International Journal of Advanced Science and Technology

Vol. 29, No. 5, (2020), pp. 4181 - 4190

Study of Investors Decisions for Investment Avenues based on Their Risk and
Return Profile: A Select Study Conducted at Uttar Pradesh

1
Shivam Bhardwaj*, 2Dr. Ankit Saxena
1
Assistant Professor, Institute of Business Management, GLA University, India
2
Associate Professor, Institute of Business Management, GLA University, India
1
[email protected], [email protected]

Abstract
With the change in time, investment norms, guidelines, policies, and facilities- financial markets
nowadays are offering better opportunities to invest. In India large numbers of small investors are
there who have the potential to invest in the stock market, gold or silver, real estate, fixed deposits,
post office deposits, insurance, etc. Many researches have been conducted during the past years to
understand the investor’s perception of various investment options available. However there is a gap
or vacuum in terms of micro studies focusing on specific cities or states in India. The objectives of the
study are to study the impact of the demographic profile of the investors in Agra on their risk
perception towards various alternative opportunities and to know about investors preferences toward
investment. Convenient snowball sampling was conducted for research, and the responses were
received using a structured questionnaire. An appropriate statistical analysis was performed over the
data collected using SPSS. Results revealed the point that the most prominent reasons for investment
are principal stability and growth of income.

Keywords: investment, risk, return, financial markets, investors

I. Introduction
The two powerful R’s in investments are Risk and Return. In simple words, Risk is the money an
individual is ready to part now, in expectation of future benefits. However, there is a probability that
the portion of money set for investment may not bring the benefit within the expected time or that
person may lose it completely if not invested it at the right place. So, it is important to calculate the
risk of different investment options along with personal goals and diversify the investments
accordingly. There are several options available to investors in the form of fixed deposits, real estate,
gold, mutual funds, shares, debentures, insurance, etc. The risk element is inherent and to be expected
while making decisions related to finance and investments. Any financial scheme, which an
individual may select to invest in, should complement with the risk profile and that risk profile varies
from investor to investor. Risk can’t be avoided but can be minimized by investing the money wisely
in different available options of investments to get considerable profit. Safety of principal amount,
liquidity, regular and stable returns, appreciation, etc. are among the key features of an investment.

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Vol. 29, No. 5, (2020), pp. 4181 - 4190

II. Literature Review

Ravichandran K. (2008) mentioned in his research that the young investors have a willingness to
invest in instruments of the capital market, and more specifically they are interested in the derivatives
segment. Decisions are being influenced by the brokers, or friends and relatives, and they are playing
the most influential role in pulling the investors into the capital market. Luhar & Luhar (2011) tried to
focus on the analysis and appraisal of risk, return and portfolio decisions in different classes of
alternative investments and their impact on the capital market of India considering the period of 2007-
2010. A study conducted by Sarita (2011) concludes that investors use to consider buying a life
insurance policy to protect their future irrespective of their educational qualification, job, income, or
age.
Margam and Vipparthi (2012) in their study highlighted that the demographic factors such as
occupation, marital status, age of the investor create the difference among investment choices of an
investor. They also mentioned that flexibility, liquidity, service quality and transparency, tax saving,
etc. are having a significant impact on investor’s perception. Patel and Patel (2012) in their study
found that the conventional investment options are not being preferred by the investors due to low
returns. Worth mentioning that this study also highlighted that females are preferring to invest in
gold. Bhatt and Bhatt (2012) highlighted risk as the factor due to which investors prefer to invest in
bank deposits, post office. However they also mentioned that investment in other options like real
estate, commodities, insurance, mutual funds and shares, etc. is also being considered by the investors
lying into high-income groups with comparatively higher education.
Chandrakumar and Palanivel (2013) found that low and middle-income groups of investors prefer to
invest in bank deposits and insurance. Vechalekar (2013) tried to find out the investment pattern of
Indian investor and their awareness level regarding various investment opportunities. It was
concluded that people have sufficient knowledge about various investment opportunities and that
portfolio diversification and benefits in tax are key factors affecting the investment pattern. Kumar
(2013) in his study mentioned that returns and liquidity are the key attributes for investment
decisions. Mutual funds were being considered more rather than equity shares, for investment. A
study conducted by Purohit (2013) revealed that the selection of market segment, trading mode, and
frequency of trade are beings influenced by the income and age of the investor. Murty and Sastry
(2013) concluded in their research that return optimization is the sole aim of investor who invests in
the stock market.
Chaturvedi et al. (2014) mentioned mutual funds as a tax saving and return-oriented instrument.
Investors were found more prone to public companies. Tripathi (2014) in his study concluded that
profession, education, and gender don’t affect investment behavior in the case of derivatives. But
income is one of the factors having a significant role in decision making. Patil and Nandawar (2014)
identified various objectives of investment like profit, security, appreciation and income stability. It
was concluded that salaried employees take factors like good returns and safety of investment amount
in due consideration while making investment decisions.”Joseph and Prakash (2014) throw light on
different investment options available and the factors to consider while investing. The study
concluded that awareness regarding investing in the share market is still low which acts as a barrier,
and due to risk aversion nature people are investing their money in bank deposits or post office.
Kumar and Maheshwari (2014) highlighted that a good number of investors prefer to invest in fixed
deposits, or gold, mutual funds, UTI units, debentures for safety and liquidity.

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Mishra (2015) highlighted that there is a difference in the approach of small and large investors.
While the former focuses on savings and tax returns, the latter expects future returns. Rastogi (2015)
in his study analyzed the role of behavioral biases in making investment choices and found that these
are not significantly different while considering the occupation and gender of investors. Kumar et al.
(2015) in their study found that risk tolerance, attractive and timely returns, security, share
preference, long term investment, are among the significant factors influencing investment decision
making of the investors. The futuristic goals are significantly having a preference for equity investors
for their level of satisfaction.
Mane (2016) concluded that investors don’t take advice from experts while investing in mutual funds,
and in result, many times fail to select the best suitable one. Research conducted by Awais et al.
(2016) concluded that the investor’s decision depends upon the degree of the risk factors. By sharing
the appropriate and adequate financial knowledge to the investors, things could be changed
drastically.”Shukla (2016) highlighted that based on educational background, investors invest in low
risk and comparatively safe investments like purchasing property or long term investments.
Muthumani M. (2017) highlighted the significance of awareness and financial knowledge in the
investment choice of an investor. Raheja and Dhiman (2017) found a statistically significant relation
of personality traits and behavioral biases with the investment decisions. The need of the investor and
investment objectives influence the decision regarding investment in a particular option. Reddy and
Mahapatra (2018) concluded that the risk tolerance of a respondent generally increases as income and
education increase. Mishra and Mittal (2019) concluded that age, marital status, occupation show a
strong association with financial risk tolerance.

III. Need of the study

In the present scenario, the trends in financial markets have changed. Investments from the public are
essential for the growth and development of various sectors in the economy. Various alternative
investment avenues are being introduced for promoting the investments from the investors. It
becomes essential to study the way investors identify various avenues of investment available to
them. To do this it is essential to measure the performance of investment avenues in terms of risk and
return. So, the need of the study is:
• To analyze the risk and return associated with various alternative investment avenues,
• To study the investment behavior of people,
• To find out top prioritized investment opportunities.

IV. Research Methodology

A sample of 60 investors using convenient sampling technique is taken into consideration to

conduct research. Responses were received using questionnaire and the Chi-square test was
applied for finding out the impact of the demographic profile of the investors on the investment
pattern with the help of hypothesis testing, and for finding out the most preferred investment
alternative among the investors.

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Vol. 29, No. 5, (2020), pp. 4181 - 4190

V. Data Analysis and Interpretation

Part A

1. Do you invest in various investment avenues?

Response Numbers
Yes 60
No 0

2. Where do you invest?

Investment avenues Frequency

Equity 50
Debt Instruments 60
Fixed deposits 35
NSC,PFF 16
Real Estate 12
Mutual Funds 8

It can be concluded that most of the respondents are investing in multiple avenues. The most
preferred investment avenues can be said to be debt instruments, equity, and fixed deposits.

3. How frequently do you invest?

Investment Frequency Responses

Monthly 24
Quarterly 8
Half-yearly 18
Annually 10
It can be interpreted from the data that most of the investors are investing monthly a small
amount of their income into various investment avenues available and held by them.

4. Why do you invest?

Reasons for investments Responses

Future security 30
Principal stability 60
Income growth 42
Capital appreciation 6
Tax saving 20
Others 0

It can be interpreted from the data that most of the investors are investing for multiple reasons
but the most prominent reasons for investment are principal stability and growth of income.

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Vol. 29, No. 5, (2020), pp. 4181 - 4190

5. How much of your income do you invest?

Percent Responses
Invested
<20% 40
20-40% 16
40-60% 3
>60% 1

Here the data reveals that 60% of investors are investing lower than 20% of their income. This
can be due to the low level of income prevailing in Agra.

6. Do you consult any specialist or fund manager before investment?

Consultation Responses
YES 26
NO 34
It can be interpreted from the data that more than 50% of the investors do not consult
specialists like brokers for making investments and making investment decisions.

7. What factors do you look at before investing in any investment avenue?

Factors considered while investing Responses

Return associated 60
Risk 43
Sectoral performance 20
Past performance 56
Recommendations from family and friends 52

Data reveals the point that apart from the sectoral performance all the other factors are
considered almost by all investors before investing the most prominent of them being the
return associated and the past performance of the investment avenue.

8. What level of risk do you prefer?

Level of risk Responses
Low 32
Moderate 22
High 6
Very high 0

Data reveals that 53% of the investors in Agra prefer taking low risk whereas 37% of the
respondents prefer moderate risk. Hence we can say that the investors in Agra are risk-averse.

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PART - B

To study whether the demographic profile of the investors affect their level of risk
perception following hypothesis were tested using Chi-Square:

A. To study if the gender of the investor affects the risk-taking capacity of investor or not
H0- There is no significant difference between the gender and the risk-return profile of the
investor
Ha- The difference is significant
Risk Gender

Taking Male Female Total

Capacity
Low 28 4 32

Moderate 12 10 22

High 4 2 6

Very high 0 0 0

Total 44 16 60

The calculated Chi-Square value from the data is 7.403 which is lower than the table value, so we
fail to reject the null hypothesis.

B. To study whether the age of the investors have an impact on the risk-bearing capacity of
the investors
H0- There is no significant difference between the age and the risk-bearing capacity of
the investor
Ha- There is a difference between the age and the risk-taking capacity of the investor

Age(in years)

Risk Taking <=25 25-35 35-45 45-55 >55 Total

Capacity
Low 2 19 4 3 4 32
Moderate 0 8 6 4 4 22
High 0 1 2 1 2 6
Very high 0 0 0 0 0 0

Total 2 28 12 8 10 60

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The calculated Chi-Square value here is found 8.70126, which is lesser than the table value hence
we fail to reject the null hypothesis that is the age of the investor does not affect their risk-taking
capacity.
Thus it can also be concluded that most of the investors prefer to remain in the bracket of low
and moderate risk-taking capacity.

C. To study whether the marital status of the investors affect their risk-taking capacity

Ho- There is no significant difference between the marital status and the risk-taking capacity of
the investor
Ha- There is a difference between the marital status and the risk-taking capacity of the investor

Single Married Total

Low 2 30 32

Moderate 0 22 22

High 0 6 6

very high 0 0 0

Total 2 58 60

Since the calculated chi-square value is observed as 1.810345, which is less than the table value
that is 7.815. So we fail to reject the null hypothesis here and hence conclude that there is no
relationship between the marital status and the risk-taking capacity of the investors in Agra.
It can be interpreted from the table that the maximum of the married people prefer to take the low
risk due to their family's safety and security while only two investors who are single being the
student prefer to be in the low risk-taking capacity bracket.

D. To study whether there is an impact of education qualification on the risk-taking capacity of

the investors.
H0- There is no significant difference between the education qualification and the risk profile of
an investor
Ha -There exists a significant difference between the education qualification and the risk profile
of an investor
Post Doctoral Other Total
Graduate Graduate
Low 17 8 3 4 32

Moderate 10 6 5 1 22

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High 3 1 2 0 6

Very High 0 0 0 0 0

Total 30 15 10 5 60

The calculated value of chi-square here is 4.405, which is lesser than the table value so we fail
to reject the null hypothesis and conclude that there is no relationship between the education
qualification of the investors and their risk-taking capacity. It can be interpreted from the table
that most of the non-graduate people prefer low risk whereas post-graduates are to some extent
ready to take high risk.

E. To study whether the occupation of the investor affects the risk-taking capacity of the
investors
H0- There is no difference between the occupation of the investor and his risk-taking capacity
Ha- There exists a significant difference between the occupation of the investor and his risk-
taking capacity

Service Professional Student Business Other Total

Low 3 12 2 15 0 32

Moderate 1 8 0 13 0 22

High 2 0 0 2 2 6

very high 0 0 0 0 0 0

Total 6 20 2 30 2 60

Since the calculated chi-square value (26.67379) here is greater than the table value so the
alternative hypothesis is accepted that is there is an impact of the occupation of investors
on risk-taking capacity.

F. To study whether the level of income has an impact on the risk-taking capacity of the
investors
H0- There is no difference between the income level and the risk-taking capacity of the investor
Ha- There exists a significant difference between the income level and the risk-taking capacity
of the investor
Income range mentioned in INR per annum
<1,50,000 1,50,000- 3,00,000- 4,50,000- >6,00,000
3,00,000, 4,50,000 6,00,000
Low 3 20 8 1 0

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Moderate 1 14 5 2 0

High 0 2 2 1 1

Very high 0 0 0 0 0

The calculated chi-square value here is 12.60125, which is less than the table value so we fail to
reject the null hypothesis.

VI. Conclusion

This study concludes that in Agra city, people prefer to take their investment decisions by
themselves or consulting to their references. They are having an approach of risk aversion and
consider the risk and return associated while making their investment decision. They invest less
than 25% of their income in investment avenues and want to play safe. This study provides an
insight that there is still much to do in terms of financial and investment literacy and awareness
among investors.

VII. Limitations

This study is conducted at Agra (Uttar Pradesh) so the results may not be generalized in the same
form across the country. Demographic, cultural and lifestyle variations among various countries,
states and cities may have a role that can be studied in a comprehensive form.

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