Investment Opportunities And Salaried People (1).docx

INTRODUCTION TO INVESTMENT In the present day financial markets. Investing money has become a very complex task. Most of the investors are unaware of the fact that investing is both an art and a science. Majority of people irrespective of their education, status, occupation etc, are fascinated by investments. Investment is an economic activity in which every person is engaged in one form or another. Even though the basic objective of making investment is earning profits, not everybody who makes investment benefits from it. Those who incur losses have not managed their funds scientifically and have just followed others blindly. All investments are risky to some degree or other as risk and return go together. The art of investment is to see that the return is maximized with the minimum degree of risk. Investment is the process of, ‘sacrificing something now for the prospect of gaining something later’. Our definition implies that there are three dimensions to an investment- time which involves creation of assets or exchange of assets with profit motive. it is the employment of funds with the purpose of earning additional income or growth in value. The person making investment has to part with his funds. the funds may be converted into monetary assets or a claim on future money for a return. This return is an award for abstaining from present consumption for parting with the money or liquidity and for taking a risk. The risk may be about the return on investment, time of waiting, cost of getting back funds, safety of funds, and variability of the return. “sacrifice of certain present value for some uncertain future value.” -sharpe/Alexander The developing countries like India face the enormous task of finding sufficient capital in their development efforts. Most of these countries find it difficult to get out of the vicious circle of poverty of low income, low saving, low investment, low employment etc. With high capital output ratio, India needs very high rates of investments to make a leap forward in her efforts of attaining high levels of growth. Since the beginning of planning, the emphasis was on investment as the primary instruments of economic growth and increase in national income. In order to have production as per target, investment was considered the crucial determinant and capital formation had to be supported by appropriate volume of saving. 1

INVESTMENT OPTIONS AVAILABLE There are a large number of investment instruments available today. To make our lives easier we would classify or group them. In India, numbers of investment avenues are available for the investors. Some of them are marketable and liquid while others are non marketable and some of them also highly risky while others are almost risk less. The people has to choose Proper Avenue among them, depending upon his specific need, risk preference, and return expected Investment avenues can broadly categories under the following heads. 1. Shares 2. FI Bonds 3. Corporate Debenture 4. Company Fixed 5. Bank Fixed 6. PPF 7. Life Insurance 8. Post Office-NSC 9. Gold/Sliver 10. Real Estate 11. Mutual Fund 12. Others

1.Shares: A share is the interest of a shareholder in a definite portion of the capital. It expresses a proprietary relationship between the company and the shareholder. A shareholder is the proportionate owner of the company. A share is the interest of a shareholder in a definite portion of the capital. It expresses a proprietary relationship between the company and the shareholder. A shareholder is the proportionate owner of the company but he does not own the company’s assets which belong to the company as a separate legal entity. Section 2(46) defines a share as, “A share in the share capital of a company and includes stock

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Except where a distinction between stock and shares is expressed or implied”. An exhaustive definition of share has been given by Farwell J. in Borland’s trustee v. steel bros. in the following words:

“A share is the interest of a shareholder in the company, measured by a sum of money, for the purpose of liability in the first place, and of interest the second, but also consisting of a series of mutual covenants entered into by all the shareholder inter se in accordance with the companies act”. Thus a share i) Measures the right of a shareholder to receive a certain proportion of the profits of the company while it is a going concern and to contribute to the assets of the company when it is being wound up; and ii) Forms the basis of the mutual covenants contained in the articles binding the shareholders inter se. A share is a personal estate capable of being transferred in the manner laid down in the articles of association. It is a movable property which can either be mortgaged or pledged. Share is included in the definition of ‘good’ under the provisions of the sale of goods act, 1930. Every share issued by a company under its common seal specified the shares held by any member. The share certificate is the prima facie evidence of the title of the member to such shares. The share certificate is not a negotiable instrument. Types of shares: According to section 86 of the companies act, a company can issue only two types of shares: (a) Preference shares; and (b) Equity shares. 

Equity shares:

All shares which are not preference shares are equity shares. Equity shareholders have the residual rights of the company. They may get higher dividend than preference shareholders if the company is prosperous or get nothing if the business of the company flops. In the winding up, the equity shares are entitled to the entire surplus assets remaining after the payment of the liabilities and the capital of the company; unless the articles confer right on the preference shares a right to participate in the distribution of surplus assets. 

Preference shares:

A preference share must satisfy the following two conditions: I) It shall carry a preferential right as to the payment of dividend at a fixed rate; and 46

II) In the event of winding up, there must be a preferential right to the repayment of the paid up capital. These are two dominant characteristics of preference shares. So preference share may or may not carry such other right as: (a) A preferential right to any arrears of dividend; (b) A right to share in surplus profits by way of additional dividend; (c) A right to be paid a fixed premium specified in the memorandum; and (d) A right to share in surplus assets in the event of a winding up, after all kinds of capital have been repaid. 1. Cumulative and non-cumulative preference shares: With regard to the payment of dividend, preference shares may be cumulative or noncumulative. In the case of cumulative preference shares, if the profits of the company in any years are not sufficient to pay the fixed dividend, on the preference shares the deficiency must be made up out of the profits of subsequent years. The accumulated arrears of dividend must be paid before anything is paid out of the profits to the holders of any other class of shares. In the case of non-cumulative preference shares, the dividend is only payable out of the net profits of each year. If there are no profits in any year, the arrears of dividend cannot be claimed in the subsequent years. Preference shares are presumed to be cumulative unless expressly described as non-cumulative. Any ambiguous language in the articles will not be enough to make them noncumulative. 2. Participating and Non-participating Preference Share: Participating preference shares are those shares which are entitled, in addition to preference dividend at a fixed rate, to participate in the balance of profits with the equity shareholders after they get a fixed rate of dividend on their shares. The participating preference shares may also have the right to share in the surplus assets of the company on its winding up. Such a right must be expressly provided in the memorandum or the articles of association of the company. Non-participating preference shares are entitled only to a fixed rate of dividend and do not share in the surplus profits. The preference shares are presumed to be non-participating, unless expressly provided in the memorandum or the articles or the terms of issue. A mere fact that the articles of a company confer on the preference shareholders a right to participate with the equity

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shareholders in the surplus profits does not necessarily mean that the preference shareholders are entitled to participate in the surplus assets also. 3. Redeemable preference shares: According to section 80, a company limited by shares, if so authorized by its articles, may issue redeemable preference shares. Such shares may be redeemed either after a fixed period or earlier at the option of the company. In the case of irredeemable shares, the capital is to be returned on the winding up of the company. The redeemable preference shares can be redeemed, only subject to the following conditions: i) Such shares must be fully paid ii) Such shares shall be redeemed out of distributable profits or out of the proceeds of a fresh issue made for the purposes of redemption. iii) Any premium to be paid on redemption of such shares must be paid out of profits or out of the share premium account. iv) Where shares are so redeemed out of profits, a sum equal to the nominal value of the shares redeemed must be transferred to the ‘capital redemption reserve account’. This amount shall be treated as capital of the company and the provisions as regards reduction of capital shall apply. The amount credited to the account cannot be paid out to the shareholders as dividend. But it can be used to pay up unissued shares to be issued as fully paid bonus shares. Redemption of preference shares is not to be taken as reduction of the company’s authorized share capital. Shares already issued cannot be converted into redeemable preference shares. Where a company fails to comply with these provisions, the company and every officer of the company who is in default shall be punishable with fine which may extend to Rs. 1,000. Redemption of redeemable preference shares shall be notified to the registrar within one month of redemption. Where redeemable preference shares have been issued, the balance sheet must contain a statement specifying what part of the capital consists of such shares and the earliest date on which the company has power to redeem the shares.

2. Debt: Debt is a route that most people will know and have the necessary experience of.There is a widerange of debt instruments that are present from bank fixed deposits tocompany fixed

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deposits. Debt is simple as the investor ill earn at a fixed percentage of theinvestment, which will then be returned to the investor at the time of maturity orredemption of the investment.

3. Mutual Funds: This is an emerging area for investment and there is a large variety of schemes inthe market to suit the requirements of a large number of people. In finance, in general,you can think of equity as ownership in any asset after all debts associated with that assetare paid off. For example, a car or house with no outstanding debt is considered theowner's equity because he or she can readily sell the item for cash. Stocks are equitybecause they represent ownership in a company. Advantages to invest in mutual funds: No large investment compulsory: Mutual funds allow you to make an investment, even if you have a very small amount to invest. This advantage makes it more attractive among investors.

Investing in a variety of instruments: Imagine ordering a thaali at your favorite restaurant where you can eat a variety of different foods in one affordable package! Mutual funds also work in a similar way. Mutual Funds invest in a wide range of securities. This diversification reduces the risk by limiting the effect of a possible decline in the value of any one security. You achieve this diversification through a Mutual Fund with far less money than you can do on your own.

Convenience: You can invest directly with the fund house or through your financial advisor. You get regular information on the value of your investments and portfolios of the schemes.

Professional Management: Mutual fund investments are managed by experienced and skilled professionals, who with the help of an investment research team, analyzes the performance & prospects of companies and selects suitable investments to achieve the objective of the scheme.

Easy access to your money In open-ended mutual funds, you can redeem all or part of your units any time you wish. Some schemes do have a lock-in period where an investor cannot return the units until the completion of such a lock-in period. With close-ended schemes, you can sell your units on a stock exchange at the prevailing market price or avail of the facility of repurchase through Mutual Funds at NAV related prices which some close-ended and interval schemes offer you on maturity of scheme or periodically, as the case maybe.

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4. Corporate Debenture: Corporate debentures are normally backed by the reputation and generalcreditworthiness of the issuing company. It is a type of debt instrument that is notcovered by the security of physical assets or collateral. Debentures are a method ofraising credit for the company and although the money thus raised is considered a part ofthe company's capital structure, it is not part of the share capital.

Security: Secured/Mortgage Debentures: Debentures secured against assets of the company .i.e. if the company is winding up, assets will be sold and debenture holders will be paid back. The charge/mortgage may be fixed or a floating charge. If it is fixed, charge is on a specific asset say plant, machinery etc. If it is floating charge, it means it is on general assets of the company. Which assets are charged: The ones available with the company presently and also assets in future Mortgage deed: Includes nature/value of the security, date of interest payment, and rate of interest, repayment terms, and rights of the debenture holders if the company defaults. In the event of default of company to pay interest or principal installment, they can recover their money via the assets mortgaged. Unsecured/Naked Debentures: Debentures not secured against assets of the company .i.e. if the company is winding up, assets will be not be sold in order to pay the debenture holders. In other words, no charge is created on the assets of the company which means that there is no security of interest and principal payment. The creditworthiness and soundness of the company serves as a security. Tenure: 50

Redeemable Debentures: Debentures which have to be repaid within a certain specified period. Eg: 5% 2 years Rs. 1000 debenture means redeemable period is 2 years(5%:interest/coupon payment). After redemption, they can be reissued. Irredeemable/Perpetual Debentures: These can be paid back at any time during the life of the company .i.e. there is no specified period for redemption. Hence they are also called Perpetual Debentures. Nonetheless if the company has to wind up, then they have to repay the debenture holders. Registration: Registered Debentures: As the name suggested, these are debentures that are registered with the company. It records all details of debenture holdings such as name, address, particulars of holding etc. Interest shall be paid only to the registered holder (treated as a non-negotiable instrument). They can be transferred by a transfer deed. Bearer Debentures: These can be transferred by mere delivery. Company does not hold records for the debenture holder. Interest will be paid to the one who displays the interest coupon attached to the debenture. Coupon: Zero Coupon Debentures: Does not have a specified interest rate, thereby to compensate, they are issued at a substantial discount. Interest: Difference in face value and issue price. Specific Coupon rate Debentures: Debentures are normally issued with an interest rate which is nothing but the coupon rate. It can be fixed or floating. Floating is associated with the bank rates. Convertibility: Convertible Debentures (Fully/ Partly convertible): Debentures which can be converted to either equity shares or preference shares by the company or debenture holders at a specified rate after a certain period. A company can also issue Partly Convertible Debentures whereby only a part of the amount can be converted to equity/preference shares. 

Non Convertible Debentures (NCDs): These can’t be converted into equity/preference shares.

Advantages/Merits of Debenture Issue: 

It enables a company to raise funds for a specific period. No dilution of control as debenture holders don’t possess voting rights

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Debenture (debt) enables the company to Trade on equity. It can pay dividend to equity shareholders at a rate higher than overall ROI. Debenture holders entitled to a fixed rate of interest. Eg: 10% debenture They enjoy priority over other unsecured creditors with respect to debt repayment. Suitable for conservative investors who seek steady ROI with little or no risk. Interest on debentures is treated as expense and is tax deductible. Company can adjust its gearing in accordance to its financial plan. Debenture holders are regarded as creditors of the company and they receive preference over equity shareholders and preference share holders. Disadvantages/Demerits of Debenture issue: They have a fixed maturity; hence provision has to be made for repayment. There is a limit to which funds can be raised through debentures. It is risky if the company fails to pay interest or principal installment on time, as debenture holders can file petition for winding up the company. It is not suitable for a company with fluctuating earnings as it may also lead to fluctuations in payment of dividend payable to equity shareholders. With more risk, you get more return. Debentures being secure investments, returns are less. Like ordinary shares, debenture holders will not be regarded as owners of the company and have no voting rights.

5. Company Fixed Deposit: Company fixed deposit is the deposit placed by investors with companies for afixed term carrying a prescribed rate of interest. Company FDs are primarily meant forconservative investors who don't wish to take the risk of vagaries of the stock market. Butexperts say the due diligence that an investor should undertake is similar to that beforebuying shares. Getting lured by the high interest rate alone is not advisable.

6. Fixed Deposits: Fixed Deposits with Banks are also referred to as term deposits. Minimuminvestment period for bank FDs is 30 days. Deposits in banks are very safe because of theregulations of RBI and the guarantee provided by the deposit insurance corporation. Theinterest rate on fixed deposits varies with term of the deposits Bank deposits enjoyexceptionally high liquidity. Loans can raised against bank deposits.

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7. Post Office Savings: Post Office Monthly Income Scheme is a low risk saving instrument, which can beavailed through any Post Office The interest rate on deposits is slightly higher than banks.The interest is calculated half yearly and paid yearly. There are various types of schemes provided by post offices. These are: Savings Account Any individual can open an account. Cheque facility available.

Group Account, Institutional Account, other Accounts like Security Deposit account & Official Capacity account are not permissible Rate of interest 4% per annum

Time Deposit Account Any individual (a single adult or two adults jointly) can open an account. Group Accounts, Institutional Accounts and Misc. account not permissible. Trust, Regimental Fund or Welfare Fund not permissible to invest. 1 Year, 2 Year, 3 Year and 5 Year Time Deposit can be opened.

In case of premature closure of 1 year, 2 Year, 3 Year or 5 Year account on or after 01.12.2011, if the deposit is withdrawn after 6 months but before the expiry of one year from the date of deposit, simple interest at the rate applicable to from time to time to post office savings account shall be payable. In case of premature closure of 2 year, 3 year or 5 year account on or after 01.12.2011, if the deposit is withdrawn after the expiry of one year from the date of deposit, interest on such deposits shall be calculated at the rate, which shall be one per cent less than the rate specified for a period of deposit of 1 year, 2 year or 3 years as mentioned in the concerned table given under Rule 7 of Post office Time Deposit Rules. Rate of interest - 8.20%, 8.20%, 8.30%, 8.40% compounded quarterly for 1,2,3 & 5 years TD account respectively. The investment in the case of 5 years TD qualify for the benefit of Section 80C of the Income Tax Act, 1961 from 1.4.2007.

Type of Account 1,2,3 & 5 Year TD

Minimum Deposit

Maximum Deposit

INR.200/- and in multiples of INR. No limit. 200/- thereafter

Recurring Deposit Account Any individual (a single adult or two adults jointly) can open an account. Advance Deposits earn rebate. Four defaults are allowed. Rate of interest 8.30% Maturity value of a 5 Years RD account opened on or after 1.4.2013 with monthly deposit of INR.10/- shall be INR.744.53. Defaults can be paid within two months. Part withdrawal facility available. Premature closure allowed after three years. Pay Roll Savings Scheme is also available for employees of various Establishments. 53

Type of Account Individual Account

Minimum Deposit

Maximum Deposit INR. 10/- and in multiples of INR. No limit 5/- thereafter

Senior Citizen Savings Scheme (SCSS) Account A new avenue of investment and return for Senior Citizen. The account may be opened by an individual, 1. Who has attained age of 60 years or above on the date of opening of the account. 2. Who has attained the age 55 years or more but less than 60 years and has retired under a Voluntary Retirement Scheme or a Special Voluntary Retirement Scheme on the date of opening of the account within three months from the date of retirement. 3. No age limit for the retired personnel of Defence services provided they fulfill other specified conditions. The account may be opened in individual capacity or jointly with spouse. Non-resident Indians (NRIs) and Hindu Undivided Family (HUF) are not eligible to open an account. The individual may open one or more account in the multiple of INR.1000/-, subject to a maximum limit of INR.15 lakh.

No withdrawal shall be permitted before the expiry of a period of five years from the date of opening of the account. The depositor may extend the account for a further period of 3 years. Premature closure of account is permitted 1. After one year but before 2 years on deduction of 1 ½ % of the deposit. 2. After 2 years but before date of maturity on deduction of 1% of the deposit. Premature closure allowed after three years.

In case of death of the depositor before maturity, the account shall be closed and deposit refunded without any deduction along with interest. Interest @ 9.20% per annum from the date of deposit on quarterly basis. Interest can be automatically credited to savings account provided both the accounts stand in the same post office. Interest rounded off to the nearest multiple of rupee one.

Post Maturity Interest at the rate applicable to the deposits under Post Office Savings Accounts from time to time is admissible for the period beyond maturity. Nomination facility is available in the Scheme. The investment under this scheme qualify for the benefit of Section 80C of the Income Tax Act, 1961 from 1.4.2007.

Monthly Income Scheme (MIS) and Senior Citizen Saving Scheme (SCSS) are the best for Senior Citizens who desire monthly/quarterly interest. Invest in MIS / SCSS and transfer interest into RD account through SB account through written request and earn a combined interest of 10.5 % (approx.). This is the safest investment option for the Senior Citizens.

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8. Life Insurance Policies: Insurance companies offer many investment schemes to investors. These schemespromote saving and additionally provide insurance cover. L1C is the largest life insurancecompany in India. Some of its schemes include -Life policies, -Convertible whole life assurance policy, -Endowment assurance policy, -Jeevan Saathi, -Money back policy -Unit linked plan -Term assurance -Immediate annuity -Deferred annuity -Riders etc. Insurance policies, while catering to the risk compensation to be faced in the future by investor, also have the advantage of earning a reasonable interest on their investment insurance premiums.

9. Public Provident Fund (PPF): A long term savings instrument with a maturity of 15 years. A PPF account can be opened through a nationalized bank at anytime during the year and is open all through the year for depositing money. Tax benefits can be availed for the amount invested and interest accrued is tax-free. A withdrawal is permissible every year from the seventh financial year of the date of opening of the account.

Public Provident Fund Account Ideal investment option for both salaried as well as self employed classes. Non-Resident Indians (NRIs) are not eligible. Investment up to INR. 1,00,000 per annum qualifies for IT Rebate under section 80 C of IT Act.

The rate of interest on the subscriptions made to the fund on or after 01.12.2011 and balances at credit of the subscriber in the existing PPF account shall bear interest at the rate of eight point seven per cent (8.70%) per annum. Loan facility available from 3rd financial year upto 5th financial year. The rate of interest charged on loan taken by the subscriber of a PPF account on or after 01.12.2011 shall be 55

2% p.a. However, the rate of interest of 1% p.a. shall continue to be charged on the loans already taken or taken up to 30.11.2011. Withdrawal permitted from 6th financial year. Free from court attachment. An individual cannot invest on behalf of HUF (Hindu Undivided Family) or Association of persons.

Type of Account

Minimum limit

Public Provident Fund(Individual INR. 500/- in a financial year account on his behalf or on behalf of minor of whom he is the guardian)

Maximum limit INR. 1,00,000/- in a financial year

10. Real Estate: Investment in real estate also made when the expected returns are very attractive. Buying property is an equally strenuous investment decisions. Real estate investment is often linked with the future development plans of the location. At present investment in real assets is booming there are various investment source are available for investment which are directly or indirectly investing real estate. In addition to this, the more affluent investors are likely to be interested in other type of real estate, like commercial property, agricultural land, semi urban land, and resorts.

11. Gold/Sliver /Others: The bullion offers investment opportunity in the form of gold, silver, art objects(paintings ,antiques), precious stones and other metals (precious objects), specific categories of metals are

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traded in the metal exchange.

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CHAPTER 2 REVIEW OF LITERATURE

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2.1 REVIEW OF LITERATURE:

Behavioral finance is a new emerging science that studies the irrational behavior of the people. Avinash Kumar Singh (2018) The study entitled "Investment Pattern of People" has been undertaken with the objective, to analyze the investment pattern of people in Bangalore city and Bhubaneswar analysis of the study was undertaken with the help of survey conducted .After analysis and interpretation of data it is concluded that in Bangalore investors are more aware about various investment avenues & the risk associated with that. All the age groups give more important to invest in equity & except people those who are above 50 give important to insurance, fixed deposits and tax saving benefits. Generally those investors who are invested in equity, are personally follow the stock market frequently i.e. in daily basis. But those who are invested in mutual funds are watch stock market weekly or fortnightly. In Bangalore, investors are more aware about various investment avenues and the risk associated with that. But in Bhubaneswar, investors are more conservative in nature and they prefer to invest in those avenues where risk is less like bank deposits, small savings, post office savings etc. senthil kumar (2018) Mutual fund is the one of investment avenues the researcher research in this area about investors perception towards mutual fund investments has been analyzed effectively taking into account the investors reference towards the mutual fund sector, scheme type, purchase of mutual fund units, level of risks undertaken by investors, source of information about the market value of the units, investors opinion on factors influenced to invest in mutual funds, the investors satisfaction level towards various motivating factors, source of awareness of mutual fund schemes, types of plan held by the investors, awareness of risk category by investors, problems faced by mutual fund investors. Running a successful mutual fund requires complete understanding of the peculiarities of the Indian Stock Market and also the awareness of the small investor. The study has made an attempt to understand the financial behavior of mutual fund investors in connection with the scheme preference and selection. An important element in the success of a marketing strategy is the ability to fulfill investor expectation. The result of these studies through satisfactory on the investor’s perception about the mutual funds and the factors determining their investment decisions and preferences. The study will be useful to the mutual fund industry to understand the investor’s perception towards mutual funds investments and the study would also be informative to the investors. 59

Sunil Gupta (2017) the investment pattern among different groups in Shimla had revealed a clear as well as a complex picture. The complex picture means that the people are not aware about the different investment avenues and they did not respond positively, probably it was difficult for them to understand the different avenues. The study showed that the more investors in the city prefer to deposit their surplus in banks, post offices, fixed deposits, saving accounts and different UTI schemes, etc. The attitude of the investors towards the securities in general was bleak, though service and professional class is going in for investment in shares, debentures and in different mutual fund schemes. As far as the investments are concerned, people put their surplus in banks, past offices and other government agencies. Most of the horticulturists in Shimla city who belong to Apple belt though being rich have a tendency of investing then surpluses in fixed deposits of banks, provident funds, Post Office savings, real estates, etc. for want of safety and suitability of returns. Manish Mittal and Vyas (2017) Investors have certain cognitive and emotional weaknesses which come in the way of their investment decisions. Over the past few years, behavioral finance researchers have scientifically shown that investors do not always act rationally. They have behavioral biases that lead to systematic errors in the way they process information for investment decision. Many researchers have tried to classify the investors on the basis of their relative risk taking capacity and the type of investment they make. Empirical evidence also suggests that factors such as age, income, education and marital status affect an individual's investment decision. This paper classifies Indian investors into different personality types and explores the relationship between various demographic factors and the investment personality exhibited by the investors.

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CHAPTER 3 OBJECTIVES & NEED OF THE STUDY

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NEED OF THE STUDY:

The need of the study was to fill the gap that was identified in the previous researches. the researchers conducted earlier lay emphasis on the customer perception bout securities considering the ample importance of this aspect the present study was conducted to know the pattern of investment of salaried people and study the behavior of investors and determine their awareness level regarding investment avenues available in the stock market.

OBJECTIVES AND SCOPE OF THE STUDY: 

To study the investment preference among salaried people working in different sectors in, Ropar, Punjab, India.

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To know the factor that influencing investment behavior of the peoples.

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To analyze the investment pattern among the salaried investors.

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To find the problems facing by the investors.

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To know the mode of investments of the salaried respondents in various investment avenues.

3.4 SCOPE OF THE STUDY:

This study is focusing on the preference of Investments by salaried class people and it will be helpful to identify the better investment options in the market the scope of the study is limited to Roper city.

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CHAPTER 4 RESEARCH METHODOLOGY

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RESEARCH METHODOLOGY Research methodology is a way to systematically solve the research problem. the research methodology includes the various methods and techniques for conducting a research. Research is an art of scientific investigation. In other words research is a scientific and systematic search for pertinent information one specific topic. The logic behind taking research methodology into consideration is that one can have knowledge about the method and procedure adopted for achievement of objective of the project.

RESEARCH DESIGN Research design is the conceptual structure within which research is conducted. It constitutes the blueprint for collection, measurement and analysis of data was a descriptive research. Descriptive research involves collecting numerical through self reports collected, through questionnaires or interviews (person or phone), or through observation. For present study, the research was descriptive and conclusion oriented.

SAMPLING DESIGN 

Universe: The universe is most commonly defined as everything that physically exists.

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The entirely of space and time, all forms of matter .energy and momentum, and the physical laws and constants that govern them. all those persons who make investment.

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Theoretical universe: It included investors make investment in all over the world

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Accessible universe: It included investors make investment in Indian stock market.

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Sampling unit: The target population must be defined that has to be sampled. The sampling unit of research included salaried people residing in Ropar.

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Sample size: This refers to number of respondents to selected from the universe to constitute a sample. The sample size of 100 investors was taken.

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Sampling technique: Convenience sampling was used to select the sample. Convenient sampling is a non probability sampling technique that attempts to obtain a sample of 64

Convenient elements. in case of convenience sampling, the selection of sample depends upon the discretion of the interviewer. In this project, questionnaire method was used for the collecting the data. With the help of this method of collecting data, a sample survey was conducted.

DATA COLLECTION AND ANALYSIS

Data collection: Information has been collected from both primary and secondary data. 

Secondary data: Secondary data are those which have already been collected by someone else and which already had been passed through the statistical process. the secondary data was collected through web sites, books and magazines.

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Primary data: Primary data are those which are fresh and are collected for the first time, and thus happen to be original in character. the primary data was collected through direct personal interviews (open ended and close ended questionnaire).

Tools of presentation & anlaysis: To analyse the data with the help of questionnaire, following tools were used. 

Likert scale: These consist of a number of statements which express either a favourable or unfavourable attitude towards the given to which the respondents are asked to react. The respondents responds to in terms of several degrees of satisfaction or dissatisfaction.

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Percentage and pie charts: Those tools were used for analysis of data.

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CHAPTER 5 DATA ANALYSIS & INTERPRETATION

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DEMOGRAPHIC PROFILE OF INVESTORS:

Demographics

No. of respondents

Percentage of respondents

Male

74

74

Female

26

26

Total

100

100

Age

No. of respondents

Percentage of respondents

Less than 20

0

0

20-40 years

35

35

Greater than 40

65

65

Total

100

100

Occupation

No. of respondents

Percentage of respondents

Government employee

38

38

Private employee

62

62

Total

100

100

Income (per month)

No. of respondents

Percentage of respondents

Less than 20000

20

20

20000-40000

55

55

Greater than 40000

25

25

Total

100

100

Interpretation: It was found that the major population of investors was greater than 40 yrs and 35% was of 2040 yrs. And 38% investors are government employees and 62% investors are private employees. And majority of respondents i.e. 55% earn income between Rs. 20000-40000 per month. It means majority of investors was greater than 40 years having income in between Rs. 2000040000. 67

Statement 1: To know whether respondents invest

No. of respondents

Percentage of respondents

Yes

90

90

No

10

10

Total

100

100

Interpretation: From the survey it was found that 90% respondents invest in the securities and 10% are non investor.

Statement 2: Awareness regarding types of investment instruments

68

Types of investment

No. of respondents

Percentage of respondents

Shares

8

8

Bank deposits

30

30

Insurance

21

21

Post office savings

13

13

Gold/real estates

18

18

Mutual funds

10

10

Total

100

100

Instruments

No. of respondents 13

8

shares Bank deposits 21

30

insurance Post office savings

Interpretation:

69

Above pie chart shows that 8% investors were aware of shares, 30% were aware of bank deposits, 21% insurance, 13% post office savings, 18% gold/ real estates and 10% were aware mutual funds.it means majority of the people are aware of bank deposits followed by insurance.

Statement 3: To know the type of investment option the person has been investing No. of respondents

Percentage of respondents

Shares

3

3

Mutual funds

8

8

Bank deposits

30

30

Post office savings

25

25

Insurance

20

20

Gold/ real estates

14

14

Total

100

100

70

No. of respondents 3

8

25 shares Mutual funds Bank deposits 30

Post office savings

Interpretation: From the survey it was found that 3% respondents invest in shares, 8% in mutual funds, 30% in bank deposits, 25% in post office savings, 20% in insurance and 14% respondents invest in gold/real estates. That means majority of the salaried people invests in bank deposits.

Statement 4: to know the rates at which the investment grow No. of respondents

Percentage of respondents

Steadily

0

0

At an average rate

10

10

At fast rate

90

90

Total

100

100

71

No. of respondents 0 10

Steadily

100 90

At an average rate At fast rate Total

Interpretation: From the survey it was found that 90% respondents wants their investment grow at fast rate whereas only 10% respondents were in the favor of investment growth at average rate.

Statement 5: To know the frequency of investment by the respondents

Daily

No. of respondents

Percentage of respondents

0

0

72

Weekly

20

20

Monthly

45

45

Yearly

35

35

Total

100

100

No. of respondents 0 20 35 Daily Weekly Monthly 45

Yearly

Interpretation: From the above table & chart it was found that 45% respondents invest monthly.35% invest yearly, and there were 20% respondents who invest daily. Thus, it can be stated that majority of the investors invest monthly in different types of alternatives.

73

Statement 6: To know the percentage of income that respondent invest annually No. of respondents

Percentage of respondents

Up to 10%

14

14

10-15%

22

22

15-20%

40

40

More than 20%

24

24

Total

100

100

No. of respondents 14

24

22

Up to 10% 10-15% 15-20%

40

More than 20%

Interpretation: From the above table & chart it was found that 40% respondents invest 15-20% of their annul income,24% respondents invest more than 20% of their annual income,22% respondents invest up to 10-15% of their income and 14% respondents invest up to 10% of their income in different 74

investment avenues. Thus, it can be conclude that majority of investors invest 10% to 20% of their annual income.

Statement 7:To know the purpose of investment No. of respondents

Percentage of respondents

Wealth creation

10

10

Future needs

42

42

Children’s education

38

38

House building

6

6

Marriage purpose

4

4

Total

100

100

No. of respondents 6

10

Wealth creation Future needs 38

Children’s education House building 42

75

Interpretation: From the above table it can be found that 10% people invest money to create its capital,42% people invest to meet its future needs ,38% of salaried people invest for their children’s education,6% people to build their house and 4% people to meet marriage expenses. thus according to above majority of the people invest majority to meet its future needs.

Statement8: to know the respondent’s influence on investment decision. No. of respondents

Percentage of respondents

Self

48

48

Friends& relatives

20

20

Service providers &

12

12

Newspapers & advertisements

10

10

Agents

5

5

Workshops & seminars

5

5

Total

100

100

Consultants

76

No. of respondents 10 12 Self 48

Friends & relatives Service providers & consultants

20

Newspapers & advertisements

Interpretation: From the above table & chart, it was found that multiple aspects for investing influenced respondents. 48% respondents take decision on the basis of their personal evaluation where as 20% respondents invest because of influence of friends & relatives, the consultants’ influences 12% respondent and the advertisement influences 10% respondents. it can be stated that majority of the persons are influenced by their own opting for investment tool.

Statement 9: to know the factors that were considered while investing Investment factors

No. of respondents

Percentage of respondents

Return on investment

25

25

Tax benefits

20

20

Capital appreciation

15

15

Maturity period

6

6

Risk

12

12

77

safety of principal

7

7

Liquidity

15

15

Total

100

100

No. of respondents 6 25

15

Return on investment Tax benefits Capital appreciation Maturity period 20

Interpretation: From the above survey it was found that the maximum respondents considered return on investment was most important factor, 20% respondents considered tax benefits as an important factor and 15% respondents considered capital appreciation as an important factor. It can be stated that majority of investors were consider return as an important factor while investing.

Statement 10: To know investor’s action in case of stock market drop

78

No.

of Percentage

of

respondents respondents Transfer funds into secure investment

25

25

Wait to see if investment improves

40

40

Invest more funds

30

30

Withdraw funds & stop investing

5

5

Total

100

100

No. of respondents 5 25 Transfer funds into secure investment

30

Wait to see if investment improves Invest more funds 40

Withdraw funds & stop investing

Interpretation: From the survey it was found that maximum respondent would wait to see if their investment improves and start generating funds, 30% respondents would more funds, 25% respondents would transfer funds into secure investment and 5% respondents would stop investing. It can be stated that majority of investors would like to wit to see whether investment improves or they can invest more funds.

79

Statement 11: to know the decision regarding other investment policy Investment decision

No. of respondents

Percentage of respondents

Yes

98

98

No

2

2

Total

100

100

No. of respondents 0

98

100

Yes No Total

2

Interpretation: From the survey it was found that 98% respondents have the other investment policy where as 2% respondents do not have the other investment policy.

80

Statement 12. To know the satisfaction level of respondents with their investment option particulars

Highly

Dissatisfied Neutral

Satisfied

dissatisfied (2)

(1)

(3)

Highly

Summated

satisfied

score

(5)

(4)

Shares

30

30

10

25

5

245

Mutual

20

18

35

19

8

277

10

6

14

30

40

384

15

10

15

40

20

340

insurance

12

15

20

35

18

332

Gold/real

30

10

20

30

10

280

funds Bank deposits Post office Savings

Estates

Range : Max. score = 100*5=500 (highly satisfied) Avg. score = 100*3=300 (neutral) Min. score = 100*1=100 (highly dissatisfied)

Interpretation: Most of the respondents have given the highest summated score to bank deposits. And the second most important investment option is post office4 savings which influenced the decision 81

regarding investment. Other important factor is insurance coverage which has the 332 summated score. Return on gold/real estates get the 280 summated score.

FINDINGS OF THE STUDY Following findings are generated from the study: 

Maximum investors are aware of all the investment options.



Investors do not invest in a single avenue. They prefer different avenues and maximum investors prefer to invest in bank deposits, post office savings and insurance.



Maximum investors’ wants their investment grow at fast rate.



The main purpose of majority of the people to invest money is to meet its future needs.



The investment decision of investors is influenced by their own decision and through friends & relatives.



Different factors considered by investors while investing are return, risk, tax benefits, capital appreciation and most prominent factor is the return on any investment avenue. 82



Majority of investors invest 15-20% of their annual income.



Maximum investors invest on monthly basis.



Maximum investors have other investment policies.



Investors are more satisfied from bank deposits followed by post office savings.

RECOMMENDATIONS Following are the recommendations of the study: 83



The various investment tools which are mostly preferred by the investors are bank deposits, post office savings, etc. So there should be various other means to create awareness regarding the potential of other instruments and the tools which can be more beneficial to the investors.



The investors consider various factors while making investment like risk, return, liquidity etc. there should be rational thinking o that the investor is able to know that at what point of time they need capital appreciation instead the risk and when the need return instead of liquidity.



The preferred time span of investment by the investors depends upon the need of the investor that whether they wants to have early and high returns or wants to have stable returns, most probably the long time span is suitable because the returns are high and safety is also there.



The satisfaction level of various investors is different due to different investment alternatives they opt for. If they will be aware of each type of alternative and the worth of the alternatives then investing as per that there satisfaction level will also be high.



Investors should have the complete knowledge of all the alternatives.

84

LIMITATIONS OF THE STUDY It I said, “what is worth doing best”.in other words a person should aim at perfection. However in real life this is not always possible.human have to work within the limitation set by the nature and society.that is to say even though every effprt has been made to make this project re[ort authentic and comprehensive however many constraints were also at play.the major limitations of the study are: 

Due to paucity of tme and resources a countrywide survey was not possible.hence only ropar city has been taken for the study.



Since a smaller sample was chosen so it may not be a true representative of the population under study.



The possible of the respondent’s responses being bisedcnnotbe ruled out.



Most of the study ws restricted to internet nd published data because of the non availability of primary data.



The information given by the respondents might be biased because some of them might not be interested to given correct information.



Some of the respondents could not answer the questions due to lack of knowledge.



Some of the respondents of the survey were unwilling to share information.

85

REFERENCES Charles (1999).economic policy astonishing growth in Americans stock portfolios. The

icfai

journal

of

stock

market,

6

(3):

43-60.

Available

at http://paper.ssrn.com/so13/results.cfm

Dijk (2007) economic policy, the size effect in equity return.Empirical research finding. Journal of financial management and analyi21 (1).available at http://paper.ssrn.com/so13/results.cfm

Johnson (2008).the value of quality: stock market returns to published quality reviews. The icfai journal of applied economics,7(3):7-22. Available at http://papers.ssrn.com/so13/results.cfm

Introduction on online investors & traders available at http://www.traderji.com/

Introduction

on

types

of

investment

available

at

http://finance.mapsofworld.com/investment/types/

86

ANNEXURE

QUESTIONNAIRE Dear respondent,

87

I am a student of BBA in Hindu college is conducting a research on “investment pattern of salaried people”. I would be extremely thankful if you spare time to answer the following questions. All the facts disclosed by you will be used for academic purpose only. PERSONAL PROFILE NAME: ………………………………….… AGE

:

less than 20 years

20-40 years

Greater than 40 years GENDER: Male

Female OCCUPATION: Government employee

Private employee INCOME: (per month) Less than Rs.20000

Rs.20000-Rs.40000

Greater than Rs.40000

Q1. Do you invest you money? 88

Yes

No

Q2. Out of the following, which type of instrument are you aware of ? Shares Mutual funds Bank deposits Post office savings Debentures Bonds Insurance Gold/real estates

Q3. Where have you been investing? Shares Bank deposits Post office savings Debentures Mutual funds Bonds Insurance Gold/real estates

Q4. Which rates do you want your investment to grow? Steadily At an average rate At fast rate

Q5.How frequently do you invest? Daily Weekly 89

Monthly Yearly

Q6.what percentage of your annual income do you invest in securities? Up to 10% 10-15% 15-20% More than 20%

Q7. What is the main purpose of your investment? Future needs Children’s education Wealth creation House building Marriage purpose

Q8.By which sources of information you come to know about particular option? Self Friends & relatives Service providers and consultants Newspapers, magazines and advertisements Agents Workshops & seminars

Q9. Which factor do you consider before investing in different securities? Capital appreciation Maturity period Safety of principal 90

Risk Return on investment

Q10.in your opinion, what would be the optimum strategy if stock market drops immediately after you invest in it? Cut your losses and transfer funds into secure investments Wait to see if investment improves Invest more funds to lower your losses expecting future growth Withdraw your funds and stop investing

Q11. Do you have any other investment policy? Yes

No

Q12. Rate the satisfaction with the return generated by your investment option?

particulars

Highly

Dissatisfied Neutral

Satisfied

dissatisfied (1)

(2)

(3)

(4)

Highly

Summated

satisfied

score

(5)

shares Mutual funds Bank deposits 91

Post office savings insurance Gold/real estates

92