PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE &ECONOMIC

CHAPTER 1
INTRODUCTION
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 the GDP.

SAVING
Saving is income not spent, or deferred consumption. Methods of saving include putting
money aside in, for example, a deposit account, a pension account, an investment fund,
or as cash. Saving also involves reducing expenditures, such as recurring costs. In terms
of personal finance, saving generally specifies low-risk preservation of money, as in a
deposit account, versus investment, wherein risk is a lot higher; in economics more
broadly, it refers to any income not used for immediate consumption. Saving does not
automatically include interest.

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Saving differs from savings. The former refers to the act of not consuming one's assets,
whereas the latter refers to either multiple opportunities to reduce costs; or one's assets in
the form of cash. Saving refers to an activity occurring over time, a flow variable,
whereas savings refers to something that exists at any one time, a stock variable. This
distinction is often misunderstood, and even professional economists and investment
professionals will often refer to "saving" as "savings".

In different contexts there can be subtle differences in what counts as saving. For
example, the part of a person's income that is spent on mortgage loan principal
repayments is not spent on present consumption and is therefore saving by the above
definition, even though people do not always think of repaying a loan as saving.
However, in the U.S. measurement of the numbers behind its gross national product (i.e.,
the National Income and Product Accounts), personal interest payments are not treated as
"saving" unless the institutions and people who receive them save them.

Saving is closely related to physical investment, in that the former provides a source of
funds for the latter. By not using income to buy consumer goods and services, it is
possible for resources to instead be invested by being used to produce fixed capital, such
as factories and machinery. Saving can therefore be vital to increase the amount of fixed
capital available, which contributes to economic growth.

However, increased saving does not always correspond to increased investment. If

savings are not deposited into a financial intermediary such as a bank, there is no chance
for those savings to be recycled as investment by business. This means that saving may
increase without increasing investment, possibly causing a short-fall of demand (a pile-
up of inventories, a cut-back of production, employment, and income, and thus
a recession) rather than to economic growth. In the short term, if saving falls below
investment, it can lead to a growth of aggregate demand and an economic boom. In the
long term if saving falls below investment it eventually reduces investment and detracts
from future growth. Future growth is made possible by foregoing present consumption to
increase investment. However, savings not deposited into a financial intermediary
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amount to an (interest-free) loan to the government or central bank, who can recycle this
loan.

In a primitive agricultural economy, savings might take the form of holding back the best
of the corn harvest as seed corn for the next planting season. If the whole crop were
consumed the economy would convert to hunting and gathering the next season.

INTREST RATES
Classical economics posited that interest rates would adjust to equate saving and
investment, avoiding a pile-up of inventories (general overproduction). A rise in saving
would cause a fall in interest rates, stimulating investment, hence always investment
would equal saving.

But John Maynard Keynes argued that neither saving nor investment was very
responsive to interest rates (i.e., that both were interest-inelastic) so that large interest
rate changes were needed to re-equate them after one changed. Further, it was the
demand for and supplies of stocks of money that determined interest rates in the short
run. Thus, saving could exceed investment for significant amounts of time, causing
a general glut and a recession.

SAVING IN PERSONAL FINANCE

Within personal finance, the act of saving corresponds to nominal preservation of money
for future use. A deposit account paying interest is typically used to hold money for
future needs, i.e. an emergency fund, to make a capital purchase (car, house, vacation,
etc.) or to give to someone else (children, tax bill etc.).

Within personal finance, money used to purchase stocks, put in an investment fund or
used to buy any asset where there is an element of capital risk is deemed an investment.
This distinction is important as the investment risk can cause a capital loss when an
investment is realized, unlike cash saving(s). Cash savings accounts are considered to

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have minimal risk. In the United States, all banks are required to have deposit insurance,
typically issued by the Federal Deposit Insurance Corporation or FDIC. In extreme cases,
a bank failure can cause deposits to be lost as it happened at the start of the Great
Depression. The FDIC has prevented that from happening ever since.

In many instances the terms saving and investment are used interchangeably. For
example, many deposit accounts are labelled as investment accounts by banks for
marketing purposes. As a rule of thumb, if money is "invested" in cash, then it is savings.
If money is used to purchase some asset that is hoped to increase in value over time, but
that may fluctuate in market value, then it is an investment.

SAVING IN ECONOMICS
In economics, saving is defined as after tax income minus consumption.[3] The fraction of
income saved is called the average propensity to save, while the fraction of an increment
to income that is saved is called the marginal propensity to save. The rate of saving is
directly affected by the general level of interest rates. The capital markets equilibrate the
sum of (personal) saving, government surpluses, and net exports to physical investment.

INVESTMENT
Investment is traditionally defined as the "commitment of resources to achieve later
benefits". If an investment involves money, then it can be defined as a "commitment of
money to receive more money later". From a broader viewpoint, an investment can be
defined as "to tailor the pattern of expenditure and receipt of resources to optimise the
desirable patterns of these flows". When expenditure and receipts are defined in terms of
money, then the net monetary receipt in a time period is termed as cash flow, while
money received in a series of several time periods is termed as cash flow stream.
Investment science is the application of scientific tools (usually mathematical) for
investments.

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In finance, the purpose of investing is to generate a return from the invested asset. The
return may consist of a gain (profit) or a loss realized from the sale of a property or an
investment, unrealized capital appreciation (or depreciation), or investment income such
as dividends, interest, or rental income, or a combination of capital gain and income. The
return may also include currency gains or losses due to changes in the foreign
currency exchange rates.

Investors generally expect higher returns from riskier investments. When a low-risk
investment is made, the return is also generally low. Similarly, high risk comes with a
chance of high losses.

Investors, particularly novices, are often advised to diversify their portfolio.

Diversification has the statistical effect of reducing overall risk.

INVESTMENT AND RISK

An investor may bear a risk of loss of some or all of their capital invested. Investment
differs from arbitrage, in which profit is generated without investing capital or bearing
risk.

Savings bear the (normally remote) risk that the financial provider may default.

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Foreign currency savings also bear foreign exchange risk: if the currency of a savings
account differs from the account holder's home currency, then there is the risk that the
exchange rate between the two currencies will move unfavourably so that the value of
the savings account decreases, measured in the account holder's home currency.

Even investing in tangible assets like property has its risk. And similar to most risks,
property buyers can seek to mitigate any potential risk by taking out mortgage and by
borrowing at a lower loan to security ratio.

In contrast with savings, investments tend to carry more risk, in the form of both a wider
variety of risk factors and a greater level of uncertainty.

Industry to industry volatility is more or less of a risk depending. In biotechnology, for

example, investors look for big profits on companies that have small market
capitalizations but can be worth hundreds of millions quite quickly. The risk is high
because approximately 90% of biotechnology products researched do not make it to
market due to regulations and the complex demands within pharmacology as the average
prescription drug takes 10 years and US$2.5 billion worth of capital.

HISTORY OF INVESTMENT

The Code of Hammurabi (developed during his reign between 1792-1750 BC) provided
a legal framework for investment, establishing a means for the pledge of collateral by
codifying debtor and creditor rights in regard to pledged land. Punishments for breaking
financial obligations were not as severe as those for crimes involving injury or death.

In the medieval Islamic world, the qirad was a major financial instrument. This was an
arrangement between one or more investors and an agent where the investors entrusted
capital to an agent who then traded with it in hopes of making a profit. Both parties then
received a previously settled portion of the profit, though the agent was not liable for any
losses. Many will notice that the qirad is similar to the institution of the commend a later

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used in western Europe, though whether the qirad transformed into the commends or the
two institutions evolved independently cannot be stated with certainty.

In the early 1900s, purchasers of stocks, bonds, and other securities were described in
media, academia, and commerce as speculators. Since the Wall Street crash of 1929, and
particularly by the 1950s, the term investment had come to denote the more conservative
end of the securities spectrum, while speculation was applied by financial brokers and
their advertising agencies to higher risk securities much in vogue at that time. Since the
last half of the 20th century, the terms speculation and speculator have specifically
referred to higher risk ventures.

INVESTMENT STRATEGIES

VALUE INVESTING
A value investor buys assets that they believe to be undervalued (and sells overvalued
ones). To identify undervalued securities, a value investor uses analysis of the financial
reports of the issuer to evaluate the security. Value investors employ accounting ratios,
such as earnings per share and sales growth, to identify securities trading at prices below
their worth.

Warren Buffett and Benjamin Graham are notable examples of value investors. Graham
and Dodd's seminal work, Security Analysis, was written in the wake of the Wall Street
Crash of 1929.

The price to earnings ratio (P/E), or earnings multiple, is a particularly significant and
recognized fundamental ratio, with a function of dividing the share price of the stock, by
its earnings per share. This will provide the value representing the sum investors are
prepared to expend for each dollar of company earnings. This ratio is an important
aspect, due to its capacity as measurement for the comparison of valuations of various
companies. A stock with a lower P/E ratio will cost less per share than one with a higher

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P/E, taking into account the same level of financial performance; therefore, it essentially
means a low P/E is the preferred option.

An instance in which the price to earnings ratio has a lesser significance is when
companies in different industries are compared. For example, although it is reasonable
for a telecommunications stock to show a P/E in the low teens, in the case of hi-tech
stock, a P/E in the 40s range is not unusual. When making comparisons, the P/E ratio can
give you a refined view of a particular stock valuation.

For investors paying for each dollar of a company's earnings, the P/E ratio is a significant
indicator, but the price-to-book ratio (P/B) is also a reliable indication of how much
investors are willing to spend on each dollar of company assets. In the process of the P/B
ratio, the share price of a stock is divided by its net assets; any intangibles, such as
goodwill, are not taken into account. It is a crucial factor of the price-to-book ratio, due
to it indicating the actual payment for tangible assets and not the more difficult valuation
of intangibles. Accordingly, the P/B could be considered a comparatively conservative
metric.

GROWTH INVESTING
Growth investors seek investments they believe are likely to have higher earnings or
greater value in the future. To identify such stocks, growth investors often evaluate
measures of current stock value as well as predictions of future financial performance.
Growth investors seek profits through capital appreciation – the gains earned when a
stock is sold at a higher price than what it was purchased for. The price-to-earnings
(P/E) multiple is also used for this type of investment; growth stock are likely to have a
P/E higher than others in its industry.[10] According to Investopedia author Troy Segal
and U.S. Department of State Fulbright fintech research awardee Julius Mansa, growth
investing is best suited for investors who prefer relatively shorter investment horizons,
higher risks, and aren’t seeking immediate cash flow through dividends.

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Some investors attribute the introduction of the growth investing strategy to investment
banker Thomas Rowe Price Jr., who tested and popularized the method in 1950 by
introducing his mutual fund, the T. Rowe Price Growth Stock Fund. Price asserted that
investors could reap high returns by “investing in companies that are well-managed in
fertile fields.”

A new form of investing that seems to have caught the attention of investors is Venture
Capital. Venture Capital is independently managed dedicated pools of capital that focus
on equity or equity-linked investments in privately held, high growth companies.

MOMENTUM INVESTING
Momentum investors generally seek to buy stocks that are currently experiencing a short-
term uptrend, and they usually sell them once this momentum starts to decrease. Stocks
or securities purchased for momentum investing are often characterized by
demonstrating consistently high returns for the past three to twelve months. However, in
a bear market, momentum investing also involves short-selling securities of stocks that
are experiencing a downward trend, because it is believed that these stocks will continue
to decrease in value. Essentially, momentum investing generally relies on the principle
that a consistently up-trending stock will continue to grow, while a consistently down-
trending stock will continue to fall.

Economists and financial analysts have not reached a consensus on the effectiveness of
using the momentum investing strategy. Rather than evaluating a company’s operational
performance, momentum investors instead utilize trend lines, moving averages, and
the Average Directional Index (ADX) to determine the existence and strength of trends.

Dollar cost averaging (DCA), also known in the UK as pound-cost averaging, is the
process of consistently investing a certain amount of money across regular increments of
time, and the method can be used in conjunction with value investing, growth investing,
momentum investing, or other strategies. For example, an investor who practices dollar-

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cost averaging could choose to invest $200 a month for the next 3 years, regardless of the
share price of their preferred stock(s), mutual funds, or exchange-traded funds.

Many investors believe that dollar-cost averaging helps minimize short-term volatility by
spreading risk out across time intervals and avoiding market timing. Research also shows
that DCA can help reduce the total average cost per share in an investment because the
method enables the purchase of more shares when their price is lower, and less shares
when the price is higher. However, dollar-cost averaging is also generally characterized
by more brokerage fees, which could decrease an investor’s overall returns.

The term “dollar-cost averaging” is believed to have first been coined in 1949 by
economist and author Benjamin Graham in his book, The Intelligent Investor. Graham
asserted that investors that use DCA are “likely to end up with a satisfactory overall price
for all [their] holdings.”

MICRO-INVESTING
Micro-investing is a type of investment strategy that is designed to make investing
regular, accessible and affordable, especially for those who may not have a lot of money
to invest or who are new to investing.

INTERMEDIARIES AND COLLECTIVE INVESTMENT

Investments are often made indirectly through intermediary financial institutions. These
intermediaries include pension funds, banks, and insurance companies. They may pool
money received from a number of individual end investors into funds such as investment
trusts, unit trusts, and SICAVs to make large-scale investments. Each individual investor
holds an indirect or direct claim on the assets purchased, subject to charges levied by the
intermediary, which may be large and varied.

Approaches to investment sometimes referred to in marketing of collective investments

include dollar cost averaging and market timing.

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FAMOUS INVESTORS

Investors famous for their success include Warren Buffett, who ranked second in
the Forbes 400 list of the March 2013 edition of Forbes magazine. Buffett has advised in
numerous articles and interviews that a good investment strategy is long-term and due
diligence is the key to investing in the right assets. Edward O. Thorp was a highly
successful hedge fund manager in the 1970s and 1980s who spoke of a similar approach.
The investment principles of both of these investors have points in common with
the Kelly criterion for money management. Numerous interactive calculators which use
the Kelly criterion can be found online.

INVESTMENT VALUATION

Free cash flow measures the cash a company generates which is available to its debt and
equity investors, after allowing for reinvestment in working capital and capital
expenditure. High and rising free cash flow, therefore, tend to make a company more
attractive to investors. The debt-to-equity ratio is an indicator of capital structure. A high
proportion of debt, reflected in a high debt-to-equity ratio, tends to make a
company's earnings, free cash flow, and ultimately the returns to its investors, riskier
or volatile. Investors compare a company's debt-to-equity ratio with those of other
companies in the same industry, and examine trends in debt-to-equity ratios and free
cashflow.

Every individual earning money, spends it to meet his or her own personal needs or to
fulfil the basic needs of his or her family. Individuals use money for various purposes
including funding their daily household expenses and expenses incurred for buying
luxuries for a better life. Money earned is generally used to fund some immediate
expenses or saved to meet some future needs. Those who spend less than what they earn

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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 a return, which can be in the form of regular
income or capital appreciation or sometimes both.

Women, in general are savers according 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
unofficially.

This Photo by Unknown Author is licensed under CC BY-NC-ND

Young people today face a very uncertain future as a result of the double-dip recession,
government spending cuts and structural problems such as the high cost of housing.

There is a real possibility that the current generation of young people in the UK will be
the first since the second world war to fare worse in economic terms than their parents. In
this report we discuss some of the challenges young people face and show that in

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particular those on low incomes, in insecure employment or not in work are highly
vulnerable to financial shocks and lack the safety net that would help them deal with
emergencies. We argue for measures to improve their financial resilience, focusing on
the role of assets, savings and a government safety net. The evidence presented here is
based on a literature review, polling carried out with 1,504 young people aged 16 to 29
on low incomes, three deliberative workshops with 54 young people aged 16to29 on a
range of incomes, and 10 interviews with expert stakeholders.

THE OUT LOOK FOR YOUNG PEOPLE

Our polling and the deliberative workshops discovered that young people believe their
financial prospects are worse than their parents’ when they were young. This was true of
close to half (44 percent) of the poll respondents, compared to just over a quarter (28 per
cent) who thought that their own prospects were better. While there is probably always
some tendency for young people to underestimate their financial prospects, there are
reasons to fear that on this occasion they may be right to be pessimistic.

The need for bigger deposits means young people are likely to struggle to get on the
housing ladder without help from the ‘Bank of Mum and Dad’, which may not be able to
provide sufficient funds for those on the lowest incomes.

Higher education has become much more expensive and much of the financial support
for further education for those on low incomes has been removed.

There are close to 1 million young people, aged 24 and under, unemployed in the UK
and young people’s relative position in the labor market has been deteriorating for two
decades.

Financial support for older people, in particular pensions, has been protected from
government spending cuts while support for young people, including the Child Trust

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Fund, has been cut or abolish.

THE FINANCIAL RESILIENCE OF YOUNG PEOPLE

This is a challenging outlook for young people, and to make matters worse they are not
facing it from a position of financial security. If they became suddenly unemployed, over
half (55 per cent) of the poll respondents said they would make ends meet using savings,
but this conflicted with their answers toother questions which suggest most have savings
significantly below the minimum level recommended in case of financial emergencies by
financial advisers (three months of post-tax income). Less than one-third of respondents
had £3,000 or more – the level of savings that would be appropriate for an after-tax
income of £12,000 a year, roughly equivalent to gross earnings of £14,000.1
In the past, the most vulnerable young people from the lowest-income backgrounds could
have turned to the discretionary Social Fund for a loan in times of emergency. But the
scheme is being abolished in its current form and the level of help from this source is
likely to be reduced. Without an effective safety net these young people are more likely
to turn to short-term or doorstep lenders who charge extremely high rates of interest.

INFLUENCES ON YOUNG PEOPLE’S SAVING BEHAVIOR

Savings can be an important buffer for times of financial emergency but young people
are not saving enough to protect themselves during the superiors. We used our polling
and deliberative workshops to discover what young people claim influences their saving
behavior. The key influences to emerge were:
• affordability: the rising cost of living has made it difficult to put money aside

• spending and saving priorities: young people often want to save but feel pressured to take
on debt and to spend
• family: parents can in grain good saving habits in their children from a very young age
and are the main source off in uncial advice for young adults

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• products: savings vehicles can be designed in ways that encourages saving.

Our research was ambiguous about the influence that young people’s understanding of
financial issues

–their financial literacy– has on how much they save.

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 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.

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Table1.1

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
Jeweler 12.8 16.6
Consumer goods 32.3 39.1
Others 15.4 14.6
Total 100.0 100.0

The developing countries in world, like India face as seen the enormous task of finding
sufficient capital to utilize in their development efforts. Most of countries find it difficult
at at stage to get out of the vicious circle of poverty that is prevailing of low income, low
saving, low investment, low employment etc. and the list goes on. With high capital
output ratio, that is observed India needs very high rates of investments that would take
and make leap forward in her efforts continues of attaining high levels of growth.

The major features that are seen in an investment are safety of principal amount,
liquidity, income and its stability, appreciation and lastly easy transferability. A different
variety of investment avenues in abundance and types are available such as shares, bank,
companies, gold and silver, real estate, life insurance, postal savings. All the investors
invest who wish to invest, invest their surplus money in the above mentioned a venue
that are available based on their risk-taking attitude and capacity bearing.

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KEY DIFFERENCES BETWEEN SAVINGS AND INVESTMENT

The differences between savings and investment are explained in the following points:

➢ Savings means to set keep aside a part of your earned income for future use.
Investment is often defined as the act of putting funds into the productive uses, i.e.,
investing in such investment vehicles which can repay money over a period of time.
➢ People often save money, to fulfill their unexpected and sudden expenses or
urgent money requirements. Conversely, investments are made or done to generate
returns over the period so that it can help in capital formation of an individual.
➢ With an investment, there is follows always a risk of losing money. Unlike
savings, there are comparatively fewer chances of the losing the hard-earned money.
➢ Investment provides higher returns than savings, as there is an assured and
nominal rate of interest on savings. However, the investments in turn can earn money
more than the invested amount, if invested wisely.
➢ You can have easily had access to your savings, anytime because they are highly
liquid and flexible, but in the case of investment you cannot have easy access to money
as compared, because the process of selling the investments and making liquid takes
some time.

INVESTMENT OPTION AVAILABLE:

There are a large number of investment instruments available today. The people have to
choose proper avenue among those available, depending upon their specific need, risk
preference, and return that are expected. Different Investment avenues can be broadly
categories under the following heads.

• Equity

• Debts

• Debentures

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• Company fixed deposit

• Fixed deposit

• Post office saving

• Public provident fund

• Real estate

• Life insurance

• Gold/silver/others

• Mutual funds

• Corporate

SCOPE OF THE STUDY:

This study is focusing on the preference of Investments by salaried class people in

Mumbai city only and it will be helpful to identify the different and better investment
options that are available in the market.

NEEDOF THE STUDY:

Salaried employees in general have fix flow of income & their investments patterns are
found also different. In connection with this Researcher has tried to find out investment
behavior of salaried investors in Mumbai region. It will be helpful to understand the
investment preferences of investors. The research paper will become the helping hand to
the research scholars as well as students for their further studies in their respective area.

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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. REALASSETS

2. FINANCIALASSETS

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
appreciation in case if there Isan increase in the price of the real estate. 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 broad end in the
current study.

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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 assets based on their features and characteristics are broadly classified
into:

o Debt

o Equity

o Hybrid instruments

DEBT
This category of assets or securities provide regular return over the life span of the
instrument. The returns in the form of 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 debt instrument.
Debt instrument having a life of less than a year is traded on the money market. Popular
instruments traded on the money market are, treasury bills, commercial papers and
certificate of deposit.
Debt instrument having maturity period of one year or more is traded on stock exchanges
as well as on the over the counter (OTC) market. India government dated securities

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having a maximum maturity period of30 years are available for investors looking for
risk-free long-term debt instruments. There are cases where more than 30 years ‟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 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 2 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 a
shareholder 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, Providing a high level of liquidity in
comparison to debt instruments. The perceived risk associated with equity shares is much
higher in 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

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of information and influencers leading to investment in equity by women.

HYBRID INSTRUMENTS
There are financial instruments that have 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 subclassified under physical assets and financial assets.

INVESTMENTCONCEPTS
Millions of investors buy bonds, mutual funds, 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 is the 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 risky to one investor may be considered to be average risk
product by another investor. Evaluation of risk associated with a financial instrument
may depend on the past experience of the investor, financial expertise or dependence on
others for investment. These factors may drive an individual opinion about the risk level
of a certain financial product. The perception of investors about the risk associated with a
financial instrument ranges from no risk to very high risk in relative terms. The
perception of investors towards different asset classes is captured in the current research
using suitable questions. The findings are discussed in later chapters.

RETURN AND RISK

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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 is unpredictable.

It is easy to measure there turn, but it is difficult to measure the risking quantitative terms
acceptable to all market participants. One of the most common accepted methods to
measure and quantify risk is, the variance of the rates of returns over 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.

Higher the variance or standard deviation, higher the risk associated with the financial
instrument compares onto a financial product having lower variance or standard
deviation. 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 to take investment decisions when we
would like to compare two investments with different levels of return and risk (standard
deviation).
Look for investments that 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 is known as investment portfolio of an individual. The basic
assumption made by the investor while making investments in multiple classes of assets
is, that the overall portfolio risks is reduced, as investments are spread across different
classes of assets. 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
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because of diversification. There were methods to calculate the portfolio return, but there
was lack of understandingon howtherisk of aportfolio, consistingof morethan
onesecurityis 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. Heproved that diversification of investments by
investors is a the portfolio standard deviation will godown. If the assets have positive
correlation among themselves then the risk of the portfolio is increased rather than
decreasing.

INVESTMENT THEORIES

EFFICIENT FRONTIER
Markowitz plotted risk and return for all possible portfolios consisting of various
combination ofassets. 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 theleastrisk forgiven
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) and
non-systematic (diversifiable) risk.
Unsystematic risk could be reduced by adding more securities to a portfolio, but the

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systematic risk associated with a portfolio could not be reduced, exceptional case being
international diversification. Remained, it may not possible to 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.

INDIAN INVESTMENT 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 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), traditional life insurance
products offered by the life insurance corporation, unit trust of India (UTI) operated unit
-64 mutual fund scheme, employee provident fund, public provident fund, equities and
debentures. Due to the large reach of postal department, investors were investing in most
of the small savings’ schemes offered through postal department and where ever stock
exchanges were there, investors had the opportunity to invest inequity shares of listed
companies. For urban investors opportunities were available for investing inequity,
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 focused on buying gold, other
precious metals and stones along with agricultural land and other real estate assets. A
tone points 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

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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.
A nation’s productive capacity depends on a healthy capital formation. Robust savings
rate coupled with good capital mobilization are the key macro-economic variables, which
play a significant role in economic growth. A nation's savings and investment
propensities also play a key role in achieving dynamic stability in the capital market. Per
Capita Income in India has been on the rise since all of the last decade. With growth in
the PCI, savings and investment in the country too has shown a north bound movement.
At the same time, there has been a phenomenal rise in the youth population.
This has made India the youngest nation with a demographic dividend appearing to be a
reality. This young work forces expected to drive then gene of growth.

In Economics, investment is generally held to mean formation of capital. As such, from a

pure economics point of view, the formation of physical assets is important when
considering investment. However, this study focuses on what is referred to as Financial
Investment i.e., investment in shares and securities aimed primarily at earning income
rather than enhancing production. By virtue of this the words savings and investment
come closer in meaning than traditionally seen. However, a slight difference still remains
which is that while savings is simply setting aside funds for future, invest mental so
involves mobilizing them so that somebody else may use it for productive purposes.

This study examines the savings and investment pattern of select college going students
(Age: 17-25years) in the city of Mumbai who has just begun to earn. The study also
looks into the basic financial literacy amongst the youth; how they go about educating
themselves, and how do they look at risk, returns and various modes of investments and
what determines the same. Primary data was collected using a survey method. The
information generated during data collection was both qualitative and quantitative.

THE MAJORO BJECTIVES OF THE STUDY WERE

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o To understand the youngster’s income and saving pattern.

o To know their long-term financial goals.

o To find out risk appetite of youngsters.

o To find out whether the young investors are looking for long term growth or risk or

return or liquidity.
The study finds that safety and security, which were always important reasons for
investment, are still influential in determining the direction of investment. Respondents
liked to keep multiple options while choosing their investment options. Saving accounts
in banks appears to be the most common way of saving and investing for the
respondents. Mutual fund has gained the favor of young investors. Investment in mutual
funds through the Systematic Investment Plan (SIP) is a favored investment option for
the youngsters. This is especially true of the young salaried class, which has just started
earning and does not have a fat bank balance as yet. Youngsters today do know about the
options available to them due to the rapid spread of information in recent times; they are
not always sure about how to go about investing in newer ways actively.
An informed investor is a good investor; there is opportunity for providing them with
guidance and information but it has to be done in a way that is in accordance with their
lifestyle – seminars and workshops are no longer the kind of options to peruse. Podcasts,
online videos, forums and tutorials are the way of learning of the young generation. The
social media platforms specially Facebook, Twitter, LinkedIn along with e-groups and
websites can be a medium to spread awareness about various options available for the
young investors. Thus, investor education can play a vital role in improving the active
participation of the investors in the market, which can help them in the informed
investment and in getting good returns.
A nation’s productive capacity depends on a healthy capital formation. Robust savings
rate coupled with good capital mobilization are the key macro-economic variables with
micro foundations, which play a significant role in economic growth. Since the domestic
saving rate is directly related to the investment rate and the lending capacity of the
banking system, it is also an important indicator of economic development. A nation's
savings and investment propensities also play a key role in achieving dynamic stability in
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the capital market.

India’s demographic profile of savers and investors
The proportion of India’s youth population (United Nations' definition of youth is people
from 15 to24 years of age) has increased steadily from 16.7% in 1961 to 18.12% in 2011.
This phenomenal rise in the youth population has made India the youngest nation with a
demographic dividend appearing to be a reality.

TABLE: AGE WISE DISTRIBUTION OF THE POPULATION

Absolute
Age Total Males Females Total
Group
0-14 28.48% 187,016,4 165,048,695 352,065,096
01
15-24 18.12% 118,696,5 105,342,764 224,039,304
40
25-54 40.56% 258,202,5 243,293,143 501,495,678
35
55-64 86,800,779 43,625,66 43,175,111
8

65+ 71,943,774 34,133,17 37,810,599

5
100.00% 641,674,3 594,670,312 1,236,344,631
19

Source: CensusofIndia,2011

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The 2011 Census data shows that

India’s youth bulge is now sharpest at the key 15-24 age group, even as its youngest and
oldest age groups begin to narrow. Economists are of the opinion that a young workforce
will drive the engine of growth. But what this young labor force does with its income
after achieving gainful employment will also form a part in determining the course the
country will take.

More than 86% of the population is below the age group of 54. Roughly 65% of the
population is in the working age of 15-64. Besides, even the Work Force Participation
statistics show a rising participation amongst the youngsters in contributing to the earners
of the country. A higher participation by the youngsters gives a healthy “Dependency”
Ratio,
i.e., the number of dependents to that of earners.

TABLE: WORK FORCE PARTICIPATION

Age Groups 15-17 18-29 30+

UPS 10.70% 49.00% 59.70%

UPSS 14.10% 52.00% 62.80%

UPS – Uniform Primary Status; UPSS – Uniform Primary and Secondary Status
Source: Census of India, 2011
Table shows that 49% of those capable of working in the age-group 18-29 were in the
Work Force on UPS basis and 52% on UPSS basis.

The data mentioned in Figure (concerning GDS and GDI) shows that Indians are not shy
of saving or investing. A young generation working and investing properly could be a
boon for the nation. The National Council of Applied Economic Research (NCAER)
survey report of 2011 examined in detail the various aspects of income, expenditure,
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savings, and investments in Indian urban and rural households. The report titled “How
Households Save and Invest: Evidence from NCAER Household Survey” looked into
the age-wised is distribution of savers and investors across the country.

SAVING VS. INVESTING

Whether it’s time for you to start investing, or if you should focus on saving, the answer
depends on your goals, risk tolerance, and financial situation.

The difference between saving and investing

▪ SAVING — putting money aside gradually, typically into a bank account. People
generally save for a particular goal, like paying for a car, a down payment on a house, or
any emergencies that might come up. Saving can also mean putting your money into
products such as a bank time account (CD).

▪ INVESTING — using some of your money with the aim of helping to make it grow
by buying assets that might increase in value, such as stocks, property or shares in a
mutual fund.

Should you invest now or wait?

You may want to consider starting your investment strategy after you’ve:

▪ BUILT YOUR EMERGENCY SAVINGS. Savings should come first. Before

investing, try to make sure you have a separate low-risk, low-return account you can use
to cover expenses during an unforeseen event — typically at least three to six months’
worth of living expenses.

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▪ PAID OFF HIGH-INTEREST DEBT. By paying off high-interest debt in full,

you’ll reduce the total amount you owe faster and free up money to put toward savings or
investing.

▪ MAXED OUT YOUR 401(K) AND IRA. If your long-term goals include a
comfortable retirement and you’re already contributing the maximum amount to your
retirement accounts, it may be an appropriate time to explore additional investment
types.

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CHAPTER 2

RESEARCH METHODOLOGY
Methodology is a systematic analysis of the methods applied to the field of study. It
comprises the theoretical analysis of the body methods and principles associated with a
branch of knowledge. A methodology does not set out to provide solutions. Therefore, is
not the same thing method. Instead, it offers the theoretical base for understanding which
method, set of methods or so called “best practices” can be applied to specific cases.

According to the Dictionary of Merriam – Webster, that provides two definitions on

research methodology as follows–

➢ “The analysis of the principles of methods, rules, and postulates employed by a

discipline”.
➢ “The systematic study of methods that are, can be, or have been applied within a
discipline”.

Research methodology is a systematic process of analyzing and selecting the best method
to conduct research. The research methodology consists of the following stages such as
identifying the research problem, formulation of research design, designing the sample,
collection of data, processing of data, analysis and interpretation, drawing conclusion and
providing recommendations, preparing their search report.

RESEARCH PROBLEM

A scientific research is a systematic process undertaken to study the research problem

and to arrive at a conclusion. Each research problem is unique and requires a special
emphasis and approach. On a way to face the uniqueness of every problem is to tailor the
research work according to the need of each problem. It is often said that-a well-defined
problems half solved.

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TYPES OF RESEARCH

The research activity is mainly classified into different categories i.e., basic research,
descriptive research, applied research, analytical research, empirical research, qualitative
research, quantitative research, and many other. My research is Descriptive research
rather than Explanatory research using primary data.
The study based on both secondary and primary data. The secondary information will be
collected from different published materials vis. Books, Journals, magazines & websites
etc. And primary data will be collected by communicating with respondents through a
structured questionnaire. The study was done with the help of primary data using the
questionnaire as a tool to assess the investment and its behavior. Since the basic aim of
the survey is to allow each and every person to list his or her opinion about the
investment avenues. A closed ended questionnaire was also prepared with total several
characteristics of attributes to analyze and assess the relative importance of each of the
statement on a five-point Likert scale. The secondary data was collected through various
webs and published data sources.
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 behavior and savings pattern of employed women
will of great interest tall those who are involved in research, financial intermediaries and
product creators. Findings of the research could help product developers to create
products meeting the needs of women especially the employed women.

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LIMITATION OF THESTUDY

The main limitation of this study is time constraint There might be Biased-approach in
filling up the questionnaire. All the data collected may not be precise. Here cost factor is
also limited because this research is not gone under proof reading. The sample size for
the research is small in size i.e.105 survey which does not represents to the whole of
population. They are taken to do research is also small in size due to time factor.

DATA COLLECTION

1) PRIMARY SOURCE

2) SECONDARY SOURCE

PRIMARY DATA:

The primary data is collected from the first-hand information. The primary data is not
given from previous data, it is new data which we collect from the market. The primary
data is collected throughsurvey, experimentation and observation method. In this the
survey can be done online and offline as well. In foreign countries =, the data is collected
from telephone as well. The experiment method is mainly used in scientific research. The
observation method is not much convenient because people have different point of view
so, it differs. For academic research purpose survey method is much suitable. This is
better for collection of data from the people. In this method a questionnaire is prepared
and then send to people to collect responses through online or offline modes. Online
method is easier to get data as compared to off linemode

SECONDARY DATA:
The secondary data is the second-hand information data. It is collected through many
ways such as, Books, Magazines, Articles, Websites, Newspaper etc. It is easy to get

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secondary data as compared to primary data because it is available in many places. It is

available in bulk quantity. The secondary data may be not be accurate or correct. The
primary data is not available in the market where as secondary data is easily available in
the market.

In this research, the data used is both primary and secondary; where the secondary data
are mainly from websites and articles and the primary data used is by preparing
questionnaire by survey method.

TECHNIQUES AND TOOLS TO BE USED

Techniques and tools are required to prove the data where we have various techniques
and tools available. It helps to prove the data in an effective way. The technique used in
this research is Sampling Method.

Sampling Method - Here a small group is selected as representative of the whole

universe. It works with the objective to obtain accurate and reliable information about
the universe with minimum of cost, time and energy and to set out the limit so accuracy
of such estimates. It makes exhaustive and intensive study possible with much less time,
money and material. Its more popular in research work.

SIGNIFICANCE OF THE STUDY

Significance of the study is written as the part of the introduction section of the thesis. It
helps us to provide details to the readers on how this research is going to help of benefit
the people from the study. It answers the questions, “What are the advantages or the
benefits of the study based on the topic of the research problem? This research will not
only help the account holders but also the non-account holders & the society as well as
the individual. It helps us to create awareness among the people, to understand its
importance, advantages, disadvantages, functions. It will help to study issues related to it
and suggest a proper suggestion.

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RESEARCH METHOD

In this research, Survey through Questionnaire method is used. It is a list of questions

related to one topic. The questionnaire is probably most used of the data gathering
devices. It is easy to prepare and to administer.

The questionnaire with the help of google survey form is prepared and distributed to
secure responses to certain questions. It is a device for securing answers to questions by
using a form which the respondent will fill by themself.

It is a systematic compilation of questions. It is an important instrument being used to

gather information from widely scattered sources. Normally used where one cannot see
personally all of the people from whom he desires responses or where there is no
particular reason to see them personally.

HYPOTHESIS

In line with the objective of identifying the relationship between knowledge, student
interest, and environment with their awareness in investment, the following hypotheses
are formulated:
H1: There is a significant relationship between financial literacy and investment
awareness of young generation.
H2: There is a significant relationship between personal interest and investment
awareness of young generation.
H3: There is a significant relationship between environment and investment awareness of
young generation.
This research study will test the following hypotheses given below using the suit able
statistical tests.
H1: There is a significant association between the saving and investment pattern and the
city of residence of the respondent.
H2: There is a significant association between the saving and investment pattern and the
age of the respondent.
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H3: There is a significant association between the saving and investment pattern and the
educational back ground 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 saving and Investment pattern and nature of job

H7: There is an association between the saving and Investment pattern and the marital
status.

H9: There is an association between the saving and Investment pattern and the family
size
H10: There is an association between the saving and Investment pattern and the financial
literacy level.
H11: There is an association between the saving and investment pattern and investment
consultant.
H12: There is an association between the saving and investment pattern and their view
period
H13: There is an association between the saving and investment pattern and the
investment purpose.

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CHAPTER 3

REVIEW OF LITERATURE

Review of Literature is an important stage in research activity. Review of literature refers

to extensive review of literature relating to research problem which the researcher intends
to undertake. The researcher reviews the previous research studies, relevant reference
books, articles in specific journals and other published sources. Such review of Literature
provides a good insight into their search problem.

The steps on literature review are identifying and selection of research problem,
determine the sources of literature relevant to the research problem which may include
article in journals, reference books, doctoral thesis, and other published and unpublished
sources, read and understand it, note and record the relevant information, cite the sources
where ever applicable.

The significance of literature review is the familiarity with the Previous Research
Studies, Significance at Pre-research stage, significance at post-research stage, Rapport
with the Audience, helps to avoid incidental plagiarism, Research focus, Compilation of
Bibliography. In simple words, it is nothing but study done by someone else.

A literature review situates our topic in relation to previous research and illuminates a
spot for your research. Its purpose or it accomplishes several goals

• Provides background for your topic using previous research.

• Shows you are familiar with previous, relevant research.

• Evaluates the depth and breadth of the research in regards to your topic.

• Determines remaining questions or aspects of your topic in need of research.

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Relationship between Literature Review and the research project. Academic research at
the graduate level is always part of a dialogue among researchers. As a student, you must
therefore indicate that you know where your topic is positioned within your field of
study. Therefore, a literature review is a key part of most research projects at the
graduate level. There is often a reciprocal relationship between literature review and the
research project for which it is written:

• A research project is often undertaken in response to a literature review. Doing the

literature review for a topic often reveals areas requiring further research. In this way,
writing the literature review helps to formulate the research question.

• A literature review helps to establish the validity of a research project by revealing

gaps in the existing literature on a topic that offer opportunities for new research.
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 analyzing 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 behavior of household, gender differences in
knowledge about financial investments, investors risk tolerance, Investor’s perception of
various financial products.

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Some of the most in rightful studies carried out in India and outside are given below.

❖ Nupur Gupta and Vijay Agarwal (2013) looked at the constituents of domestic savings
and investments by investors, from the cities of Mumbai. 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 November2011. 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-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. Stock market investment was third
most preferred investment avenue in Mumbai 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 factors influencing investment decision was the
prevailing interest rate.

❖ Geetha. N and Ramesh M, (2012), studied the role of demographic factors in investment

decisions. Response received from 475 respondents from of Mumbai was used for
analysis. The sampling method used was convenient sampling. A well-structured
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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 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, risk
protection, 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 was may be due to the boom in the
prices of gold and silver during their period of study.

❖ P. Parmashivivaiah, Puttaswamy and Ramya (2013) conducted a study in the city of

Mumbai, 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 Mumbai
Statistical tools used for analyzing 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
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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 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.

❖ 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 Mumbai with a sample size of 500 respondents out of which 363 respondents
were investing in mutual funds, and these respondent’s data was analyzed 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.

❖ Abhijeet Birari & Umesh Patil (2014) studied the spending and savings habit of youth in

the city of Mumbai. The study finds that significant difference exists in the spending
habits of students belonging to different education levels. The study finds that most of
the youth in the sample spend a large portion of the money on consumable goods and
that due to lack of awareness, the amount of money saved or invested is very little.

❖ Gina Chowa, Mat Despard & Isaac Osei-Akoto (2012) in their paper ‘Youth saving

patterns and performance in Mumbai’ attempted to find whether the youth will

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participate in savings via formal financial services if given the opportunity. The study
found that most youth in the sample, set aside money regularly, hold onto their set aside
money for short periods of time and use it mostly for short-term consumptive purposes.
The study concluded that, youth of a developing country have high propensity to save
but, lack of proper knowledge and information restricted the youth from venturing out
into the area formal savings and investments.

❖ Patel & Patel (2012) studied the investment perspective of salaried people. The paper

aimed at studying the behavioral pattern & difference in perception of an individual

related to various investment alternatives. The study finds that the youth that was
surveyed preferred investments over savings. The study also discovers that, rather than
safe and secure investments, the youth prefer investments that are high risk but also yield
high returns.

❖ Murithi Suriya, Narayanan and Arivazhagan (2012), in their study reveal that female

investors dominate the investment market in Mumbai. According to their survey,

majority of the investors are found to be considering two or more sources of information
to make investment decisions. Most of the investors discuss with their family and friends
before making an investment decision.
❖ Shanmugasundaram and Balakrishnan (2011) conducted research to analyses the factors

influencing the behaviour of investors in capital market. They concluded that

demographic factors influence the investors investment decisions.

❖ Jaakko and Tikkanen (2011) in their study on “Individuals’ Affect-Based Motivations to

Invest in Stocks: Beyond Expected Financial Returns and Risks” found that most
investors had affected based extra motivation to invest in stock, over and above financial
return expectations. The more positive an individual's attitude towards the company was,
the stronger was his extra investment motivation.

❖ Suman Chakraborty and Sabat Kumar Digal (2011) found from their work that, saving is

significantly influenced by demographic factors such as age, occupation and income

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level of investors. It was found that female investors tend to save more in a disciplined
way than the male investors. Paper attempts to explore whether dichotomy of the popular
believes that men are morepro-risk than women. It was observed that women are risk
averse indeed but save more than the male counterparts as the income level rises.

❖ Deshpande & Zimmerman (2010) explored the potential of Youth Savings Accounts

(YSAs) as avital intervention in youth development and financial inclusion. The paper
finds that the best way to encourage youth savings and asset accumulation is by offering
major financial incentives to jumpstart the savings process. The paper found evidence
that youth savings may have the potential to be a high leverage intervention, with
positive effects on youth development and financial inclusion Deshpande & Zimmerman
(2010) explored the potential of Youth Savings Accounts (YSAs) as avital intervention
in youth development and financial inclusion. The paper finds that the best way to
encourage youth savings and asset accumulation is by offering major financial incentives
to jumpstart the savings process. The paper found evidence that youth savings may have
the potential to be a high leverage intervention, with positive effects on youth
development and financial inclusion.

❖ Kabra, Mishra and Dash (2010) studied the factors which affect individual investment

decision and differences in the perception of investors in the decision of investing on the
basis of age and gender and found that investors' age and gender predominantly decides
the risk-taking capacity of investors.

❖ Zoghlami, F. and Matoussi, H (2009) in their study on Mumbai investors in “A Survey of

the Tunisian Investors Behaviors” revealed psychological particularities that are not
expected by financial behavioral literature.

❖ Manish Mittal and R. K. Vyas (2007) study on “Demographics and Investment Choice

among Mumbai Investor” shows that based on gender, men prefer Equities as their first
choice and women prefer post office deposits as their first choice. The investor of age
group18-25 first choice is Equities and above 45 years first choice is Derivatives. Less
income group prefers post office deposit and high-income group prefers Derivatives as

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their first choice. Post graduates prefer Mutual Fund and Professionals prefer Equity.
Service as occupation people prefers Equity whereas house wife prefers Real estates and
Bullions.

❖ Verma (2008) studied the effect of demographics and personality on investment choice

among Mumbai investors and found that mutual funds were popular amongst
professionals, students and the self-employed. Retirees displayed their risk aversion by
not investing in mutual funds and equity shares. It was also found that higher the
education, higher was the level of understanding of investment complexities. Graduates
and above in qualification preferred to invest in equity shares as well as mutual funds.

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CHAPTER 4

DATAANALYSIS, INTERPRETATION AND PRESENTATION

Data analysis, Interpretation and Presentation is totally based on people’s opinion
regarding A study of saving and investment pattern in Mumbai. This research below is
purely done on primary data. The below shows various aspects on the research topic. The
conclusion and analysis are done on the data collected by the respondents.

In the research work, data collection, tabulation, analysis and interpretation are very
important. This chapter presents testing of hypothesis and interpretation of the results. It
describes the statistical procedure adopted to test the hypothesis and also the qualitative
analysis of the responses of the students.

According to Gay, ‘Analysis of the data is as important as any other component of the
research process. Regardless of how well the study is conducted, inappropriate analysis
can lead to inappropriate conclusion’. (Gay, 1996, p416).

Data analysis is considered to be important step and heart of the research in research
work. After collection of data with the help of relevant tools and techniques, the next
logical step, is to analyses and interpret data with a view to arriving at empirical solution
to the problem.

In this research project, simple data analysis of percentage method is used to fine the
collected data and interpret the result which is shown in the next chapter which is
conclusion and suggestions.

From the next page, we can see the simple percentage method of analysis done on the
basis of questionnaire prepared and the data collected is shown in bar graph, pie-
diagram, clustered graph to understand the collected data in an easy manner.

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Graph1:Numberofrespondentsclassifiedintomalesandfemales.

Respondents Percentage
Male 54 51.4%
Female 44 41.9%
Prefer not to say 07 6.7%

GENDER

7%

MALE
FEMALE
51%
42% OTHERS

The above chart shows the classification of the number of respondents on the basis of
gender i.e., male and female. Total female respondents are 44 people, the male
respondents are 54 people and 7 respondents prefer not to say.
The number of female respondents is 42%, the number of male respondents is 51% and
7% are others
Form this, we can conclude that in saving and investment pattern in young generation
there are less females as compared to male respondents.

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Graph 2) Number of respondents on the basis of Occupation.

Respondents Percentage
Student 33 31.4%
Self-Employed 18 17.1%
Employee 42 40%
Others 12 11.4%

45

40

35

30

25

20

15

10

0
EMPLOYEE STUDENT SELF EMPLOYED OTHERS

The above diagram the number of respondents on the basis of occupation.

The maximum population of employee is 40 % with 42 respondents and the lowest being
the other with 11.4% of 12 respondent.

The percentage of 31.4% is of student with 33 respondents & the percentage of17.1% are
self-employed with 18 respondents.
Form this, we can conclude that in saving and investment pattern in young generation
there are more employee.

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Graph 3: Number of respondents on the basis of saving/investment their income

Yes 77
No 28

DO YOU SAVE/ INVEST YOUR INCOME

27%

YES
NO

73%

The above pie-diagram the number of respondents on the basis of saving/investment their
income
There is total 77 respondent who are into saving/investment and 28 respondents not into
saving/investment.

The number of No respondents is 27% while the number of Yes respondents is 73%.
From this we can conclude that there are more respondents who are into saving and
investment their income.

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4) Number of respondents on the basis of How much income do they

invest/save(Approx)

SAVE/INVEST(APPROX)

13%
35%
18%
UPTO 25%
25-50%
50-75%
More than 75%
34%

The above pie-diagram shows the number of respondents on the basis of How much
income do they invest / save (Approx)

There are 10 respondent who are 50-75%, 30 into 25-50%, 10 up to 25% , 20 in more

Then 75%

50-75% are18%,

25-50% are34%,

upto25% are 35%,

more than 75% are 13%.

highest respondent is between 25-50% Lowest respondent are up to 25% & 50-75%

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Graph5: Number of Respondent on the basis of Investment

Vehicle do the prefer.

investment vehicle

8%

13% EQUITY
34%
COMMODITIES
MUTUAL FUNDS
DEBENTURE/BONDS
RETIREMENT PLAN
POST OFFICE SAVING
33%
12%

The above diagram shows the number of respondents on the basis of Investment vehicle
do they prefer.

Investment vehicle preferred by the respondents are as follows:

Equity Shares are10

Commodities are 5, Mutual Funds are 14, Debentures / Bonds are 12, Retirement plans
are 8.
Post Office Savings the old way is 7.
Bank Deposits are 15
Highest respondent is investing their income in equity shares (there as on may be trend in
share market)

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Graph6 : Number of respondents on the basis of factors considered while choosing an

investment option

INVESTMENT FACTORS

14%

46%
19%
RETURNS
STABILITY
RISK
TAX BENEFITS
21%

The above diagram shows the number of respondents on the basis of factors considered
while choosing an investment option.
Respondents in Tax benefits are 17, stability is 15, Risk are 13, Returns are 25.
The number of respondents in
Tax benefits are14%, Stability are 21%,
Risk is 19%, and Returns are 46%
Highest factor considered while choosing an investment option is returns.

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7 . Number of respondents on the basis of risk-return pattern do they look for

RISK RETURN PATTERN

27%
39%

HIGH RISK-HIGH RETURN

LOW RISK-LOW RETURN
DON’T KNOW
34%

The above diagram shows the number of respondents on the basis of risk-return pattern
do they look for
The number of Percent in High Risk-high return is 39 %, Low risk-low return is 27%
Don’t know, never gave it much thought is 34%.
This concludes that respondent is more into low risk & low return as compared to others.

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8. Number of respondents on the basis of who they consult for taking investment decisions

14%
29%
15% OWN ANALYSIS/RESEARCH
PARENTS
FRIENDS & COLLEAGUES
18% 24% SPOUSE
FINANCIAL CONSULTANT

The above diagram shows the number of population of respondents on the basis of whom
do they consult for taking investment decision
They areas given below:
Own Analysis/ research = 30

Spouse=16
Parents=25

Friends & Colleagues = 19, Financial consultants =15

highest respondent is in category of Own Analysis/research with 29%
Lowest respondent is in category of financial consultants with%14.%

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Graph9: Number of respondents on the bsais of monthly income

MONTHLY INCOME
2%

BELOW RS 20000
49%
RS. 20000 -RS 40000
49%
RS .40000 & ABOVE

The above diagram shows the number of population of respondents on the basis of
monthly income

The number of Respondent are follows:

Below Rs20000 are 40

Rs 20000- RS 40000 are 40

Rs 40000 & above are 25

From above diagram, we conclude that there are equal number of respondents in the
category of below Rs 20000 & Rs 20000-Rs 4000.

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Graph 10: Number of respondents on the basis of whether they consult with a broker to
reach at their investment decisions? How much influence doe she/he have on their
investment pattern

27%

YES, BUT I DON’T DEPEND ON

45% HIM MUCH
YES, A LOT

NO, NOT AT ALL

28%

The above diagram shows the number of population of respondents on the basis of
whether they consult with a broker to reach at their investment decisions, how much
influence does he/she have on their investment pattern
The number of respondent areas:

Yes, a lot =30

Yes, but I don’t depend on him much=47

No, not at all =28

The highest responded are in Yes, but I don’t depend on him much with 45%

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Graph 11. Number of years(tenure) would like investment period

TENURE

19%
33%

MORE THAN 3 YEARS

24% 1-3 YEARS

NO SPECIFC TIME FRAME
24% LESS THAN 1 YEAR

Respondent like to investment for longer period like more than 3 years,

There are 19% of respondent who like to invest for less than 1 years,
24 % respondent like to invest for 1-3 years and same number of respondents don’t think
for specific time frame.
Which shows that like to invest for longer period.

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CHAPTER 5

CONCLUSIONS AND SUGGESTIONS

CONCLUSIONS
After the analysis & interpretation of data by the researcher it is concluded that Investors are
very well aware about investment avenues that are available in Mumbai, India but still investors
are preferring to invest in their money in bank deposit, real estate. The data analysis of research
reveals that the safety is concerned as important factor while doing investment, so remaining
avenues are less found less considerable while doing investment by investors.
Especially in a city like Mumbai where Real estate is always on the high or up, this is not at all
bad investment option. But there is no fixed return and the risk and amount of investment is
high.
It is absolutely essential and needed to save what you earn, to have a plan for your own future,
and to resist the spending funds that you do not already have.
The economy is growing, the job market has been doing well and there has been a rise in the
graph for salaries. The new generation of youth in India will have money in its pockets and
ample opportunity to put it to good use, if they can shift from the traditional bank account
savings to the capital market. They understand the importance and benefits of investing and
know how they want to use their money now and in the future. They need lucrative options to
put their money in for days to come but are understandably afraid or confused due to lack of
practical understanding.
Traditional saving options like post office schemes and fixed deposits are now passé. Options
like post office schemes and fixed deposits are not very popular with the youth as the rate of
interest on the mis lower as compared to other investment options available. But somehow
savings accounts are still seen widely. Safety and security which were always important reasons
for investment are still influential in determining the direction of investment. However, their

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hold is loosening. With money in hand and age on their side, the young investors are becoming
more inclined toward staking risk. Fixed deposits are not a very attractive investment option for
youngsters these days. Tax saving is one of the reasons behind investment by the youth.
Traditional saving schemes do not provide any tax benefits and are, therefore, keeping the
youngsters away from them. There seems no rationale for investing in fixed deposits and post
office schemes when they provide no tax rebates and the rate of return on the mis fixed and also
lower than other investment options.

SUGGESTIONS:

"If you want to get rich, save whatever you get. Even A fool can earn money; but then it takes a
wiseman to save and to dispose fit to his own advantage."-- Brigham Young.
It is absolutely essential to save your income what you earn, to have a plan for your future, and
to resist spending funds that you do not already have. Mutual fund is the also found as most
favored option by the youngsters today. Investment in mutual funds through the way of
Systematic Investment Plan (SIP) is a favored investment option by the youngsters.
Awareness programs needs to be conducted by stock broking firms, because most of the
respondents i.e., investors are thinking that these avenues are loss making & having are having
no good return omit. Hence the researchers have concluded that most of the investors prefer
secured regular income noninvestment the study Area.

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BIBLIOGRAPHY

▪ 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, Feb2013,
pp17-26
▪ 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, pp39-56
▪ Paramashivaiah. P. Puttaswamy, Ramya S.K. (2014) Changing risk perception of women
investors: An empirical study, Indian Journal of Finance, June2014, pp 22-33
▪ Yogesh P. Patel & Charul Y. Patel. (2012). A Study of Investment Perspective of Salaried
People.
▪ Kabra Gaurav, Mishra Prashant Kumar and Dash Manoj Kumar. (2010). Factors Influencing
Investment Decision of Generations in India: An Econometric Study. ISSN2229
–3795
▪ Manish Mittal and R.K.Vyas. (2007). Demographics and Investment Choice among Indian
Investors. IUP Journal of Behavioral Finance.
▪ Verma M. (2008). Wealth Management and Behavioral Finance: The effect of Demographics
and Personality on Investment Choice among Indian Investors. The ICFAI University Journal
of Behavioral Finance, Vol. 5, No. 4, pp.31-57.
▪ Zoghlami, F. and Matoussi, H. (2009). A Survey of the Tunisian Investors Behaviors.
International Research Journal of Finance & Economic. Vol. 31, No.9, pp.66-81.

Webliograpghy

- https://www.bseindia.com/downloads1/investment_pattern_of_youth.pdfhttps://www.vinayak
amission.com/userfiles/phd/MGT2009AP183.pdf
- https://download.atlantis-press.com/article/25887765.pdf

- https://www.slideshare.net/chkarthik1/project-on-saving-and-investment-pattern-of-teachers-
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in-hyderabad-city-a-survey
- https://acadpubl.eu/jsi/2018-118-18/articles/18b/30.pdf

- http://www.iosrjournals.org/iosr-jbm/papers/Vol16-issue8/Version-4/A016840110.pdf

- https://www.researchgate.net/publication/283274594_A_Study_of_Investment_Awareness_an
d_Patterns_of_Savings_and_Investments_by_Rural_Investors
- http://www.indianjournaloffinance.co.in/index.php/IJF/article/view/72351

- http://shodh.inflibnet.ac.in:8080/jspui/bitstream/123456789/922/1/synopsis.pdf

- https://zenodo.org/record/266614/files/31.PDF

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APPENDIX

1. Gender

o Male

o Female

o Prefer not to say

2. Occupation

o Students

o Self-Employed

o Employee

o Others

3. Do you save/invest your income?

o Yes

o No

4. How much of your income do you invest/save? (Approx)

o Up to 25%

o 25-50%

o 50-75%

o 50-75%

o Morethan75%

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5. What investment vehicles do you prefer?

o Equity shares

o Commodities

o Mutual funds

o Debenture/Bonds

o Retirement plan

o Post office saving, the old way

o Bank deposits

6. What factors do you consider while choosing an investment option?

o Returns

o Risk

o Stability

o Tax Benefits

7. What risk-return pattern do you look for?

o High Risk-High Return

o Low Risk- Low Return

o Don’t know, never gave it much thought

8. Do you consult with a broker to reach at your investment decisions? How much influence does
he/she have on your investment pattern?

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o Yes, a lot

o Yes, but I don't depend on him much

o No, not at all

9. Whom do you consult for taking investment decision?

o Own Analysis/research

o Spouse

o Parents

o Friends & Colleagues

o Financial consultants

10.Planned investment period (Tenure)is

o Less than 1year

o 1-3years

o morethan3years

o no specific timeframe

11.Monthly Income

o BelowRs.20,000,

o Rs. 20,000–Rs.40,000

o Rs. 40,000 &above

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