Habib Educational and Welfare Society’s

M.S COLLEGE
OF ARTS, SCIENCE, COMMERCE AND B.M.S
AFFILIATED TO THE UNIVERSITY OF MUMBAI
(NAAC ACCREDITED)
A PROJECT REPORT ON
A STUDY ON INVESTMENT DECISION
Dissertation submitted in partial fulfilment of the requirements
for qualifying.
MASTER OF COMMERCE (PART II) SEMESTER IV
Choice based (A.Y 2023-2024)
From
UNIVERSITY OF MUMBAI

SUBMITTED BY
MEHVISH NAUSHAD DHANSE
ROLL NO: 14
UNIVERSITY SEAT NO:
Under the guidance of
ASST. PROF. UMME FARWAH SAYED
 Habib Educational and Welfare Society’s

M.S COLLEGE
OF ARTS, SCIENCE, COMMERCE AND B.M.S
AFFILIATED TO THE UNIVERSITY OF MUMBAI
(NAAC ACCREDITED)
A PROJECT REPORT ON
A STUDY ON INVESTMENT DECISION
Dissertation submitted in partial fulfilment of the requirements
for qualifying.
MASTER OF COMMERCE (PART II) SEMESTER IV
Choice based (A.Y 2023-2024)
From
UNIVERSITY OF MUMBAI

SUBMITTED BY
ROLL NO:
UNIVERSITY SEAT NO:
Under the guidance of
ASST. PROF. UMME FARWAH SAYED
 Habib Educational and Welfare Society’s

M.S COLLEGE
OF ARTS, SCIENCE, COMMERCE AND B.M.S
AFFILIATED TO THE UNIVERSITY OF MUMBAI
(NAAC ACCREDITED)

Habib Educational Complex, M.H Mohani Road, Kausa, Mumbra, Thane-400612.

CERTIFICATE

This is to certify that, has worked and duly completed her Project work for
the degree of Master in Commerce under the Faculty of Commerce and her
project is entitled, “A STUDY ON INVESTMENT DECISION” under
my supervision.
I further certify that the entire work has been done the learner under my
guidance and that no part of it has been submitted previously for any
Degree or Diploma of any University.
It is her own work and facts reported by her personal findings and
investigations.

Name and Signature of Guiding Teacher

Date of submission:

Principal College Seal

 DECLARATION

I the undersigned Miss. MEHVISH NAUSHAD DHANSE here by,

declare thatthe work embodied in this protect work titled “A STUDY
ON INVESTMENT DECISION”, forms my own contribution to the
research work carried out under the guidance of ASST. PROF. UMME
FARWAH SAYED is a result of my own research work and has not been
previously submitted to any other University for any other Degree/
Diploma tothis or any other University.

Wherever reference has been made to previous works of other, it has

beenclearly indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been
obtained and presented in accordance with academic rules and ethical
conduct.

Certified by

Name and signature of the Guiding Teacher

(Signature of Leaner)
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous
and thedepth is so enormous.

I would like to acknowledge the following as being idealistic channels

and freshdimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me

chanceto do this project.

I would like to thank my Principal, DR. HUSSEINALI DATTOO for

providing the necessary facilities required for completion of this project.

I would also like to express my sincere gratitude towards my project guide

ASST. PROF. UMME FARWAH SAYED, whose guidance and care
made the projectsuccessful.

I would like to thank my College Library, for having provided various

referencebooks and magazines related to my project.

Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project especially my Parents
and Peers whosupported me throughout my project.

Place: Mumbra, ThaneDate:

Remark

5
 INDEX

Chapter Page
Content
No. No.
1. INTRODUCTION 7-31

1.1 Introduction
1.2 Concept Of Investment
1.3 Speculation and Gambling
1.5 Investment Environment
1.6 Type Of Investments
1.7 Investment Process
1.8 Summary
1.9 Key Words
2. RESEARCH METHODOLOGY 32-33
2.1 Introduction:
2.1 Objectives Of The Study:
2.2 Scope Of Study
2.3 Limitation Of The Study
2.4 Significance Of Study
2.5 Sample Design
2.6 Data Collection Techniques And Tools

3. LITERATURE OF REVIEW 34-36

3.1 Literature of Review

4. DATA ANLYSIS, INTERPETATION AND PRESENTATION 37-45

5. CONCLUSIONS AND RECOMMENDATIONS 46-51
5.1 Summary Of Findings:
5.2 Overall Conclusion
5.3 Recommendations
6. BIBLIOGRAPHY 52-53
7. REFERENCE 54
8. ANNEXURE 55-56

6
 CHAPTER 1: INTRODUCTION

1.1 Introduction

Individuals like you invest money for various reasons. It could be:

You or your family may be earning more than what is required for monthly expenses
and thus would like to keep the money in a safe place and also allow the savings to earn
a return during the period.

You may not have regular surplus but may get occasional one-time surplus earnings
such as annual bonus from your employer or sale of some family property. You would
like to keep such money for some time, when you don’t required, in some safe place
and also allow such savings to earn a return during the period.

We also invest money on education of our children like our parents did. Just as
individuals do, organizations too invest to increase revenue. For example, you might
have read news items like X Industries investing `1000 Cr. for expansion of its
petrochemical division.

The above examples underline the following characteristics of an ‘investment’ decision:

One, it involves the commitment of funds available with you or that you would be
getting in the future. Two, the investment leads to acquisition of a plot, house, or shares
and debentures. Three, the physical or financial assets you have acquired is expected to
give certain benefits in the future periods. The benefits may be in the form of regular
revenue over a period of time like interest or dividend or sales or appreciation after
some point of time as normally happens in the case of investments in land or precious
metals.

The investment decisions relate to financial assets bulk of which comprises pieces of
paper evidencing a claim of the holder (i.e., investor) over the issuer (i.e., user of funds).
For example, when you buy shares of, say, A or B organization, the share certificate that
is handed over to you is a piece of paper which testifies your ownership of the number
of shares stated in the certificate. It represents your financial claim (as a holder of the
said shares) over A or B, (as issuers of the shares). The same can be said for any security
like a debenture, a warrant a convertible, etc., of an organization. Unlike promoters of

7
organizations, several buyers of these securities hold them for limited period and then
sell them. The reasons for selling the financial assets could vary from person to person.
If an investor needs money for other expenditure like marriage or education, s/he could
sell some of the financial assets like shares/ bonds. Similarly, if an investor finds that
her/his expected return for the financial asset is realized, s/he can sell the same and use
the money to buy some other securities. It is also possible that some of these high-risk
takers speculate in financial securities. Investors of different kinds look out for
investments, which can be sold in organized markets with ease and at best obtainable
prices. Financial assets, which are tradable with ease and at best prices in organized
markets, are known as ‘marketable securities’. In this unit we are going to study various
aspects of investment.

1.2 Concept Of Investment

It may be appropriate at this juncture to define the term ‘investment’ in a general sense.
Investment takes place when an investor postpones her/his consumption, which is
initially converted into savings and subsequently into investments. By not spending the
entire amount of your salary, you are saving a part of your salary income for the future
needs. Savings of this kind run into risk of loss of value because of inflation. In order
to prevent erosion of value of your savings, the amount saved has to be invested at least
by depositing the amount in savings bank account.

You have several options if the money you are saving is not required in the near future
and the number of options increases further, if you are willing to assume a bit of risk in
your investment. Remember without taking risk, it is not possible to expect a higher
return. Some of the investment options available to you are time deposit (fixed deposit)
of bank, bonds and debenture of financial institutions or organizations, mutual funds,
futures, options, etc.

It is interesting to observe that all investment decisions arise from a ‘tradeoff’ between
current and future consumption. An example would make this idea clear. which s/he
can either spend on current consumption or invest, say, for one year at 11 per cent
interest Having defined ‘investment’ in terms of ‘postponed consumption’ we must get
ready to answer an inescapable question viz., why should a person postpone her/his
present consumption? This question acquires added significance because we know that
individuals generally prefer current consumption to future consumption. And if they are

8
required to invest or postpone current consumption there must be commensurate
inducement. This underlines the need for a positive rate of return on all potential
investment without which a person would prefer to consume all her/his income today
rather than tomorrow. Such an investment /consumption behaviour is based on an
important concept known as ‘time value of money’. This concept signifies ‘a rupee
today is worth more than tomorrow’. The ‘tomorrow’ must promise a larger wealth to
give incentive to forego current consumption. The next natural question is how much
the return should s/he larger to attract investment?

You will readily notice that a nominal rate of return may well be fully swallowed away
by the inflation. For example, if you earn an interest rate (nominal) of 11 per cent for
one year on your investment and face the threat of 11 per cent price rise (inflation) too
during that year, where do you stand in terms of purchasing power of your money?
What happens in a situation like this is that the 11 per cent nominal return is neutralized
by 11 per cent inflation and you remain after one year where you were a year ago. It is,
therefore, natural that an investor would be induced to postpone consumption today
only if her/his command over goods and services does not get diluted over time. Thus,
if s/he gets 11 per cent nominal interest and 11 per cent is the rate of inflation, her/his
real rate of return would be zero.

In the event of inflation what induce investors to postpone current consumption are the
real rate of return and not just the monetary rate of return. There is yet another
dimension to the rate of return as an incentive to invest. For example, if a person buys,
say, government securities s/he is completely assured of all payments viz., interest and
principal. In such cases, a relatively lower rate of return is adequate as an incentive. But
if the avenue of investment is an organization’s debenture, the probability of default
does exist even if the rate of interest and the repayment schedules are known in advance.
The investor here perceives some risk and would insist upon an additional
compensation. In other words, the investor requires a risk premium over and above the
risk free rate.

This extra reward or risk premium would have to be substantially greater in the case of
shares of organizations where the dividend rates are not ascertainable in advance and
where payment of such dividends and invested sums are not at all assured. What we are
trying to underline through these examples is the ‘risk’ factor which affects the expected

9
rates of return by investors. In all these cases, investors demand a risk premium. It
would thus be seen that the investor’s required rate of return would be an aggregate of
the risk-free real rate, expected rate of inflation, and risk premium.

Investments in securities on average offer adequate return to compensate the risk

assumed by the investors. But one has to wait for a longer period to realize such extra
return for the additional risk assumed particularly in case of investments in stocks. In
other words, if the holding period of an investment is short, then high-risk securities
may not offer adequate return to compensate the risk, you have assumed. You might
have recognized the existence of ‘speculators’ in the securities markets. They invest in
high risk securities for a short period and hence exposed to high level of risk.

1.3 Speculation and Gambling

Speculation and gambling are two distinct ways of increasing wealth in the face of risk
or uncertainty. However, in the world of investing, these two terms are very different.
Gambling is the act of putting money into an event with an uncertain outcome in the
hope of winning more money, whereas speculation is the act of taking a calculated risk
in an uncertain outcome. Speculation involves some sort of expected positive return on
investment, even if the end result is a loss. While the expected return on gambling is
negative for the player, some people may be fortunate and win.

1. Speculation

Before engaging in a financial transaction, speculators calculate risk and

conduct research. A speculator buys or sells assets in the hope of making a larger
profit than he risks. A speculator takes risks, knowing that the more risk they
take, the greater is their potential gain. They are also aware that they may lose
more than they gain.

An investor, for example, may speculate that a market index will rise due to
strong economic data by purchasing one contract in one market futures contract.
If their analysis is correct, they may be able to sell the futures contract for a
higher price than they paid in the short to medium term. However, if they are
incorrect, the investor may suffer a loss greater than expected.

10
2. Speculator vs Investor

Speculators may lose their entire wealth or become rich in a short period of time.
How are they different from that of normal investors? We can distinguish the
two operators as follows:

The time-horizon of a speculator is short while that of the investor is long.

The investor expects a ‘good’ return and a consistent performance over time but
the speculator expects abnormal returns earned quickly over short periods.

The investor generally sticks to her/his investment, but the speculator makes
rapid shifts to greener pastures. S/he moves from one stock to other for a small
profit.

The investor is risk-averse but the speculator takes greater risks. Often,
speculators take risk by entering into margin trading (i.e. use borrowed funds)
to increase the volume and her/his exposure in the market.

If speculation is high-risk game, why do exchanges allow such trading? They

essentially provide liquidity for the securities and often match the demand and
supply of the market.

For example, positive news on an organization may attract a large demand for
the stock. In the absence of any sellers, the price will shoot up. Some speculators
may take a different view and are willing to sell the stock to meet the excess
demand of the market. Similarly, a mutual fund may wants to sell 1 lakh shares
of an organization. If there are limited buyers for the stock, the stock price would
crash. Again, speculators would buy the stock in anticipation of selling the same
at a small profit once the demand for the stock picks up in the market.

3. Gambling

Gambling, in contrast to speculation, is a game of chance. The odds are

generally stacked against gamblers. When gambling, the chances of losing an
investment are usually greater than the chances of winning more than the
investment. Gambling, as opposed to speculation, carries a higher risk of loss.

11
 For example, a gambler opts to play a game of American roulette instead of
speculating in the stock market. Only single numbers are bet on by the gambler.
The payout, however, is only 35 to 1, while the odds against them winning are
37 to 1. So, if a gambler bets $2 on a single number, their potential gambling
income is $160 (80*$2), but their chances of winning are about 1/37.

4. Key Differences

Although there are some superficial similarities between the two concepts, a
strict definition of both speculation and gambling reveals the fundamental
differences. A standard dictionary defines speculation as a risky type of
investment, whereas investing means to invest money in something that offers
profitable returns, particularly interest or income. According to the same
dictionary, gambling is defined as participating in any stakes game. To stake or
risk money or anything of value on the outcome of something involving chance;
bet; wager is gambling.

The act of conducting a financial transaction that has a significant risk of losing
value but also holds the expectation of a significant gain or other major value is
referred to as speculation. The risk of loss in speculation is more than offset by
the possibility of a large gain or other recompense. Some market professionals
regard speculators as gamblers, but a healthy market includes not only hedgers
and arbitrageurs, but also speculators.

A hedger is a riskaverse investor who purchases positions that are diametrically

opposed to those already held. If a hedger owned 500 shares of Marathon Oil
and was concerned that the price of oil would soon fall significantly, they could
short sell the stock, purchase a put option, or use one of the other options of
hedging strategies.

While speculation is risky, it frequently has a positive expected return, even if

that return never materialises. Gambling, on the other hand, always has a
negative expected return—the house always wins. Gambling tendencies go
much deeper than most people realise and far beyond the standard definitions.
Gambling can take the form of feeling the need to socially prove oneself or

12
 acting in a way to be socially accepted, which leads to action in a field one
knows little about.

Market gambling is frequently seen in people who do it primarily for the

emotional high they get from the excitement and action of the markets. Finally,
relying on emotion or a must-win attitude to generate profits rather than trading
in a methodical and tested system indicates that the individual is gambling in
the markets and is unlikely to succeed over a long period of time.

5. Investment Objectives
Asset managers use investment objectives to determine the best portfolio mix
for a client. The investment objective guides the selection of investments. An
investor questionnaire frequently defines financial goals and objectives and
determines portfolio asset allocation based on an individual’s time horizon, risk
tolerance, and financial situation. Features of investment goals are as follows:
x A set of goals that determines an investor’s financial portfolio is known as an
investment objective.
x Using an investment objective, a financial advisor determines the best strategy
for achieving the client’s objectives.

x The risk tolerance and time horizon of an investor aid in determining an

investment goal.

6. Understanding an Investment Goal

An individual’s investment objective, which is typically based on one of four
strategies that include income, growth, and income, growth, or trading, clarifies
investment ideas to help achieve an individual’s financial goals.

Individuals may provide information such as annual income and net worth,
average annual expenses, timeline for withdrawing funds, and the maximum
decrease in the value of the portfolio with which the investor is comfortable.
The portfolio is tailored based on the answers to these questions, and a strategy
is defined as an investment goal.

7. Tolerance for Risk

Risk tolerance is the level of risk that an investor is willing to accept given the
volatility of an investment’s value. A client with a high risk tolerance who is
13
 looking for growth may have a short-term aggressive portfolio comprised of
stocks and trading opportunities. A balanced portfolio of growth and income
instruments, including stocks and bonds, may be appropriate for a moderate-
risk investor. A conservative investor with a low risk tolerance may concentrate
on an income-producing portfolio comprised of dividends and bonds.
8. Factors Influencing a Person’s Investment Goal
Other factors that influence an individual’s investment decisions, in addition to
time horizon and risk profile, include income, capital gains tax, dividend tax,
commission and fees for actively managed portfolios, and total wealth, which
may include assets such as Social Security benefits, expected inheritance, and
pension value.
9. Questionnaire on Investment Objectives
Investors can find a variety of free questionnaires on brokerage websites. When
deciding not to use a personal advisor, however, it is critical to review the
questionnaire’s assumptions and limitations as well as accept the organization’s
terms and conditions. Because the information that will be provided is highly
sensitive, an investment objective is typically not formally completed until a
client has decided to use the services of a financial planner or advisor.

When an investor’s financial circumstances or goals change, it may be

beneficial to re-complete an investment objective questionnaire and reallocate
investments in a portfolio.

1.6 Types of investment objectives

There are two types of investment objectives viz.a.viz. primary and secondary
investment objectives. There are discussed below.

Primary Investment Objectives

1. Safety
Everyone wants their money to be safe and secure. If you are a conservative
investor who wants to receive their initial capital investment on time and
without losses, then the safety objective is critical to you. However, you should
be aware that no investment is completely risk-free. However, if your primary

14
 goal is safety, you can make investments with low or reduced risks. Naturally,
the returns on these investments will be low and may not keep pace with rising
inflation. Government bonds, bank securities, and money market instruments
are examples of safe investment objectives.

2. Capital Gain

When you want to grow your wealth, capital gain or capital appreciation is an
important investment goal. While safety is critical, many people invest heavily
in order for it to grow. Capital gains can be obtained through conservative
growth, aggressive growth, or speculation.

Conservative growth refers to the process by which investors construct an

investment portfolio that will generate wealth over time. When investors make
a risky investment in stocks, they are looking for both short and long-term gains.
Speculation occurs when investors attempt to maximise returns by trading
shares and securities through share price speculation. Capital gains necessitate
a great deal of forecasting and determining which stock to buy when. They also
attract taxes.

3. Income
The income investment objective, as the name implies, means investing to
generate a source of income for you. Dividends, interest, and yields are all
forms of income. These investment goals have a high level of risk and low
stability, but they also have higher returns. Income objectives are popular
among conservative investors due to their attractive returns and ability to keep
up with inflation. The stock market is an example of an income investment
objective; it has high risks and high returns.

15
Secondary Investment Objectives

1. Liquidity
Another investment goal is the liquidity of the investment you make. The ability
to instantly trade/sell/convert assets into cash with ease in the market and with
minimal risk of loss is referred to as liquidity. While some securities are easier
to liquidate than others, this is not always the case.
Most investors prefer to invest in securities that are easy to liquidate and use in
an emergency. They try to keep a portion of their total investments in readily
marketable securities, if not entirely. If liquidity is one of your primary goals,
you should consider investing in such securities as well.

2. Tax Savings
Did you know that capital gains income is taxed differently than ordinary
income? Yes, taxes on such income are lower than taxes on interest or salary-
based income. As a result, tax savings are a popular investment goal for many
people.

Tax-free savings accounts and the National Pension Scheme are two examples
of tax-saving investments. Furthermore, life insurance policies and tax-saving
mutual funds are popular ways to save taxes while earning good returns. Actual
returns on investment are aftertax returns. As a result, before making an
investment decision, it is best to research and learn about all tax considerations
and exemptions available to you in order to reduce your tax burden.

1.5 Investment Environment

A reading of the earlier sections has provided some understanding on the basic
principles of investment. Suppose you are able to frame your investment objective and
also identified securities that are to be purchased. Now you need to deal with the market
for the purchase and sale of securities. An understanding of the operational details of
the market would be useful. Investment decisions to buy/sell securities taken by
individuals and institutions are carried through a set of rules and regulations.

There are markets - money and capital - that function subject to such rules and
established procedures and are, in turn, regulated by legally constituted authority. Then

16
there are securities or financial instruments which are the objects of purchase and sale.
Finally, the mechanism, which expedites transfers from one owner to another,
comprises a host of intermediaries. All these elements comprise the investment
environment. Investors have to be fully aware of this environment for making optimal
investment decisions.

The three elements of the investment environment are as follows:

1. FINANCIAL INSTRUMENTS
• Financial assets or instruments can be classified in a variety of ways. We will
classify them into creditorship and ownership securities on the basis of the
nature of the buyer’s commitment. The description will then be split into public
and private issues differentiating the two major forms of issuance.

Creditorship Securities

• Debt instruments furnish an evidence of indebtedness of the issuer to the buyer.

Periodic payments on such instruments are generally mandatory and all of them
provide for the eventual repayment at maturity of the principal amount.
Securities may also be sold at a price below the eventual redemption price, the
difference between the redemption price and the sale price constituting the
interest. For example, a buyer of a ` 100 bond/debenture may receive an interest
at 6 per cent for one year in one of the following ways:

• s/he pays ` 100 at the time of investment and receives ` 106 at the end of one
year, or

• s/he pays ` 94:30 at the beginning and receives ` 100 at maturity i.e., s/he
receives 6 per cent of ` 94.30 that is equal to the difference between ` 100
(redemption price) and ` 94.30 (issue price).

• The latter arrangements are known as zero-interest bonds. The interest amount
in rupees measured as a percent of the par value of a debt instrument is known
as nominal or coupon rate of interest. For example, ` 28 payable per year on a
debenture whose face/par value is ` 200 yields a coupon rate of 14 per cent per
annum.

17
• Debt instruments can be issued by public bodies and governments and also by
private business organizations.

• Public Debt Instruments: Government issues debt instruments for long and
short periods. They are rated the best in terms of quality and are risk-free. A
common term used to designate them is ‘gilt-edged-securities’. The 182-day
treasury bills issued by the Government of India are examples of short-term
instruments. State governments and local bodies also issue series of loans and
bonds. Banks, insurance, pension and provident funds, and several other
organizations buy government debt instruments in compliance with their
statutory obligations. Such debt instruments are usually over-subscribed.

• You can refer money market page of any one of the financial dailies, where you
can find the list of short-term and long-term securities that were bought and sold
on a particular day.
• Private Debt Instruments: These are issued by private business organizations,
which are incorporated as organizations under the Organizations Act, 1956.
Generally these instruments are secured by a mortgage on the fixed assets of a
organization. In addition to plain debt instruments, there are several variations.
A very popular variety of such debentures are‘convertible’ whereby either the
whole or a part of the par value of a debenture is convertible (either
automatically or at the option of investors) on the expiry of a stipulated period
after issue. The terms of conversion are stated in advance. There may be a series
of conversions and conversion price may differ from period to period.

• The PSU bonds are issued to the general public and financial institutions by
public sector undertakings, usually with tax incentive. It is interesting to note
that a large proportion of PSU bonds are privately placed with banks, their
subsidiaries, and financial institutions. Certificates of Deposits (CDs) were
introduced in June 1989.

• Commercial banks are permitted to issue CDs within a ceiling equal to 2 per
cent of their fortnightly average outstanding aggregate deposits. The maturity
of 3 months at the short-end and one-year at the longer end was generally

18
 popular with investors. Interest rates for CDs are normally higher than the
interest rate offered by the bank for similar maturity period deposits.

• Ownership Securities: These instruments are called ‘equities’ because

investors who invest in them get a right to share residual profits. Equity
investment may be acquired indirectly or directly or even through a hybrid
instrument known as preference shares. They are discussed in this order.

• Indirect Equities: The investor acquires special instruments of institutions,

who take the buy-sell decisions on behalf of investors. Such institutions are Unit
Trust or Mutual Funds. An individual who buys Units gets a dividend from the
income of the Trust/Mutual Fund after meeting all expenses of management.
The Units can be bought from and sold to the institution at sale and repurchase
prices announced from time to time (on a daily basis).

• Many mutual funds schemes are also listed in stock exchanges and investors
can also sell and purchase the Units through secondary markets. The objective
of Trusts and Mutual Funds is to use their professional expertise in portfolio
construction and pass on the benefits to the small investor who cannot repeat
such a performance if left alone to subscribe to equity shares directly.

• Direct Equities: The investor can subscribe directly to the equity issues placed
on the market by the new organizations or by the existing organizations. If s/he
is already a shareholder of an existing organization, which enters the capital
market for additional issue of equity shares, such an investor would get a pro
rata right to subscribe, on a pre- emptive basis, to the new issue. Such offerings
are known as ‘rights shares’.

• Established organizations reward their shareholders in the form of ‘bonus

shares’ also. They are given out of the accumulated reserves and shareholders
need not pay any cash consideration as happens in the case of `right shares’. For
example, an organization may announce a bonus issue on a one-for-one basis.

19
• This amounts to a 100 per cent bonus issue (or, loosely stock dividend) so that
the number of shares held by a shareholder after the bonus would be doubled.
The chances for an increase in the potential dividend income become very bright
and this would happen unless the organization imposes a proportionate cut in
future dividends. Thus, a shareholder, who held 100 shares of ` 100 each in an
organization, got a dividend income of ` 2000, the dividend announced being
20 per cent. His shareholding after a 100 per cent bonus now increases to 200.
Now, if the organization maintaining the same rate of dividend as last year viz.,
20 per cent, the dividend income of the shareholder would go up to ` 4000.

• A less popular instrument is called ‘preference share’. It is neither full debt nor
full equity and is, therefore, recognized as a ‘hybrid security’. Such a
shareholder would have certain preference over equity shareholder. They may
relate to dividends, redemption, participation, and conversion, etc. The most
common is with regard to dividends which, when not paid for any particular
year, get accumulated and no equity dividend would be payable in future until
such accumulated areas of preference dividend are cleared. The dividend rate
on these shares is normally less than the one on equity shares but greater than
interest rate.

2. FINANCIAL INTERMEDIARIES
• Financial intermediaries perform the intermediary function i.e., they bring the
users of funds and the suppliers of funds together. Many of them issue financial
claims against themselves and use cash proceeds to purchase the financial assets
of others. The Unit Trust of India and other mutual funds belong to this category.

• Most financial institutions underwrite issues of capital by non-governmental

public limited organizations in addition to directly subscribing to such capital
either under a public issue or under a private placement.

• The financial institutions engaged in intermediary activities include the

Industrial Development Bank of India, Industrial Finance Corporation of India,

20
 Industrial Credit and Investment Corporation of India, Unit Trust of India, Life
Insurance Corporation, and General Insurance Corporation.

• Two institutions, which have broadened financial services activities in India,

deserve a special mention. They are: The Credit Rating Information Services of
India Ltd., (CRIS1L) and other credit rating agencies, and the Stockholding
Corporation of India Ltd. (SHCIL).

• CRISIL, the first credit rating agency of the country, was set up jointly by ICICI,
UTI, LIC, GIC, and Asian Development Bank. It started operations in January
1988 and has rated a large number of debt instruments and public deposits of
organizations. CRISIL ratings provide a guide to investors as to the risk of
timely payment of interest and principal on a particular debt instruments and
preference shares on receipt of request from a organization.

• Ratings relate to a specific instrument and not to the organization as a whole.

They are based on factors like industry risk, market position and operating
efficiency of the organization, track record of management, planning and
control system, accounting, quality and financial flexibility, profitability and
financial position of the organization, and its liquidity management.

• The SHCIL was sponsored by IDBI, IFCI, ICICI, UTI, LIC, GIC and IRBI to
introduce a book entry system for the transfer of shares and other types of scripts
replacing the present system that involves voluminous paper work. The
corporation commenced its operations in August 1988.

3. FINANCIAL MARKETS
• Securities markets can be seen as primary and secondary. The primary market
or the new issues market is an informal forum with national and even
international boundaries. Anybody who has funds and the inclination to invest
in securities would be considered a part of this market. Individuals, trusts, banks,
mutual funds, financial institutions, pension funds, and for that matter any entity
can participate in such markets. Organizations enter this market with initial and
subsequent issues of capital.

21
 • They are required to follow the guideline prescribed by the regulating agencies
like SEBI from time to time unless they are expressly exempted from doing so.
A prospectus or a statementin-lieu of prospectus is a necessary requirement
because this contains all material information on the basis of which the investor
would form judgment to put or not to put his money. Concealment and
misrepresentations in these documents have serious legal implications including
the annulment of the issue.

• Some organizations would use the primary market by using their ‘in house’ skill
but most of them would employ brokers, broking and underwriting
organizations, issue managers, lead managers for planning and monitoring the
new issue. New guidelines are periodically issued by the Securities & Exchange
Board of India (SEBI).

• Secondary markets or stock exchanges are set up under the Securities Contracts
(Regulation) Act, 1956. They are known as recognized exchanges and operate
within precincts that possess networks of communication, automatic
information scans, and other mechanized systems. Members are admitted
against purchase of a membership card whose official prices vary according to
the size and seniority of the exchange.

• Membership cards generally command high unofficial premia because the

number of members is not easily expandable. Business was earlier transacted
on the trading floor within official working hours under the open bid system.
Today, all exchanges in India have introduced screen-based trading where the
members of the exchange transact the business (purchase and sale of securities)
through computer terminals.

1.6 Type Of Investments

You have a lot of options for where to put your money as an investor. It is critical to
carefully consider the various types of investments. Within each bucket, there are
numerous investment options.

22
Here are six types of investments to consider for long-term growth, along with
information about each. We won’t discuss cash equivalents, such as money markets,
certificates of deposit, or savings accounts, because those types of investment accounts
are more concerned with keeping your money safe than with growing it.

x Stocks x Bonds
x Mutual funds x Index funds x Exchange-
traded funds (ETFs) x Options
Stocks

A stock is a financial investment in a particular organization. When you buy a stock,

you are purchasing a share — a small portion of the organization’s earnings and assets.
Organizations sell shares of stock in their businesses to raise cash; investors can then
buy and sell those shares among themselves. Stocks can produce high returns, but they
also carry a higher level of risk than other investments. Organizations’ values can fall
or they can go out of business. Read our complete stock explanation.

How investors profit: Stock investors profit when the value of the stock they own rises
and they can sell it for a profit. Some stocks also pay dividends, which are regular
distributions of profits to shareholders.

Bonds

Bonds are loans made to organizations or governments. When you buy a bond, you are
giving the bond issuer permission to borrow your money and pay you back with interest.

Bonds are considered less risky than stocks, but they may provide lower returns. As
with any loan, the primary risk is that the issuer will default. Government bonds issued
by the United States are backed by the country’s “full faith and credit,” effectively
eliminating that risk. State and local government bonds are generally thought to be the
least risky option, followed by corporate bonds. In general, the lower the interest rate,
the less risky is the bond.

Investors anticipate regular income payments. Investors typically receive interest in

regular installments, typically once or twice a year ,and the total principal is paid off
when the bond matures.

23
Mutual funds

If picking and choosing individual bonds and stocks doesn’t appeal to you, you are not
alone. In fact, there is an investment specifically designed for people like you: the
mutual fund.

Mutual funds enable investors to buy a diverse range of investments in a single

transaction. These funds pool money from multiple investors and then hire a
professional manager to invest it in stocks, bonds, or other assets.

Mutual funds adhere to a specific strategy — for example, a fund may invest in a
specific type of stock or bond, such as international stocks or government bonds. Some
mutual funds hold both stocks and bonds. The mutual fund’s risk level is determined by
the investments it holds. Learn more about mutual funds and how they work.

How investors make money: When a mutual fund earns money, such as through stock
dividends or bond interest, a portion of it is distributed to investors. When the value of
the fund’s investments rises, the value of the fund rises as well, implying that you could
sell it for a profit. To invest in a mutual fund, you must pay an annual fee known as an
expense ratio. the investments within the fund. Learn more about mutual funds and how
they work.

ETFs are short for exchange-traded funds.

ETFs are index funds that track a benchmark index and attempt to replicate its
performance. They, like index funds, are less expensive than mutual funds because they
are not actively managed.

The major difference between index funds and ETFs is how ETFs are purchased. They
trade on an exchange like stocks, so you can buy and sell ETFs at any time, and their
prices fluctuate throughout the day. Mutual funds and index funds, on the other hand,
are priced once per trading day and remain the same regardless of when you buy or sell.
Bottom line: For many investors, this distinction is insignificant, but if you want more
control over the fund’s price, an ETF may be preferable. Here’s more information on
ETFs.

24
How investors make money: As with mutual funds and index funds, your hope as an
investor is that the fund’s value will rise and you will be able to sell it for a profit.
Investors may also receive dividends and interest from ETFs.

Options

An option is a contract to buy or sell a stock at a predetermined price and by a

predetermined date. Because the contract does not obligate you to buy or sell the stock,
options provide flexibility. As the name suggests, this is an option. The majority of
option contracts are for 100 shares of a stock.

When you purchase an option, you are purchasing the contract rather than the stock.
You can then buy or sell the stock at the agreed-upon price and time; sell the options
contract to another investor; or let the contract expire.

1.7 Investment Process

A lot of planning is required while investing your hard-earned money in securities.
Often investors lose money when they make investments without any planning. They
make hasty investment decision when the market and economy was at its peak based
on some recommendation. Many investors who invested before the stock market crash
are yet to recover their losses. This is a result of lack of planning and to an extent greed.
Both are not good for making a decent return on investment. A typical investment
decision undergoes a five-step procedure, which in turn forms the basis of the
investment process. These steps are:

1) Determine the investment objectives and policy

2) Undertake security analysis

3) Construct a portfolio

4) Review the portfolio

5) Evaluate the performance of the portfolio

You may note at the very outset that this five-step procedure is relevant not only for an
individual who is on the threshold of taking his own investment decisions but also for
individuals and institutions who have to aid and work out investment decisions for
others i.e., for their clients. The investment process is a key-process entailing the whole

25
body of security analysis and portfolio management. Let us, now, discuss the steps
involved in the investment process in detail:

1. Investment objectives and Policy

The investor will have to work out her/his investment objectives first and then evolve a
policy with the amount of investible wealth at her/his command. An investor might say
that his objective is to have ‘large money’. You will agree that this would be a wrong
way of stating the objective. You would recall that the pursuit of ‘large-money’ is not
possible without the risk of ‘large losses’.

The objective should be in clear and specific terms. It can be expressed in terms of
expected return or expected risk. Suppose, an investor can aim to earn 12% return
against the risk-free rate of 9%. It means the investor is willing to assume some amount
of risk while making investment. Alternatively, the investor can set her or his preference
on risk by stating that the risk of investment should be below market risk.

In specific terms, she or he can say that beta of the portfolio has to be 0.80. If the
investor defines one of the two parameters of investment (return or risk), it is possible
to find the other one because a definite relationship exists between the two in the
market. It may not be possible for you to define both return and risk because it may not
be achievable. For example, if you want to earn a return of 12% with zero risk when
government securities offer a return of 9%, it would not be possible to develop an
investment for you.

Thus, it is desirable to set one of the two parameters (risk or return) and find the other
one from the market. If necessary, an investor can revise the objective if sheik finds the
risk is too high for her/ him to bear a desired return. Though setting an investment
objective is good, many investors fail to do the same and blindly invest their money
without bothering the risk associated with such investments. Investments are bound to
fail if an investor ignores this point.

The next step in formulating the investment policy of an investor would be the
identification of categories of financial assets he/she would be interested in. It is
obvious that this in turn, would depend on the objectives, amount of wealth and the tax
status of the investor. For example, a tax-exempt investor with large investible wealth
like a pension/provident fund would invest in anything but tax-exempt securities unless

26
compelled by law to do so. Some investors may entirely avoid derivatives because of
high risk associated with such investments. Some investors may invest more in equities
to earn higher return but use derivatives to reduce additional risk. As in consumer
products, financial products also come With different colours and flavors and one has
to be highly knowledgeable before selecting appropriate securities.

2. Security Analysis

After defining the investment objective and broadly setting the proportion of wealth to
be invested under different categories, the next step is selecting individual securities
under each category. For instance, if an investor sets 50% of her/his wealth to be
invested in government securities, the next question is which of the government
securities that the investments should be made.

It should be noted that not all government securities are one and the same. A long-term
government bond is much riskier than short-term bonds. Similarly, investment in
equities requires identification of organizations stocks, in which the investment can be
made. Security analysis is often performed in two or three stages.

The first stage, called economic analysis, would be useful to set broad investment
objective. If the economy is expected to do well, investor can invest more in stocks. On
the other hand, if the economic slowdown is expected to continue, investor can invest
less in stocks and more in bonds. In stage two, investors typically examine the industries
and identify the industries, in which investment can be made.

There are several classifications of industry, which we will discuss in a separate unit.
Investments need not be made in any one specific industry because many of the stocks
may be overpriced in a growth industry. It is better to look for three to five industries
and it depends on individual’s choice. The issue is an analysis of broad trends of
industry and future outlook is essential to proceed further on security analysis.

As the last step, one has to look into the fundamentals of specific organizations and find
whether the stock is desirable for investment. At this stage, investors need to match the
risk-return objective she/he has set in the previous stage. Organization specific analysis
includes examination of historical financial information as well as future outlook. Using
historical performance and future outlook, specifically the future cash flows are
projected and discounted to present value. Through such analysis, analysts quantify the

27
intrinsic value of the stock and compare the same with current market price. If the
intrinsic value is greater than the current market price, the stock qualifies for
investment.

3. Portfolio Construction

In the previous stage, bonds and stocks, which fulfill certain conditions, are identified
for investments. Under portfolio construction stage, the investor has to allocate the
wealth to different stocks. A couple of principles guide such allocation of wealth.
Investors need to appreciate that the risk of portfolio comes down if the portfolio is
diversified. Diversification here doesn’t mean more than one stock but stocks whose
future performance is not highly correlated.

Further, too much diversification or too many stocks may also create problem in terms
of monitoring. For example, if the investor decides to invest 10% of the wealth in
software sector, it would be desirable to restrict the investment in two or three stocks
based on the amount of investment. On the other hand, if s/he invests in 20 software
stocks, the portfolio will become too large and create practical problem of monitoring.
While including stocks in the portfolio, the investor has to watch its impact on the
overall portfolio return and risk and also examine whether it is consistent with the initial
investment objective.

Portfolio construction is not done once for all. Since investors saving take place over a
period of time, portfolios are also constructed over a period of time. It is a continuous
exercise. Sometime, timing of investment may be critical. For instance, if an investor
saves ` 30,000 during the first quarter and the desired portfolio includes both bonds and
stocks, the issue before the investor is whether the amount has to be used for bonds or
stocks or both. It requires some further analysis at that point of time. However, over the
years, when the accumulated investments grow to certain level, subsequent yearly
investments as a proportion of total investments will become smaller and hence the
timing issue will become minor decision.

4. Portfolio Revision

Under portfolio construction, investor is matching the risk-return characteristics of

securities with the risk-return of investment objective. In two conditions, the securities,
in which investment was made earlier, require liquidation and investing the amount in

28
a new security. The risk or expected return of the security might have changed over a
period of time when the business environment changes. The stock might also become
less risky but offer lower return. That is, when the risk-return characteristics of
securities change, it will affect the desired risk-return characteristics of portfolio and
hence calls for a revision of portfolio of stocks.

Another reason for selling some of the securities in the portfolio and buying a new one
in its place is a change in investment objective. For instance, when you are young and
have less family commitments, then your investment objective may aim for higher
return even if it amounts to higher risk.

You may invest more of your savings in equity stocks and derivatives. When your
family grows, you might want to reduce the risk and change the investment objective.
Portfolio of securities has to be revised to reflect your new investment objective. There
is yet another reason for revision, which we discussed earlier. When the macro-
economic condition changes, you may want to shift part of your investment from equity
to debt or vice versa depending on the future economic outlook.

5. Portfolio Performance Evaluation

The value of your investment changes over a period of time and it reflects the current
market value of the securities in the portfolio. For instance, if you have made some
investment in A some 10 years back, when you first started investing, the value of A
today is several times more than its value some 10 years back. Few stocks could have
resulted in a loss and it would be difficult to construct a portfolio of stocks only with
winner stocks.
Portfolio return reflects the net impact of positive and negative returns of individual
securities in the portfolio. At the end of each period, you may like to compute the
portfolio return and risk and compare the same with your investment objective as well
as certain benchmark risk-return. The objective of this exercise is to evaluate the
efficiency in construction and management of portfolio.

1.8 Summary
Individuals save a part of their earnings to meet their future cash flow needs. Such
savings are often invested in securities since money has a time value. Investments
normally offer a positive return, which often is more than rate of inflation. Such a

29
positive return is an incentive for individuals to increase the level of savings and help
the country by creating new capital. Individuals before making investments need to
understand the basic principles of investments.

x Securities are of different types and the expected return from such securities differs
considerably. Government securities offer lowest return but they are also risk- free.
Equities offer maximum return but they are too risky. Risk and return of securities
go together.

x The starting point of investment process is clearly defining the investment objectives.
Investment objectives are expressed in terms of expected return or risk and period
of holding.

x Security analysis is performed to identify securities, which qualify for investments.

Following the principles of portfolio management, securities are combined to
achieve diversification. Portfolios are periodically revised and performance of
managing the portfolio is also periodically evaluated.

x In addition to knowing the basic principles of investments, an investor is also required

to know the operations of securities market. Different types of securities are traded
in the market and they are broadly classified into debt and equity instruments. They
are bought and sold through a set of intermediaries, which include brokers, stock
exchanges, etc. All stock market intermediaries are regulated by the SEBI to ensure
orderly functioning of the market.

1.9 Key Words

Financial Assets : Documentary evidence of financial claim of the
holder, say of shares on debentures, over the
issuer.
Financial intermediation : A function, which brings the savers and users of
funds together, usually performed by
specialized agencies and institutions like banks
and underwriters for art agreed/ stipulated
commission.

30
Investment : Commitment of funds for a period usually
exceeding one year in expectation of a required
rate of return.
Investment decision : The decision to acquire, hold, or dispose asset by
rational and risk-averse individuals/
organizations.
Marketable securities : Financial claims, which are tradable in organized
markets at the best prices.
Portfolio : A collection of two or more assets, generally
employed in the context of financial assets.
Portfolio construction : Building up a portfolio of financial assets with
consideration of selectivity, timing, and
diversification or raising a portfolio with
rational selection criteria, at the right time, and
in a way that the risk is reduced to the minimum
for a given level of expected return.
Portfolio revision : A review of an existing portfolio in the light of
changes in risk- return dimensions.
Portfolio evaluation : Assessing the performance of a portfolio on the
basis of some aptly developed norms or
yardsticks.
Real assets : Physical assets held to perform an activity with
an expected income/pay off profile.
Risk : The probability that the realized return would be
different from the anticipated return of an
investment.
Securities market : Organized and recognized trading centres, where
financial claims are bought and sold as per
established rules and procedures.
Zero-interest bonds : Creditorship securities on which a coupon rate is
not made explicit but the compensation is
provided through a discount on the purchase
price or a premium on redemption.

31
 CHAPTER 2 - RESEARCH METHODOLOGY

2.1 Introduction:
Research may be very broadly defined as a systematic gathering of data and information
and its analysis for the advancement of knowledge in any subject. The research attempts
to find answer intellectual and practical questions through the application of systematic
methods.

2.1 Objectives Of The Study:

1. To identify the investor behaviour selecting a fund.2. To know their long term
financial goals.3. To find out whether the young investors are looking for long term
growth or risk or return or liquidity.4. To identify the investor’s perception
about mutual fund
.
2.2 Scope Of Study
• Conceptual scope:
The study is limited to various investment avenues and mutual funds.
• Geographical scope:
The study is centered on investors residing in Vashi area Navi Mumbai,
region.

2.3 Limitation Of The Study

• Only Vashi, Navi Mumbai area was selected for study
• The study is an effort to find out the investment pattern of investors

2.4 Significance Of Study

The study is conducted to understand the investment patterns of the investors in various
financial instruments. The study has tried to find out different factors affecting the
investment decisions of the investors. It will be helpful to understand the investment
preferences of investors. To identify the investor behaviour selecting a fund and to also
know their long term financial goals.

32
2.5 Sample Design
a) Universe of study
- Residents of Vashi, Navi Mumbai
b) Sampling unit
- The population of the study is residents residing in and around Vashi, Navi Mumbai
c) Sample size
– 100 respondents
d) Sampling technique-
To study the relationship of 50 each respondent has been selected from the population
in this study consist of residence of Thane probability convenient sampling process has
been followed to select the respondents from the entire population
Gender Male Female Total Respondents 50 50 100

2.6 Data Collection Techniques And Tools

The data is collected in two forms. Primary data and secondary data. Primary data is
collected through the questionnaire method. Secondary data is collected through
internal and external sources in the form of reports, research papers, publications,
books, websites, etc. the data analysis tools utilize for interpretation of data is the
percentile method (ms-excel)

33
 CHAPTER 3: LITERATURE OF REVIEW

3.1 Literature Of Review

A literature review is a comprehensive summary of previous research on a topic. The
literature review surveys scholarly articles, books, and other sources relevant to
a particular area of research. The review should enumerate, describe, summarize,objec
tively evaluate and clarify this previous research. It should give a
theoretical base for the research and help you (the author) determine the nature of you
r research. The literature review acknowledges the work of previous researchers, and in
so doing, assures the reader that your work has been well-conceived.

When we examined relevant literature, factors influencing individual investors’ attitude

were classified into two groups, namely social and economic factors, in
general. But recent literature put emphasis on social factors in general and
behavioural factors (psychological biases and personality traits) in particular that affect
investors’ decisions, as the fluctuations in financial markets could not be explained with
the principal doctrines of finance literature. Psychological biases and personality
traits affecting investment behaviour are over significance, risk tolerance, self-
monitoring and social influence (Kourtidis et al., 2011).

Nagy and Obenberger (1994) conducted a survey on determining the underlying

criteria that affect decisions of individual equity investors with substantial holdings in
fortune 500 firms. According to empirical evidence, wealth-maximization criteria were
found significant among respondents while the effect of recommendations of
brokerage houses, individual stock brokers, family members and co-workers were
identified as insignificant.

Kiran and Rao (2005) examined whether demographic and psychographic variables
were effective on risk-bearing capacity of Indian investors by conducting a sampling
survey. By analyzing the collected data through multinomial logistic regression and
factor analysis (FA) of SPSS, they verified a strong relationship between risk taking
attitude and demographic and psychographic variables.

Goodfellow et al. (2009) investigated institutional and individual investors’ trading

behaviour by testing for the presence of herding on the Polish stock market
from July 1996 to November 2000. According to empirical evidence, contrary

34
to institutional investors, individual investors exhibited herding during market
downswings and to a lesser extent also in market upswings which implied that
individual investment decisions were prone to sentiment during market stress,
while they mostly trusted their beliefs and information when stock prices rose.

Bennet et al. (2011) sought to identify various factors that influence retail investors’
attitude towards investing in equity stock markets. They applied a structured
questionnaire to retail investors in Tamil Nadu, India. Collected data were analyzed
through descriptive statistics and FA. According to the test results, out of the total 26
variables, it was found out that five factors (investors’ tolerance for risk, strength of the
Indian economy, media focus on the stock market, political stability and government
policy towards business) had a very high influence over retail investors’ attitude
towards investing in equity stocks.

Shanmughama and Ramyab (2012) tried to explain underlying factors that affect
individual investors’ behaviour in context of the theory of reasoned action (Fishbein
and Ajzen, 1975) personal and financial needs. The rest of the investors who
took part in the survey were primarily influenced by information related to
recommendation of friends/peer group or broker advice (11%), information related
to firm image of the company (4%) and natural or general information of
the company (4%) relatively.

In his study, Obamuyi (2013) tried to reveal the socio-economic factors

influencing investment decisions of investors in the Nigerian capital market
through a modified questionnaire developed by Al-Tamimi (2005). By employing
independent t-test, analysis of variance and post-hoc tests, past performance of
the company’s stock, expected stock split/capital increases/ bonus, dividend policy,
expected corporate earnings and get-rich-quick were found to be the most influential
factors on investment decisions of investors in Nigeria.

When taking investment decisions, non-economic factors such as religions, rumors,

loyalty to the company’s products/services, and opinions of members of the family were
found to be insignificant among investors. Lodhi (2014) examined the impact of
financial literacy, high experience, use of accounting information, importance of
35
analyzing financial statements and age on the investment decision of any individual by
applying a survey in Karachi, Pakistan.

By using SPSS, correlation analysis was performed in order to determine the relation
between the aforementioned variables. According to empirical results, financial
literacy and accounting information were considered to be significant in lowering
information asymmetry and allowing investors to invest in risky instruments.
Additionally it was verified that investors’ preference for risky investments
decreases, as age and experience increase.

Geetha and Vimala (2014) investigated the effect of demographic variables on the
investment decisions by performing a sample survey method in Chennai, India.
According to analysis results, from the investors’ point of view, changes in
demographic factors such as age, income, education, and occupation had an
influence in the investment avenue preference.

36
 CHAPTER 4: DATA ANALYSIS, INTERPETATION AND
PRESENTATION

4.1 DATA ANALYSIS

1. Primary Investment Goal:

S.R No Primary Investment Goal Percentage

1. Capital appreciation 10%
2. Income generation 15%
3. Wealth preservation 60%
4. Retirement planning 10%
5. Other 5%

50 responses

5% 10%
10%

15%

60%

Capital appreciation Income generation Wealth preservation Retirement planning Other

INTERPRETATION:

From the above chart, it reveals that, Wealth preservation 60%, 15% of the respondents
Primary Investment Goal is the Income generation, 10% of the respondents Primary
Investment Goal is Capital appreciation, 10% of the respondents Retirement planning
and 5% of the respondents Other Say of Primary Investment Goal.

37
 2. Risk Tolerance:

S.R No Risk Tolerance Percentage

1. Aggressive 60
2. Moderate 30
3. Risk-averse 8
4. Conservative 2

50 responses

8% 2%

30%

60%

Conservative Moderate Aggressive Risk-averse

INTERPRETATION:

From the above chart, it reveals that, most of respondents are Aggressive 60% to Risk
Tolerance, Moderate 30%, 8% Risk-averse, 2% of the respondents Conservative of Risk
Tolerance.

38
 3. Investment Time Horizon:

S.R No Investment Time Horizon Percentage

1. Short-term (1-3 years) 80
2. Medium-term (3-5 years) 12
3. Long-term (5+ years) 8

50 responses

8%
12%
Short-term (1-3 years)
Medium-term (3-5 years)
Long-term (5+ years)

80%

INTERPRETATION:

From the above chart, it reveals that, 80% are respondents say Short-term (1-3 years)
Investment Time Horizon, 12% of the respondents Medium-term (3-5 years), 7% of the
respondents Long-term (5+ years) are Investment Time Horizon.

39
 4. Types of Investments Considered or Held:

S.R No Types of Investments Considered or Percentage

Held
1. Mutual Funds 60.7
2. Real Estate 18.2
3. Alternative Investments 14.2
4. Bonds 3.4
5. Commodities 2
6. Stocks 1.5

50 responses

3%

3%
14%
2%

Stocks
Bonds
Mutual Funds
18%
Real Estate
Commodities
Alternative Investments
61%

INTERPRETATION:

From the above chart, it reveals that, it appears that the majority of respondents, 61%,
prefer mutual funds as their investment choice. Real estate follows as the second most
popular option, with 18% of respondents choosing it. Alternative investments are
selected by 14% of respondents. Bonds are chosen by 3.4% of respondents,
commodities by 2%, and stocks by 1.5%.

40
 5. Information Gathering Methods:

S.R No Information Gathering Methods Percentage

1. Brokerage analysis 71.6
2. Personal analysis 12.2
3. Financial advisor recommendations 10.5
4. Financial news 3.5
5. Other 2.2

50 responses

2%

3%
12%
Financial news

Brokerage analysis
11%

Financial advisor
recommendations
Personal analysis

Other
72%

INTERPRETATION:

The data indicates that the majority of individuals, at 71.6%, rely on brokerage analysis
for financial guidance, followed by 12.2% who prefer personal analysis. Approximately
10.5% seek recommendations from financial advisors, while a smaller percentage,
3.5%, turn to financial news sources. The remaining 2.2% utilize other unspecified
methods. This breakdown suggests a strong inclination towards professional brokerage
services for financial insights, with a significant minority also valuing personal analysis
and advice from financial advisors, while financial news plays a comparatively smaller
role in information gathering.

41
 6. Factors Considered Most Important in Evaluation:
S.R No Factors Considered Most Important in Percentage
Evaluation
1. Industry outlook 30
2. Management quality 30
3. Financial performance 20
4. Market trends 10
5. Competitive positioning 7
6. Valuation metrics 3

50 responses

3%
7%
20%
Financial performance
Market trends
Industry outlook
30% 10%
Management quality
Competitive positioning
Valuation metrics

30%

INTERPRETATION:

The evaluation of factors in this context suggests that both industry outlook and
management quality hold the highest significance, each accounting for 30% of the
evaluation criteria. Financial performance follows closely behind at 20%, indicating its
considerable importance in decision-making. Market trends and competitive
positioning hold moderate significance, with 10% and 7% respectively, while valuation
metrics are considered the least critical at 3%. This breakdown highlights the emphasis
placed on understanding the broader industry context and the capabilities of
management when evaluating investment opportunities, with financial performance
also playing a substantial role in decision-making.

42
 7. Assessment of Company Financial Health:
S.R No Assessment of Company Financial Health Percentage
1. Evaluating financial ratios 22
2. Profitability analysis 21
3. Assessing cash flow 20
4. Debt levels evaluation 16
5. Analyzing financial statements 12
6. Growth prospects assessment 9

50 responses

9% 12%

Analyzing financial statements

21% Evaluating financial ratios

22% Assessing cash flow

Debt levels evaluation
Profitability analysis
Growth prospects assessment
16%

20%

INTERPRETATION:

The assessment of company financial health relies on a multifaceted approach, with

evaluating financial ratios (22%) and profitability analysis (21%) being the most
significant factors. Assessing cash flow (20%) and evaluating debt levels (16%) closely
follow, indicating the importance of liquidity and solvency considerations. Analyzing
financial statements (12%) provides additional insights, while growth prospects
assessment (9%) rounds out the evaluation, emphasizing the importance of future
sustainability and expansion potential.

43
 8. Portfolio Review Frequency:

S.R No Portfolio Review Frequency Percentage

1) Monthly 70
2) Annually 14
3) Quarterly 11
4) Ad-hoc basis 5

50 responses

5%

14%

Monthly
Quarterly
11%
Annually
Ad-hoc basis

70%

INTERPRETATION:

Portfolio review frequency varies, with the majority of individuals opting for monthly
reviews (70%), indicating a preference for regular monitoring and adjustment of
investments. Annually, only 14% of individuals conduct reviews, suggesting a less
frequent but still significant assessment of portfolio performance. Quarterly reviews are
conducted by 11% of individuals, reflecting a preference for more frequent evaluations
than annual reviews but less frequent than monthly ones. A small portion, 5%, choose
to review their portfolios on an ad-hoc basis.

44
 9. Tools or Software Used for Data Analysis:
S.R No Tools or Software Used for Data Analysis Percentage
1. Financial platforms 70
2. Investment analysis software 14
3. Spreadsheet tools 2
4. Custom-built models 5
5. Other 9

50 responses

9%

2% 5%

Financial platforms
Investment analysis software
14%
Spreadsheet tools
Custom-built models
Other
70%

INTERPRETATION:

The data reveals that a majority of individuals utilize financial platforms (70%) for data
analysis, indicating a reliance on specialized tools designed for financial analysis and
management. Investment analysis software is also commonly used, albeit to a lesser
extent, with 14% of individuals relying on such tools for their analytical needs. A small
percentage (2%) utilize spreadsheet tools, suggesting a more manual or basic approach
to data analysis. Custom-built models are used by 5% of individuals, indicating a
preference for tailored solutions to meet specific analytical requirements. The
remaining 9% of individuals employ other tools not specified, highlighting the diversity
in approaches to data analysis within the realm of finance.

45
CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS

5.1 FINDING
➢ From the above chart, it reveals that, Wealth preservation 60%, 15% of the
respondents Primary Investment Goal is the Income generation, 10% of the
respondents Primary Investment Goal is Capital appreciation, 10% of the
respondents Retirement planning and 5% of the respondents Other Say of
Primary Investment Goal.

➢ From the above chart, it reveals that, most of respondents are Aggressive 60%
to Risk Tolerance, Moderate 30%, 8% Risk-averse, 2% of the respondents
Conservative of Risk Tolerance.

➢ From the above chart, it reveals that, 80% are respondents say Short-term (1-3
years) Investment Time Horizon, 12% of the respondents Medium-term (3-5
years), 7% of the respondents Long-term (5+ years) are Investment Time
Horizon.

➢ From the above chart, it reveals that, it appears that the majority of respondents,
61%, prefer mutual funds as their investment choice. Real estate follows as the
second most popular option, with 18% of respondents choosing it. Alternative
investments are selected by 14% of respondents. Bonds are chosen by 3.4% of
respondents, commodities by 2%, and stocks by 1.5%.

➢ The data indicates that the majority of individuals, at 71.6%, rely on brokerage
analysis for financial guidance, followed by 12.2% who prefer personal
analysis. Approximately 10.5% seek recommendations from financial advisors,
while a smaller percentage, 3.5%, turn to financial news sources. The remaining
2.2% utilize other unspecified methods. This breakdown suggests a strong
inclination towards professional brokerage services for financial insights, with
a significant minority also valuing personal analysis and advice from financial
advisors, while financial news plays a comparatively smaller role in information
gathering.

46
➢ The evaluation of factors in this context suggests that both industry outlook and
management quality hold the highest significance, each accounting for 30% of
the evaluation criteria. Financial performance follows closely behind at 20%,
indicating its considerable importance in decision-making. Market trends and
competitive positioning hold moderate significance, with 10% and 7%
respectively, while valuation metrics are considered the least critical at 3%. This
breakdown highlights the emphasis placed on understanding the broader
industry context and the capabilities of management when evaluating
investment opportunities, with financial performance also playing a substantial
role in decision-making.

➢ The assessment of company financial health relies on a multifaceted approach,

with evaluating financial ratios (22%) and profitability analysis (21%) being the
most significant factors. Assessing cash flow (20%) and evaluating debt levels
(16%) closely follow, indicating the importance of liquidity and solvency
considerations. Analyzing financial statements (12%) provides additional
insights, while growth prospects assessment (9%) rounds out the evaluation,
emphasizing the importance of future sustainability and expansion potential.

➢ Portfolio review frequency varies, with the majority of individuals opting for
monthly reviews (70%), indicating a preference for regular monitoring and
adjustment of investments. Annually, only 14% of individuals conduct reviews,
suggesting a less frequent but still significant assessment of portfolio
performance. Quarterly reviews are conducted by 11% of individuals, reflecting
a preference for more frequent evaluations than annual reviews but less frequent
than monthly ones. A small portion, 5%, choose to review their portfolios on an
ad-hoc basis.

➢ The data reveals that a majority of individuals utilize financial platforms (70%)
for data analysis, indicating a reliance on specialized tools designed for financial
analysis and management. Investment analysis software is also commonly used,

47
albeit to a lesser extent, with 14% of individuals relying on such tools for their
analytical needs. A small percentage (2%) utilize spreadsheet tools, suggesting
a more manual or basic approach to data analysis. Custom-built models are used
by 5% of individuals, indicating a preference for tailored solutions to meet
specific analytical requirements. The remaining 9% of individuals employ other
tools not specified, highlighting the diversity in approaches to data analysis
within the realm of finance.

48
5.2 CONCLUSIONS

1. The investment landscape is dynamic and multifaceted, requiring investors to

navigate through a myriad of options and considerations. In light of this
complexity, the conclusions drawn from the data shed light on key trends and
preferences shaping investment decisions.

2. One of the most prominent observations is the preference for active portfolio
management, as evidenced by the significant proportion of investors conducting
monthly portfolio reviews. This suggests a proactive approach to monitoring
investments and adapting strategies to capitalize on emerging opportunities or
mitigate risks.

3. Furthermore, the diversity of information gathering methods underscores the

importance of comprehensive research in decision-making. Investors rely on a
variety of sources, including brokerage analysis, personal analysis, financial
advisor recommendations, and financial news, to gather insights and inform
their investment strategies.

4. Within the realm of information gathering, there's a notable emphasis on

fundamental analysis, with factors such as industry outlook, management
quality, and financial performance being key considerations. This reflects a
focus on understanding the underlying dynamics of companies and industries to
identify promising investment opportunities.

5. The prevalence of financial platforms and investment analysis software

highlights the role of technology in facilitating data-driven decision-making.
These tools provide investors with sophisticated analytical capabilities,
enabling them to delve into market trends, assess financial metrics, and evaluate
investment options more effectively.

6. Despite the reliance on technology, the human element remains crucial, as

indicated by the continued importance of financial advisors in providing

49
 personalized recommendations and guidance. Investors value expertise and
personalized advice, especially when navigating complex financial landscapes.

7. It's also noteworthy that while monthly portfolio reviews are common, a
significant proportion of investors opt for less frequent evaluations, such as
annual or quarterly reviews. This suggests a diversity of approaches to portfolio
management, with some investors prioritizing regular monitoring while others
prefer a more hands-off approach.

8. The data underscores the importance of flexibility and adaptability in

investment strategies. Investors must remain agile in response to changing
market conditions, economic trends, and geopolitical events to optimize
portfolio performance and mitigate downside risks.

9. Lastly, the conclusions drawn from the data emphasize the importance of
continuous learning and staying informed. The investment landscape is
constantly evolving, and investors must stay abreast of developments, refine
their analytical skills, and adapt their strategies accordingly to achieve long-
term financial success.

10. In summary, the conclusions drawn from the data highlight the dynamic nature
of investment decision-making, characterized by active portfolio management,
reliance on diverse information sources, emphasis on fundamental analysis, and
leveraging of technology and expert advice. By embracing these insights and
principles, investors can navigate the complexities of the investment landscape
with greater confidence and effectiveness.

50
5.3 RECOMMENDATIONS

1. Utilize Diverse Information Sources: Given the wide array of information

gathering methods used, investors should leverage a variety of sources such as
brokerage analysis, personal analysis, financial advisor recommendations, and
financial news. Diversifying information sources can provide a more
comprehensive understanding of market conditions and potential investment
opportunities.

2. Prioritize Industry Outlook and Management Quality: Focus on evaluating

industry outlook and management quality when assessing investment options.
Thorough research into industry trends and the competence of company
leadership can help identify companies with strong growth potential and
resilience in changing market conditions.

3. Regular Portfolio Monitoring: Emphasize regular portfolio reviews, ideally

on a monthly basis, to stay informed about portfolio performance and make
timely adjustments as needed. Monitoring key financial metrics, assessing cash
flow, profitability, and debt levels can help ensure that investment portfolios
remain aligned with financial goals and risk tolerance levels.

4. Leverage Specialized Tools: Consider using specialized tools and software for
data analysis, such as financial platforms and investment analysis software.
These tools can streamline the investment decision-making process, provide in-
depth analysis, and facilitate informed decision-making.

5. Seek Professional Advice When Necessary: While personal analysis is

valuable, don't hesitate to seek advice from financial advisors, especially for
complex investment decisions or when additional expertise is required.
Financial advisors can provide personalized recommendations tailored to
individual financial goals and circumstances.

51
 BIBLIOGRAPHY

• "The Intelligent Investor" by Benjamin Graham: This classic book provides

timeless advice on investing, emphasizing the importance of value investing and
a disciplined approach to decision-making.
• "A Random Walk Down Wall Street" by Burton Malkiel: Malkiel explores
various investment strategies, including fundamental analysis, technical
analysis, and behavioral finance, offering insights into the efficiency of financial
markets and the implications for investment decision-making.
• "Thinking, Fast and Slow" by Daniel Kahneman: Kahneman, a Nobel laureate
in economics, delves into the two systems of thinking that influence decision-
making—intuitive, fast thinking, and deliberative, slow thinking.
Understanding these systems can help investors recognize biases and make
more rational investment decisions.
• "Capital Ideas: The Improbable Origins of Modern Wall Street" by Peter L.
Bernstein: Bernstein traces the evolution of investment theories and practices,
from the early days of portfolio theory to the development of efficient market
hypothesis and behavioral finance. It provides a historical perspective on
investment decision-making.
• "Common Stocks and Uncommon Profits" by Philip Fisher: Fisher focuses on
qualitative aspects of investment analysis, such as understanding the quality of
management, competitive advantages, and growth prospects of companies. This
book emphasizes the importance of thorough research and informed decision-
making.
• "The Warren Buffett Way" by Robert G. Hagstrom: This book explores the
investment philosophy and decision-making strategies of Warren Buffett, one
of the most successful investors of all time. It highlights the importance of
patience, discipline, and a long-term perspective in investment decision-
making.
• "Predictably Irrational: The Hidden Forces That Shape Our Decisions" by Dan
Ariely: Ariely explores the irrationalities that affect human decision-making,
including those related to investing. Understanding these biases can help
investors make more rational and informed decisions.

52
• "Fooled by Randomness" by Nassim Nicholas Taleb: Taleb discusses the role
of luck and randomness in investment outcomes, emphasizing the importance
of risk management and recognizing the limitations of forecasting. It challenges
conventional wisdom about investment decision-making.
• "The Little Book That Still Beats the Market" by Joel Greenblatt: Greenblatt
presents a simple yet effective investment strategy based on his "Magic
Formula" for selecting stocks. This book provides insights into quantitative
investment decision-making and the importance of sticking to a disciplined
approach.
• "Mastering the Market Cycle: Getting the Odds on Your Side" by Howard
Marks: Marks explores the cyclical nature of markets and the implications for
investment decision-making. He emphasizes the importance of understanding
market cycles, risk management, and contrarian thinking.

53
 REFERENCE

➢ Chandra, P. (2018). Investment Analysis & Portfolio Management (5e). Tata

McGraw Hill. D Ambrosio, Charles A.(1976). Principles of Modern
Investments, Chicago : SRA, Inc.
➢ Fischer, D. E., Jordan, R. J., & Pradhan, A. K. (2018). Security Analysis
Portfolio Management (7th ed.). Pearson Education.
➢ Frank K. (1979) Investment Analysis & Portfolio Management, Hinsdale,
Illinois : The Dryden Press.
➢ Fuller, Russell J., and Farrell, James L. (1987). Modern Investments and
Security Analysis, New York : McGraw-Hill Book Co. Reilly,
➢ IIT Kharagpur [nptelhrd]. (2012). Mod-01 Lec-01 Introduction to Investment
Management [Video]. YouTube.
https://www.youtube.com/watch?v=ope5Y3Mrsaw
➢ Jones, Charles P., Futtle, Donald L., and Heaton, Cherill P. (1977). Essentials of
Modem Investments, New York Ronald Press.
➢ Kevin S.( 2000)., Portfolio Management, Prentice-Hall of lndia Pvt. Ltd.,
NewDelhi.
➢ Pandian Punithavathy.( 2001). Security Analysis and Portfolio Management,
Vikas Publishing House Pvt. Ltd., New Delhi.
➢ Reilly, F. K., Brown, K. C., Gunasingham, B., Lamba, A., &Elston, F. (2019).
Investment Analysis & Portfolio Management. Cengage AU.
➢ Rustagi, R. (2021). Investment Analysis & Portfolio Management. Sultan Chand
& Sons.
➢ Tripathi, V. (2023). Taxmann’s Fundamentals of Investments. Taxmann
Publications Private Limited.

54
 ANNEXURE

➢ Primary Investment Goal

• Capital appreciation
• Income generation
• Wealth preservation
• Retirement planning
• Other

➢ Risk Tolerance
• Aggressive
• Moderate
• Risk-averse
• Conservative

➢ Investment Time Horizon

• Short-term (1-3 years)
• Medium-term (3-5 years)
• Long-term (5+ years)

➢ Types of Investments Considered or Held

• Mutual Funds
• Real Estate
• Alternative Investments
• Bonds
• Commodities
• Stocks

➢ Information Gathering Methods

• Brokerage analysis
• Personal analysis
• Financial advisor recommendations

55
 • Financial news
• Other

➢ Factors Considered Most Important in Evaluation

• Industry outlook
• Management quality
• Financial performance
• Market trends
• Competitive positioning
• Valuation metrics

➢ Assessment of Company Financial Health

• Evaluating financial ratios
• Profitability analysis
• Assessing cash flow
• Debt levels evaluation
• Analyzing financial statements
• Growth prospects assessment

➢ Portfolio Review Frequency

• Monthly
• Annually
• Quarterly
• Ad-hoc basis

➢ Tools or Software Used for Data Analysis

• Financial platforms
• Investment analysis software
• Spreadsheet tools
• Custom-built models
• Other

56