RETAIL INVESTMENT PATTERN OF SALARIED INDIVIDUALS

Mr. Vinod H. Kamble

Learner of M.Com – Nirmala Memorial Foundation College of Commerce, Kandivali,
Mumbai
___________________________________________________________________________

Abstract: With the passage of time, the investment patterns of investors are changing. The
present study aims to understand the investment patterns of salaried individuals, including
their proportion of income invested, preference for investment, factors influencing investment
decisions, sources of information about investment products and difficulties faced while
selecting investment. The study finds that mutual funds are the top investment choice for
salaried individuals, followed by fixed deposits and the capital market, with government
schemes like EPF and NPS being less favoured. Safety of the principal amount is crucial in
investment decisions, with investment apps, financial news and advisors as primary
information sources. Higher income leads to a higher proportion of income invested and
there is no significant gender difference in preferred investment avenues..
Key Words: Investment Pattern, Salaried individuals, Investment Behaviour, Investment
Attitude

1. INTRODUCTION

Retail investors trade securities for their own personal accounts, rather than on behalf of an
organization or institution. They typically invest smaller amounts of money compared to
institutional investors and use various investment vehicles such as Fixed Deposits, PPF, post
office Investment schemes, stocks, bonds, mutual funds and ETFs. Retail investors often rely
on online trading platforms and financial advisors for investment decisions and are generally
motivated by personal financial goals such as saving for retirement, education, or other long-
term objectives.

The investment pattern of retail investors has changed a lot over the years, driven by
technology, market conditions and socio-economic changes. In the past, retail investors
mainly used traditional investment options like savings accounts and fixed deposits. Their
approach was usually cautious, focusing on safe, long-term investments to ensure their
financial security. This conservative strategy was due to limited access to market information
and financial education, which made it hard for them to make informed decisions.
With the rise of digital technology and online trading platforms, retail investing has
undergone a major transformation. Retail investors now have easy access to real-time market
data, analytical tools and a wide range of investment options, such as stocks, mutual funds,
exchange-traded funds (ETFs). This availability of information has enabled retail investors to
diversify their portfolios and adopt more active and varied investment strategies.

Understanding the investment patterns of retail investors is important today for several
reasons. First, retail investors represent a significant portion of market participants and their
collective actions can impact market trends and prices. Second, their behaviour can offer
insights into consumer confidence and the overall economic outlook; i.e., if retail investors
are buying more stocks, it may indicate that they are optimistic about the economy.
Conversely, if they are selling and moving to safer investments, it might suggest they are
worried about economic conditions. Third, financial institutions, policymakers and
companies can tailor their strategies and products to better meet the needs and preferences of
retail investors. Lastly, as retail investors become more active and sophisticated,
understanding their patterns helps promote financial literacy and ensure a more informed and
stable investment environment.

Salaried individuals are people who earn a regular income through wages or salaries,
typically from employment in various professions or industries. They receive fixed payments
from their employers, usually on a monthly basis. They have assured remuneration at fixed
intervals of time. They therefore have a more or less fixed budget and follow a stringent and
disciplined investment routine. They make up a significant portion of retail investors.

2. REVIEW OF LITERATURE
A paper titled "A Study on Investment Patterns of Salaried Employees in Udupi City"
aims to analyze the investment patterns of salaried employees in Udupi City. The research
identifies that bank deposits (35%) are the most preferred investment avenue for these
employees, followed by mutual funds (21%). Safety is the most significant factor influencing
their investment decisions. Most employees invest up to 15% of their monthly income, and
their preferred investment period ranges from 1 year to 5 years. (Miranda, 2023)

The study titled “A Study on Investment Pattern of Salaried Individuals with Reference
to Coimbatore City” explores the investment behaviours, preferences and awareness of
salaried individuals in Coimbatore. The key findings reveal that fixed deposits are the most
preferred investment avenue, followed by gold and government schemes. Most respondents
invest for regular income and future needs, with a significant portion monitoring their
investments monthly. The research concludes that while salaried individuals are generally
satisfied with their investments, there is a need for better financial planning and awareness to
enhance investment decisions. (Therasa & S. Bhuvaneswari, 2022)

A paper titled “Investment pattern of salaried employees (with special reference to

Coimbatore city” aims to know the awareness among salaried employees about differen
investment avenues and factors influencing their investment behaviour. The study finds that
respondents predominantly prefer bank deposits, as these are perceived as relatively low-risk
investments. This suggests that most participants are risk-averse. Many are unfamiliar with
new investment schemes and reluctant to invest in unfamiliar options. Their investment
choices are mainly driven by goals related to safety, security, and funding their children's
education or marriage, indicating a focus on future needs over immediate benefits.
(Kalimuthu & Vibharashmi, 2023)

A paper titled “Investment pattern of salaried class of Somnath (Daman) – A study of

various investment options available” aims to analyze the awareness, perception, and
behavior of salaried individuals regarding different investment avenues and to study the
impact of demographic variables on investment patterns. The study found that most salaried
individuals in Somnath are knowledgeable about and actively invest in bank deposits and
insurance policies. It also revealed that the motivation for saving among these individuals is
influenced by their age but is not affected by other demographic factors such as gender,
education, or monthly income. The primary considerations for investment decisions are
regular returns and tax reduction, followed by the availability of investment information and
services from agents. For respondents aged 21 to 40, the key reasons for saving include
building a reserve for emergencies, improving their standard of living, passing wealth to
future generations, and engaging in speculative investments. (Atodaria & Sharma , 2019)

A paper titled “Savings and investment pattern of salaried individuals in Guwahati city”
aims to examine pattern of savings and investment of salaried individuals and factors
influencing their investment decision. Findings of the study show that while investing,
salaried individuals prioritize safety and are generally willing to accept moderate risk. The
majority of their surplus income is invested in bank deposits and mutual funds, followed by
insurance, real estate, gold, and equity. Additionally, many individuals resort to borrowing to
invest in real estate. Investment behavior varies among different groups, influenced by risk
perception and awareness of investment options. (Roy & Bhattacharjee, 2022)

3. OBJECTIVES OF THE STUDY

1) To find out the investment preferences of salaried individuals and their preferred
government investment avenue
2) To study the factors influencing investment decisions of salaried individuals.
3) To know the sources used to analyse investment avenues before making investment
decisions.
4) To find out the difficulties faced by salaried individuals while making investment
decisions.

4. HYPOTHESIS STATEMENTS
H0 = There is no significant relation between income level and proportion of income invested
by salaried individuals.

H0 = There is no significant relation between gender and preferred investment avenues by

salaried individuals.

5. RESEARCH METHODOLOGY
5.1 Type of Research:
The study employs a descriptive research design that describes the characteristics of salaried
individuals related to their investment patterns.

5.2 Study Area:

The research is conducted in Mumbai suburbs areas, i.e., Borivali to Bandra.

5.3 Sampling Method

The sampling method followed in the study is a convenient sampling method.

5.4 Target Population and Sample Size:

The target population is salaried individuals. The sample size is 101.

5.5 Type and Source of Data:

The present study is based on primary data, which is collected through a Google Form.
Secondary data is collected through journal articles and research papers.
5.6 Statistical Tools Use:
Tables and graphs are used to organise the data for decision-making. The Chi-square test and
Mann-Whitney U test are used for hypothesis testing.

6. LIMITATIONS
1) A sample size of 101 is a limitation; the findings may differ with a larger sample size.
2) The study is limited to Mumbai suburban areas, i.e., Borivali to Bandra. Other areas are
not considered.

7. DATA ANALYSIS AND FINDINGS OF THE STUDY

7.1 DESCRIPTIVE ANALYSIS OF DEMOGRAPHIC FACTORS

Table 7.1 Demographic Factors

Demographic Variables Count

Female 1
Gender
Male 1
18-25 1
26-35 1
Age 36-45 1
46-55 1
56-65 1
₹0 - ₹2,50,000 1
₹10,00,000 - ₹12,50,000 1
₹12,50,000 - ₹15,00,000 1
Annual
₹2,50,000 - ₹5,00,000 1
Income
₹5,00,000 - ₹7,50,000 1
₹7,50,000 - ₹10,00,000 1
More than ₹15,00,000 1
Source: Primary Data
7.2 OBJECTIVEWISE ANALYSIS
Objective 1: To find out the investment preferences of salaried individuals and their
preferred government investment avenue

Table 7.2 Investment preference of salaried individuals

Share Real Mutual Fixed

Preference Gold
Market Estate Funds Deposit

Lowest Preferred - 1 1 64 1 1 1
2 1 1 48 1 1
3 12 1 1 1 1
4 1 1 1 1 38
Highest Preferred - 5 1 1 1 51 1
Source: Primary Data
The above table shows that mutual funds are the most preferred investments of salaried
individuals, followed by fixed deposits and share market investments. Real estate is the least
preferred investment, followed by gold.
Table 7.3 Preferred Government investment avenue of salaried individuals

Do you invest in following Government

Counts - Yes
Investments
NPS (National Pension Scheme) 29
Postal Service 1
EPF (Employees' Provident Funds) 36
SGB (Sovereign Gold Bond) 1
I don't invest in government schemes 49
Source: Primary Data
Note: For the above question, respondents were given the choice to select multiple options

The above table shows that most salaried individuals do not invest in government schemes.
Those who invest in government schemes prefer EPF (Employees' Provident Funds),
followed by NPS (National Pension Scheme).
Objective 2: To study the factors influencing investment decisions of salaried
individuals
Table 7.4 Factors influencing investment decision of salaried individuals

Factor influencing to investment decision Count

Safety of Principal amount 77
High Return 1

Low Risk 1

Maturity Period 1

Affordability 1
Source: Primary Data
Note: For the above question, respondents were given the choice to select multiple options

The above table shows that the safety of the principal amount is the most important factor in
the investment decision of salaried individuals.

Objective 3: To know the sources used to analyse investment avenues before making
investment decisions

Table 7.5 Sources used to analyse investment avenue before making investment decision

sources used to analyse investment avenue

Count
before making investment decision

Investment Apps 48
Financial News Source 45
Social Media 1
Company Balance Sheet 1
Financial Advisor Recommendation 40
Word of Mouth 1
Source: Primary Data
Note: For the above question, respondents were given the choice to select multiple options

The above table shows that investment apps, followed by financial news and financial
advisors’ recommendations, are the sources used by salaried individuals to analyse
investment avenues before making investment decisions.
Objective 4: To find out the difficulties faced by salaried individuals while making
investment decisions

Table 7.6 Difficulties faced by salaried individuals while making investment decisions

Difficulties faced in understanding different

Count
investment products

Complexity of Financial Jargons 1

Difficulty in Analyzing Market Trends 58

Confusion Regarding Tax Implications 1

Uncertainty about Investment Goals 1

Limited Access to Reliable Investment Advice 1

Source: Primary Data
Note: For the above question, respondents were given the choice to select multiple options

The above table shows that analysing market trends is the difficulty faced by salaried
individuals in understanding different investment products, followed by the complexity of
financial jargon and confusion regarding tax implications.
 8. HYPOTHESIS TESTING
H0 = There is no significant relation between income level and proportion of income invested by the salaried individuals.

Table 7.7 Crosstabulation - Income level and proportion of income invested by the salaried individuals
Income Less than 10% 10-20% 21-30% 31-40% More than 40% Not sure
0 - 2,50,000 18 12 0 2 0 2
10,00,000 - 12,50,000 1 1 1 1 1 0
12,50,000 - 15,00,000 1 1 1 1 2 0
2,50,000 - 5,00,000 1 1 1 1 0 4
5,00,000 - 7,50,000 1 1 6 1 1 0
7,50,000 - 10,00,000 1 1 2 0 0 0
More than 15,00,000 1 1 4 0 2 2
Grand Total 31 35 15 6 6 8
Source: Primary Data

Table 7.8 Chi-square test statistics - Income level and proportion of income invested by the salaried individuals
Less than 10% 10-20% 21-30% 31-40% More than 40% Not sure Total
0 - 2,50,000 Observed 1 1 1 1 1 1 1
10,00,000 - 12,50,000 Observed 1 1 1 1 1 1 1
12,50,000 - 15,00,000 Observed 1 1 1 1 1 1 1
2,50,000 - 5,00,000 Observed 1 1 1 1 1 1 1
5,00,000 - 7,50,000 Observed 1 1 1 1 1 1 1
7,50,000 - 10,00,000 Observed 1 1 1 1 1 1 1
More than 15,00,000 Observed 1 1 1 1 1 1 1
Total Observed 1 1 1 1 1 1 1
59.20 chi-square
30 df
.0012 p-value

Source: Primary Data

To test the hypothesis mentioned above, a chi-square test is applied. The p-value obtained is
0.0012, which is less than 0.05; therefore, the null hypothesis is rejected. This indicates that
there is a significant relationship between income level and the proportion of income
invested by salaried individuals. Consequently, it can be concluded that salaried individuals
with different income levels invest different proportions of their income. It can be seen in the
cross-tabulation table that as income increases, the proportion of income invested also
increases.

H0 = There is no significant relation between Gender and preferred investment avenue

by salaried individuals.

Table 7.9 Mean value of Genderwise preferred investment avenue of salaried individuals

Gender N Mean Rank Sum of Ranks

Male 1 54.31 3258.50
Share Market Female 1 46.16 1892.50
Total 1
Male 1 54.29 3257.50
Real Estate Female 1 46.18 1893.50
Total 1
Male 1 48.68 2921.00
Gold Female 1 54.39 2230.00
Total 1
Male 1 49.03 2942.00
Mutual Funds Female 1 53.88 2209.00
Total 1
Male 1 47.80 2868.00
Fixed Deposit Female 1 55.68 2283.00
Total 101
Source: Primary Data

Table 7.10 Mann-Whitney U test statistics of Gender and preferred investment avenue
of salaried individuals
Share Market Real Estate Gold Mutual Funds Fixed Deposit
Mann-Whitney U 1031.500 1032.500 1091.000 1112.000 1038.000
Wilcoxon W 1892.500 1893.500 2921.000 2942.000 2868.000
Z -1.417 -1.592 -1.026 -.883 -1.382
Asymp. Sig. (2-tailed) .156 .111 .305 .377 .167
a. Grouping Variable: Gender
Source: Primary Data
To test the hypothesis mentioned above, a Mann-Whitney U test was applied. The p-value
obtained for all the investment avenues is above 0.05; therefore, the null hypothesis is
accepted. This indicates that there is no significant relationship between gender and the
preferred investment avenue for salaried individuals. Consequently, it can be concluded
that both male and female salaried individuals do not differ in their investment preferences.
This is further supported by the mean values, which are very close to the preferred investment
avenues of both males and females.

9. CONCLUSION
The study concludes that mutual funds are the most preferred investment avenue for salaried
individuals, followed by fixed deposits and the share market. Government investment
schemes are less favoured by most salaried individuals. However, those who do invest in
government schemes prefer EPF (Employees' Provident Funds) and NPS (National Pension
Scheme). The safety of the principal amount is a crucial factor in their investment decisions.
They primarily use investment apps to analyze investment avenues, followed by financial
news and financial advisors. A common difficulty faced by salaried individuals is analyzing
market trends.

Further analysis of the hypothesis testing reveals that as the income of salaried individuals
increases, the proportion of income invested also rises, indicating that the amount invested is
correlated with income levels. The second hypothesis analysis shows that there is no
significant difference between genders regarding preferred investment avenues. Both male
and female salaried individuals tend to invest in similar types of investment options.

10. REFERENCES
Atodaria , Z., & Sharma , R. (2019). Investment pattern of salaried class of Somnath (Daman)
– A study of various investment options available. International Academic Institute
for Science and Technology, 6(1), 49-61.
Kalimuthu, M., & Vibharashmi, S. (2023). Investment pattern of salaried employees (with
special reference to Coimbatore city. International Research Journal of
Modernization in Engineering Technology and Science, 5(5), 3332-3339.
Miranda, M. (2023). A Study on Investment Patterns of Salaried Employees in Udupi City.
EPRA International Journal of Environmental Economics, Commerce and
Educational Management, 10(8), 13-17.
Roy, P., & Bhattacharjee, R. (2022). Savings and investment pattern of salaried individuals in
Guwahati city. International Journal of Creative Research Thoughts (IJCRT), 10(12),
555-563.
Therasa, N., & S Bhuvaneswari. (2022). A Study on Investment Pattern of Salaried People
with Reference to Coimbatore City. International Journal of Creative Research
Thoughts (IJCRT), 10(6), 787-791.