PROJECT REPORT

ON

A study on various investment opportunities

And investment pattern of salaried people

A project report submitted in partial fulfillment of the requirement for the degree of

MASTERS OF BUSINESS ADMINISTRATION

(2012-2014)

PROJECT GUIDE: SUBMITTED BY:

Prof.Kiranjitkaur NavjeetKaur

Roll no:………………

Cordia institute of business management,

Sanghol , ( Punjabi university Patiala)

CERTIFICATE

This is certify that the Final Project report entitled “A STUDY ON VARIOUS INVESTMENT

OPPORTUNITIES AND INVETSMENT PATTERN OF SALARIED PEOPLE” Submitted

in partial fulfillment of the requirement for the degree of MBA ( Semester 4TH ) affiliated to the

Punjabi University, Patiala is a research work carried out by NAVJEET KAUR under my

supervision and guidance.

PROF. KIRANJIT KAUR

(Project Guide)

DECLARATION

I Navjeet Kaur, student of cordial institute of Business management,hereby declare that the

project entitled “ a study of various investment opportunities and investment pattern of

salaried people” is an original work and the same has not been submitted to any other institute

for the award of any degree.

NAVJEET KAUR

ACKNOWLEDGEMENT

In this present world of competition there is a race of existence in which those who are having

will to come forward will succeed. Project is a bridge between practical and theoretical working ,

with this will I have joined the project . I really wish to express my gratitude towards all those

people who have helped me.

I really indebted to PROF. KIRANJIT KAUR faculty M.B.A. department cordial institute of

business management for this kind hearted approach. Her timely guidance, supervision &

encouragement have helped me to get this golden opportunity.

My project guide provided me her expert advice, inspiration& moral support in spite of her busy

schedule & assignments, has mainly provided my understanding of this project. I am very

grateful to her kind hearted approach & encouragement, which helped me immensely in

completion of this project report.

Last , but not the least, I say only this much that all are not to be mentioned but none is forgotten

and I will like to extend my special thanks and gratitude to my parents who always encourage me

in pursuit of excellence.

(NAVJEET KAUR)

CHAPTER 1

INTRODUCTION TO INVESTMENT & ITS

ALTERNATIVES

1.1 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.

1.2 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

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

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 non-

cumulative. 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 non-

cumulative.

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

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

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.

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:

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

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.

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 Minimum Deposit Maximum Deposit

1,2,3 & 5 Year TD INR.200/- and in multiples of INR.

200/- thereafter

No limit.

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.

Type of Account Minimum Deposit Maximum Deposit

Individual Account INR. 10/- and in multiples of INR.

5/- thereafter

No limit

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.

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 thefuture by investor,

also have the advantage of earning a reasonable interest on theirinvestment insurance premiums.

9.Public Provident Fund (PPF):

A long term savings instrument with a maturity of 15 years. A PPF account can beopened

through a nationalized bank at anytime during the year and is open all throughthe year for

depositing money. Tax benefits can be availed for the amount invested andinterest accrued is

tax-free. A withdrawal is permissible every year from the seventhfinancial 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

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 Maximum limit Public Provident Fund(Individual

account on his behalf or on behalf

of minor of whom he is the

guardian)

INR. 500/- in a financial year INR. 1,00,000/- in a financial year

10.Real Estate:

Investment in real estate also made when the expected returns are veryattractive. Buying

property is an equally strenuous investment decisions. Real estateinvestment is often linked with

the future development plans of the location. At presentinvestment in real assets is booming

there are various investment source are available forinvestment which are directly or indirectly

investing real estate. In addition to this, themore affluent investors are likely to be interested in

other type of real estate, likecommercial 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), specificcategories of metals are

traded in the metal exchange.

CHAPTER 2

REVIEW OF LITERATURE

2.1 REVIEW OF LITERATURE:

Behavioral finance is a new emerging science that studies the irrational behavior of the people.

Avinash Kumar Singh (2006) 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.

Sudalaimuthu and senthilkumar (2008) 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.

Sunil Gupta (2008) 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 (2008) 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.

CHAPTER 3

OBJECTIVES & NEED OF THE STUDY

3.1 NEED OF THE STUDY:

The need of the study was to fill thegapthatwas 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.

3.2 OBJECTIVES AND SCOPE OF THE STUDY:

To study the investment preference among salaried people working in different sectors in,

Ropar, Punjab, India.

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

To analyze the investment pattern among the salaried investors.

To find the problems facing by the investors.

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 peopleand it will be

helpful to identify the better investment options in the market.the scope of the study is limited to

Roper city.

CHAPTER 4

RESEARCH METHODOLOGY

4.1 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.

4.2 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.

4.3 SAMPLING DESIGN

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

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.

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

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

Sampling unit: The target population must be defined that has to be sampled. The

sampling unit of research included salaried people residing in Ropar.

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.

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

convenientelements. 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.

4.4 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.

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.

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

CHAPTER 5

DATA ANALYSIS & INTERPRETATION

DEMOGRAPHIC PROFILE OF INVESTORS:

Demographics No. of respondents Percentage of respondents

Male

female

74

26

74

26

Total 100 100

Age No. of respondents Percentage of respondents

Less than 20

20-40 years

Greater than 40

0

35

65

0

35

65

Total 100 100

Occupation No. of respondents Percentage of respondents

Government employee

Private employee

38

62

38

62

Total 100 100

Income (per month) No. of respondents Percentage of respondents

Less than 20000

20000-40000

Greater than 40000

20

55

25

20

55

25

Total 100 100

Interpretation:

It was found that the major population of investors was greater than 40 yrs and 35% was of 20-

40 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. 20000-

40000.

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

Types of investment

instruments

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

Interpretation:

8

3021

13

No. of respondents

shares

Bank deposits

insurance

Post office savings

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

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

38

30

25

No. of respondents

shares

Mutual funds

Bank deposits

Post office savings

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

No. of respondents Percentage of respondents

Daily 0 0

0

10

90

100

No. of respondents

Steadily

At an average rate

At fast rate

Total

Weekly 20 20

Monthly 45 45

Yearly 35 35

Total 100 100

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.

0

20

45

35

No. of respondents

Daily

Weekly

Monthly

Yearly

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

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

14

22

40

24

No. of respondents

Up to 10%

10-15%

15-20%

More than 20%

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

10

42

38

6

No. of respondents

Wealth creation

Future needs

Children’s education

House building

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 &

consultants

12 12

Newspapers & advertisements 10 10

Agents 5 5

Workshops & seminars 5 5

Total 100 100

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

48

20

12

10

No. of respondents

Self

Friends & relatives

Service providers & consultants

Newspapers & advertisements

safety of principal 7 7

liquidity 15 15

Total 100 100

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

25

20

15

6

No. of respondents

Return on investment

Tax benefits

Capital appreciation

Maturity period

No. of

respondents

Percentage of

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

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.

25

40

30

5

No. of respondents

Transfer funds into secureinvestment

Wait to see if investmentimproves

Invest more funds

Withdraw funds & stopinvesting

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

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.

98

2

100

0

No. of respondents

Yes

No

Total

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

particulars Highly

dissatisfied

(1)

Dissatisfied

(2)

Neutral

(3)

Satisfied

(4)

Highly

satisfied

(5)

Summated

score

shares 30 30 10 25 5 245

Mutual

funds

20 18 35 19 8 277

Bank

deposits

10 6 14 30 40 384

Post office

savings

15 10 15 40 20 340

insurance 12 15 20 35 18 332

Gold/real

estates

30 10 20 30 10 280

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

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.

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:

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.

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.

REFERENCES

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

The icfai journal of stock market, 6 (3): 43-60. Availableat

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/

ANNEXURE

QUESTIONNAIRE

Dear respondent,

I am a student of MBA in cordial institute of business management 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?

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

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

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

(1)

Dissatisfied

(2)

Neutral

(3)

Satisfied

(4)

Highly

satisfied

(5)

Summated

score

shares

Mutual

funds

Bank

deposits

Post office

savings

insurance

Gold/real

estates