Investment Motive of Individual Investor in the Stock of Market of Nepal
62 Pages Posted: 3 Jul 2015
Date Written: July 2, 2014
An investor may have specific investment objective for his/her investment. Investment objective is the motive for which investment is made. Some investors may invest fund for regular income while others may prefer capital gain. In general, investment is concerned with risk taking activity for future returns over a long period which is not necessary to be marketable in short run. The primary source of return is earnings of the firm and investment is based on sufficient information and analysis. On the other hand, speculation is short-term phenomenon that involves purchasing marketable securities with the expectation of getting high return in short period. The primary source of return is changes in the market price of an asset and speculation is made with limited information and analysis. Similarly, gambling is an act of risk taking activity without having proper knowledge of associated risk. It is an unplanned and non-scientific act based on tips, rumors, hunches, etc.
The general objective of this study was to identify the current state of investment motive of individual investors in the stock market of Nepal. It further intended to identify the association between information and analysis, investment horizon, age level, academic qualification and experience in stock market with investment motive of the individual investor.
The study was quantitative in nature. The study adopted exploratory survey research design and correlation research design. This study took the sample of 111 people who have invested their money into the stock of corporations, using purposive convenience sampling method.
This study finds that the most of the investors had the investment motive of speculation and least of the investors had the investment motive of gambling. There was a positive relationship between information and analysis, investment horizon, age level, and experience in stock market with investment motive. Further this study also revealed a moderate association between academic qualification and investment motive.
The results reported in this study hold several important practical implications. Whether the investment motive is investment or speculation, investors must search adequate information and analysis before investing into the stocks of company. The results found that rumors and tips are playing vital role in Nepalese stock markets. Investors are recommended to leave such practices. They must make their investment decisions based on adequate information and analysis, since it is always difficult to lose hard earned money. Similarly, investors can have knowledge of basic accounting and finance, so that they can analyze financial statements and make wise investment decision based on the firms’ financial statements. Therefore, investors should know about the company they are investing, despite of investment motive as speculation or investment. It is recommended to the investors to leave the investment motive of gambling and invest in the firm with proper and adequate information and analysis.
Keywords: Investment Motive, Individual Investor, Stock of Market of Nepal
JEL Classification: G10, G11
Suggested Citation: Suggested Citation