V-SEARCH 2021 ISBN: 978-93-5457-359-0
A study on investment in various avenues and its corresponding risks in
mixed age groups
Ram Gujar
Vidyalankar School of Information Technology,
Vidyalankar Marg, Wadala (E), Mumbai- 400037
Email: [Link]@[Link]
Guide: Chitra More
ABSTRACT
Investment is an activity as well as a process emerged in people who have habits of savings
with the anticipation of positive rate of return in near future. A variety of investment options
are available such as bank, Gold, Real estate, post services, mutual funds & so on. Investors
are investing their money with the different objectives such as profit, security, appreciation,
Income stability etc. With such wide spectrum of investment avenues, the risk factor arises.
With the fluctuation in the economy people’s audacity to take risks changes according to the
age and responsibilities. The study is based on the questionnaire and the personal interview of
50 people with different age groups and their willingness to invest and taking risk in the
avenues. The data has been analyzed using pie charts, bar graphs, percentages and statistical
charts. The researcher has analyzed that young generation has shown keen interest in new
investment patterns, exploration in investment instruments, and high probability of accepting
the risk factor in the investment compared to elder crowd. The awareness and trust have been
highly varied in the age groups. Respondents are aware about the investment avenues available
in India except people above 50 years of age and neither has shown any interest to know it.
Keywords: Investments, profit, saving, peer groups, risk, Avenues.
INTRODUCTION
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The developing countries like India face the enormous task of finding sufficient capital in their
development efforts. Most of these countries find it difficult to get out of the vicious circle of
poverty of low income, low saving, low investment, low employment etc. With high capital
output ratio, India needs very high rates of investments to make leap forward in her efforts of
attaining high levels of growth. Since the beginning of planning, the emphasis was on
investment as the primary instruments of economic growth and increase in national income. In
order to have production as per target, investment was considered the crucial determinant and
capital formation had to be supported by appropriate volume of saving. Investment is the
sacrifice of certain present value for the uncertain future reward. Investments are always
interesting, challenging and rewarding. Generally, where there is a high risk, more rate of return
is assured. Risk and reward go together. The major features of an investment are safety of
principal amount, liquidity, income stability, appreciation and easy transferability. A variety of
investment avenues are available such as shares, bank, companies, gold and silver, real estate,
life insurance, postal savings and so on. All the investors invest their surplus money in the
above-mentioned avenues based on their risk-taking attitude. Research observed that this risk
talking attitude has been changing with every age groups. Every type of risk has been affecting
people in various age sectors. Certain types of investment have been identified in the
investment avenues.
Market risk: The risk of investments declining in value because of economic developments
or other events that affect the entire market. The main types of market risk are equity risk,
interest rate risk and currency risk.
• Equity risk – applies to an investment in shares. The market price of shares varies all
the time depending on demand and supply. Equity risk is the risk of loss because of a
drop in the market price of shares.
• Interest rate risk – applies to debt investments such as bonds. It is the risk of losing
money because of a change in the interest rate. For example, if the interest rate goes up,
the market value of bonds will drop.
• Currency risk – applies when you own foreign investments. It is the risk of losing
money because of a movement in the exchange rate. For example, if the U.S. dollar
becomes less valuable relative to the Canadian dollar, your U.S. stocks will be worth
less in Canadian dollars
Liquidity risk: The risk of being unable to sell your investment at a fair price and get your
money out when you want to. To sell the investment, you may need to accept a lower price. In
some cases, such as exempt market investments, it may not be possible to sell the investment
at all
Concentration risk: The risk of loss because your money is concentrated in 1 investment or
type of investment. When you diversify your investments, you spread the risk over different
types of investments, industries, and geographic locations
Credit risk: The risk that the government entity or company that issued the bond will run into
financial difficulties and won’t be able to pay the interest or repay the principal at maturity.
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Credit risk applies to debt investments such as bonds. You can evaluate credit risk by looking
at the credit rating of the bond.
Reinvestment risk: The risk of loss from reinvesting principal or income at a lower interest
rate. Suppose you buy a bond paying 5%. Reinvestment risk will affect you if interest rates
drop and you have to reinvest the regular interest payments at 4%. Reinvestment risk will also
apply if the bond matures, and you have to reinvest the principal at less than 5%. Reinvestment
risk will not apply if you intend to spend the regular interest payments or the principal at
maturity.
Inflation risk: The risk of a loss in your purchasing power because the value of your
investments does not keep up with inflation. Inflation erodes the purchasing power of money
over time – the same amount of money will buy fewer goods and services. Inflation risk is
particularly relevant if you own cash or debt investments like bonds. Shares offer some
protection against inflation because most companies can increase the prices they charge to their
customers. share prices should therefore rise in line with inflation.
Foreign investing risk: The risk of loss when investing in foreign countries. When you buy
foreign investments, for example, the shares of companies in emerging markets, you face risks
that do not exist in Canada, for example, the risk of nationalization.
Investment Option Available: In India there are lot many Investment avenues are available.
The following figure is pretty self-explanatory regarding investment options. Investments are
broadly classified into five categories i.e., Equity, Debt, Real Estate, Commodities and
Miscellaneous.
OBJECTIVES
1. To study the investment design of investors
2. To study the avenues of investments
3. To study the investment decisions in age groups
4. To study the reason affecting the choice of investors
5. To know the factors influencing investment behaviour of people
REVIEW OF LITERATURE
Jalpa Thakkar, Sheenam Gogia & Vatsala Manjunathan (2013) has conducted an empirical
study on gold investment rage among the professionals with a comparative analysis of e-Gold,
gold ETF and gold funds with an objective to study the most preferred metal for investment
from gold, silver and platinum, to know the attitude towards investment in gold and other gold
options and also to know the information sources, risk associated and returns in making gold
investment. The study was conducted with a sample of 100 investors through online
questionnaire. The study concluded that physical gold is most preferred investment by the
investors, market information has the first source of information for investment in gold. It was
also found that family members and friend play an important role in investment decision and
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Risk and return perspective of gold ETF is considered as moderate in the ratings as compared
to E-Gold and Gold funds.
The Institute of company secretaries of India in its Investor Education series III entitled,
“Investment Decision making by a Lay Investor” (1991) explained the preconditions for
investment decision making, analysis and evaluating risks. SEBI (1998) survey revealed that
Risk appetite, investment objective of the investor, income of the investor, funds available for
investment, greatly influences the behavior of the investor in corporate securities at various
levels. According to Brahma Bhatt, Raghu & Malekar of Aruna Manharlal Shah Institute of
Management and Research, Mumbai University (2012), “the awareness of investment
knowledge, investment opportunities is quite high. Financial portals, financial news channels,
financial newspapers help these people; various markets related T.V. shows, Expert talks,
magazines. For Indian public money is everything. Therefore, they are more sensitive about
their money. They will think hundred times before investing in any market and will expect
more than that. They feel that they are having enough money, time, resources and opportunities
with them for investing. Though they are having sound knowledge of financial market and
economic condition of India, yet they lack the edge above the others as this field is very
unpredictable and vast hence, they must be backed up by a financial planner.
Manish Mittal and Vyas (2008) Investors have certain cognitive and emotional weaknesses
which come in the way of their investment decisions. Over the past few years, behavioural
finance researchers have scientifically shown that investors do not always act rationally. They
have behavioural biases that lead to systematic errors in the way they process information for
investment decision. Many researchers have tried to classify the investors on the basis of their
relative risk-taking capacity and the type of investment they make. Empirical evidence also
suggests that factors such as age, income, education and marital status affect an individual’s
investment decision. This paper classifies Indian investors into different personality types and
explores the relationship between various demographic factors and the investment personality
exhibited by the investors.
Investment is the sacrifice of certain present value for the uncertain future reward. It entails
arriving at numerous decisions such as type, mix, amount, timing, grade etc. of investment and
disinvestments. Further such decisions making has not only to be continuous but rational too.
Instead of keeping the savings idle you may like to use savings in order to get return on it in
the future, which is known as ‘investment’. There are various investment avenues such as
Equity, Bonds, Insurance, and Bank Deposit etc.
RESEARCH METHODOLOGY
A research design is basic plan, which guide the researcher in the collection and the analysis
of data required for practicing the research. Research is limited to Mumbai city, and having
both primary and secondary data.
Secondary data through books, magazines, website and certain research performed before.
Sample Size:
The sample size is 50 customers of different insurance companies, from various part of the
Mumbai city. Respondents were the customers from different industries like real estates,
insurance, financial services.
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Limitation:
Due to time constraints and social distancing the sample size is relatively small as it is
conducted only in Mumbai city. It is difficult to know if all respondents gave accurate
information and not feasible option to travel around the state.
FINDINGS
Chart 1: Would you like to explore investment opportunities?
It has been observed that 50.9% of people are highly interested in exploring new opportunities
in the market. 3 people who are least interested in exploring new opportunities belong to 45+
age groups with 5.3%. 16 people out of sample size are interested to explore but won’t make
any possibilities to invest in the opportunities. And rest of the population in sample size are
neutral about decision.
Perception Percentage No. of respondent
Highly interested 50.9 29
Moderately interested 28.1 16
Neutral 19.3 11
Least interested 5.3 3
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Chart 2: For how long you are looking to invest your money?
The pie chart above has mentioned that 57.9% of the people are willing to go for short term
investment i.e., from 0-5 years and only 7 percentage of the sample size are willing to invest
in the long-term scenarios rest 7% of the people are interested to invest for 5-10 years and
10.5% of the people have set mindset to invest for more than 10 years but less than 20 years.
Years No. of respondents Percentage
0-5 33 57.9
5-10 14 24.6
10-20 6 10.5
20+ 4 7
SUGGESTIONS
1. If the investors want high returns, they take high risk but while they take these kinds of
risk, they should also do proper research before investing and taking risk.
2. Before taking the risks, they can take advice from expert.
3. The funds can be managed with various strategies’ the strategy should be told to the
investor beforehand.
4. The strategy to overcome loss is through risk management the investors should know
how to manage the risk.
5. There are various options in avenues through which they can Gain profits and have tax
benefits.
6. People with higher age should not have prejudice mindset towards the market.
7. It is possible to diversify your investment to overcome the precious losses.
8. Better analysis tools should be uses to make better predictions.
9. It is recommended that investors decisions should be based on their broker advice.
10. Risk and return should be evaluated before making and investment decisions.
11. People with higher age group should be open ended about new schemes and
investments.
12. Those investors who want avoid risk should invest in treasury notes or high-rated
municipal bonds and debentures and so on.
CONCLUSION
The investment decision is driven by the economic indicators such as GDP, inflation rate,
unemployment rate, NNP, GNP, government policies etc. The study shows how different
factors and instruments have different risk, return and tax considerations while talking
investment decision and are of diverse nature and significant decision making in different age
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groups. It is very difficult to conclude how a particular market instrument is doing and how
they will perform the future and the prejudice that elderly people have towards these
instruments, but still the study concludes to an extent that the particular instrument or product
like equity or government security has performed well in the past and supported with strong
demands will perform well in the future.
Indian economy has grown from a position of 2 to 3% of growth rate to a position of 8.5% at
present. The economy has done immensely well and so is the performance of the equity market,
which has given a high return to the investors. The study of the random sample of fifty
prospective with mixed age groups which limited to more accurate results, however the fact of
prejudice towards certain instruments has been significantly shown in high age people. The
population which are younger of the investing community is that the market will give high
returns for the securities that are fundamentally strong.
The study also drawn an important conclusion from the study that the investors are keen to
invest in short term and less risk products especially people with 45+ years of age. The risk
appetite of 20-40 years of age group is significantly high compared with other groups. Investors
are moderately aware about the factor affecting their short term as well as long term, investment
plans and they do take advice from experts and self-analysis. The intensive study will somehow
help investors and people with ignorant prejudices in deciding the correct investment for their
savings.
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