the secondar y market. Mutual Funds One of the most convenient investment options available, mutual funds offer investors the benefits of professional management and diversification. By pooling the assets of man y investors, and pursuing a set investment objective, mutual fund managers are able to provide investors with buying power unavailable to individual investors. Insurance and Annuities Insurance and annuities can help you work towards life's goals and plan for the une xpected. Offering tax-deferred growth, the option of income for life and a guaranteed death benefit, annuities can be a way to supplement your 401(k) or IRA retirement savings plan. An annuity requires you to make one or a series of payments and, if you choose, the insurance company will pay you a regular stream of income in the future in return. With life insurance, you pay premiums to the insurance company which entitle your beneficiaries to a specified benefit payment should something happen to you unexpectedly. This is all subject to the paying ability of the issuing insurance company.

Cash and Cash Equivalents Treasur y bills, money market mutual funds, certificates of deposit, even passbook savings accounts are all considered cash. Returns on these types of savin gs and investments are usually low because they often involve little or no loss of principal. But as a relatively safe place to keep funds that you may need to access readily, they play an important role in any investment plan. M. P.Birla Institute of Management, Associate B hartiya Vidya Bhavan 23 Investment behavior of Women Investors

But women investors have to restrict their choice of investment assets. These restrictions arise from their specific circumstances. Identifying these restrictions will affect their investment policy. The investment decisions are mainly affected by:

Liquidity

Liquidity is the ease with which an asset can be sold and still fetch a fair price. Women investors must consider how likely they a re to dispose of the assets at short notice. From this likelihood, they establish the minimum level of liquid assets they want in the investment portfolio.

Investment Horizon

This is the planned liquidation date of the investment or part of it. It could be the time to fund a childs education or marriage for women. Horizon needs to be considered as the women investors have to choose between assets of various maturities.

Tax Considerations

Tax consequences are central to investment decisions. The performance of an y investment strategy is measured by how much it yields after taxes. For women investors who face significant tax rates, tax sheltering and deferral of tax obligations may be pivotal in their investment strategy.

Unique needs Virtually every i nvestor faces special circumstances. Primary i nvestment of an individual and the unique risk profile that results from employment can play a big role in determining a suitable investment portfolio for women. These unique needs often center on a womans stage in the life cycle. Retirement, housing and childrens education and many other factors demand for funds and investment policy will depend in part on the prox imity of this expenditure.


Since this research has been conducted on the women investors and a study of their investment behavior, it becomes important to divide them into different types. Women Investors have their own investing styles: some are risk takers by nature, willing to gamble large amounts of money on highly speculative investments. Others prefer the safety and security of cash in the bank even if it means that the actual buying power of their money is slowly dwindling because of inflation. Most people fall somewhere in between these extremes, and are willing to assume some risk, with the expectation that theyll be rewarded with higher returns. The amount of risk youre willing to take is your investing style.

The investing style stems from a variety of things: age, personality, personal experience, and financial circumstances to name a few. For instance, if women are approaching retirement, have many financial responsibilities, or have lived through major recession, chances are they may be a more risk-averse, or conservative investor.

On the other hand, if youre young, earning a high income, have few financial responsibilities, and have seen little in the way of economic hardship, you might be inclined to take more risk.

Categories of Investors

While there are as many investing styles as there are investors, most people fall more or less into one of three broad categories: conservative, moderate, aggressive.

Conservative investors Generally, conservative investors feel that safeguarding what they have is their top priority. These investors want to avoid risk particularly the risk of losing any principal (their original investment) even if that means theyll have to settle for very modest returns.

Conservative investors allocate most of their portfolios to bonds, such as Treasur y notes or high-rated municipal bonds, and cash equivalents, such as CDs and money market accounts. Theyre generally reluctant to invest in stocks, which may lose value, especially over the


short term. When conservative investors do venture into stocks theyre often inclined to choose blue chips or other large-cap stocks with well-known brands because they tend to change value more slowly than other types of stock and often pay dividend income.

Moderate investors

Moderate investors want to increase the value of their portfolios while protecting th eir assets from the risk of major losses.

For example, a moderate investor might use an allocation model that has 60% in stock, 30% in bonds, and 10% in cash equivalents . While they will tend to favor blue chip and other large-cap stocks, they may be willing to invest a modest portion of their principal in higher risk securities such as international stock, small-caps, and volatile sector funds in order to increase their potential for higher returns.

Even if women are not risk takers by natur e, a moderate investing style may be suitable in any circumstance or financial situation.

Aggressive investors

Aggressive investors concentrate on investments that have the potential for significant growth. They are willing to take the risk of losing some of their principal, with the expectation that they will realize greater returns.

Aggressive investors might allocate from 75 to 95% of their portfolios to individual stocks and stock mutual funds. While large- and small-cap stocks and funds may make up the core of their portfolios, many aggressive investors will have significant holdings in more speculative stocks and funds, such as emerging market and sector mutual funds.

Since aggressive investors focus on growth, they are usually less inclined to hold income-producing securities, such as bonds.

An aggressive investing style is definitely n ot for the faint of heart. Its best suited for investors with a long-term investing horizon of 15 years or more, who are willing to make a


long-term commitment to the stocks they bu y. But history has shown that an aggressive investing approach, combined with a well diversified portfolio, and the patience to stick to a long-term buy-and-hold investing strategy through inevitable market downturns, can be the most profitable in the long run.

Problem Statement

This research is carried out primarily to find out the various options available to the women investors whole doing their financial planning and to find their attitude towards risk and return .To find out the type of investment option which are desirable to different kinds of women investors.

Purpose of the Study

This research is conducted with a focus on the investment behavior of the women investors and factors they consider while taking investment decisions. It also highlights the various purposes for which the funds from the investments done by the women will be used by them.

Scope of the Study

The scope of the stud y is restricted to the market survey conducted on women investors with respect to the preference of various investment options while doing their financial planning .

Research Question

What are the traits of womens investment behavior?


Objectives of the Study

Primary Objectives

To find out risk appetite of women investors.

To find out whether the women investors are looking for long term growth or risk or return or liquidity. To know their long term financial goals.

Secondary Objectives To understand the needs and wants of the resp ondents with respect to their financial requirements in their life. To have an understanding of the respondents saving pattern.


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REVIEW OF LITERATURE

Financial investment is the purchase of a financial security, such as a stock, bond, or mortgage. Investment in human capital is spending on education, training, health services, and other activities that increase the productivity of the workforce. It is the use of money for the purpose of making more money, to gain income, increase capital, or both. The purchasing of stocks, bonds, mutual funds, options, real estate, etc., made with the expectation of future income or capital gains is investment.

An article entitled When It Comes to Investing, Is Gender a Strong Influence on Behavior and a report given by Robert C. Doll was reviewed to know the purpose, objective and also the methodology used in their report and the conclusions that he has drawn. This process has helped in devising a broad framework for the stud y and in identifying those areas of study that the researcher has not touched upon.

When It Comes to Investing, Is Gender a Strong Influence on Behavior


Background

In April 2004, Merrill Lynch Investment Managers undertook a study of investors and examined their related attitudes, beliefs and knowledge levels. In gender terms, the survey found that a little self-knowledge can go a lon g way.

Participants had to be solely or jointly responsible for financial and investment decisions for their household, and have at least $75,000 in investable assets and an annual household income of at least $75,000.

Objective of the Study

This survey brings a new perspective on the attitudes, knowledge and emotions that inform investor mistakes. Male or female, the point is this: Understand the motivations and emotions that inform their decision making and that can make better, more profitable investment decisions."

Purpose of the Study

According to a groundbreaking survey of investors despite the fact that, on average, they tend to know less about investing and enjoy investing less than men. The purpose was to understand the investment styles of both men and women and the effect of money as an emotional instrument which can get in the way of making the right investment decisions.

Methodology

The nationwide telephone poll examined the investment mistakes of 1,000 investors 500 men and 500 women and their related attitudes, beliefs and knowledge levels. Overall findings were analyzed looking specifically at results by gender. M. P.Birla Institute of Management, Associate B hartiya Vidya Bhavan 31 Investment behavior of Women Investors

The survey was done and random selection of sample was collected. The data was presented and summarized to get the pattern of relationships between various characteristics such as respondents attitude, emotions etc.

Findings

While all investors make mistakes, the survey found that women make fewer mistakes than men. Women are f ar less likely than men to hold a losing investment too long or wait too long to sell a winning investment. A significantly greater percentage of women (47%) than men (30%) report not being knowledgeable about investing. Women take a very deliberate approach to their finances. They are eager to identify goals and look to build a partnership with their financial advisor and want to be actively involved in the process of building and executing a financial plan. Both men and women cite the desire to have a comfortable retirement as their primary motivator, however, more women than men cite this. More women also cite wanting to be financially independent and having money to spend on the things they as "very important" motivators. Women are more likely than men to fall into the reluctant or unprepared categories Investors in these categories tend to not enjoying investing and are generally less knowledgeable about investing.

Conclusion

Women's lesser knowledge and interest in investing may explain why this catego ry skews slightly female. Unpr epared investors are not happy with their current financial situation. They are the most likely to lack confidence and be fearful or anxious about investing. They are the least likely to rebalance their portfolios.

It's critical for investors to understand their psychological makeup . Money is an emotional instrument, but emotions can get in the way of making the right investment decisions. Behavioral scientists have tended to look at investors as a whole, but both men and


women alike are influenced by di fferent emotions. If we can fathom our individual emotional tendencies, then we can take steps to anticipate and correct them."

Recommendations

Women should be encouraged to participate in the investment avenues. They should try to invest in securities which have higher risks. Women investors should achieve their su ccess by starting early investment in life and invest and rebalance regularly. These women investors should not over-allocate to a single investment.

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