A Study on Retail Investors Asset Choices and its association with Demographic Parameters

Abstract

The investment decisions of the investors are guided by both economic as well as demographic factors. The risk, return, liquidity etc. are not sufficient to explain the rationale behind the asset choices of the individual. This research explains the investment preferences of retail investors and also analyses the association of demographic factors like income and occupation with the asset choices of the retail investor of Nagpur city. To study the investment preference of 415 respondents Garrett Ranking test was applied and it was identified that Equity Shares is the most preferred investment followed by mutual funds. To study the association between income, occupation and investors asset choices Kruskal Wallis test was applied in the SPSS software and it was concluded that income and occupation are not strongly associated with the choices of the respondents.

The results of the data analysis indicates that around 42% of the respondents are investing only upto 10% of their income which is in line with the National trend highlighted in the RBI report (Reserve Bank of India, 2019). When it comes to making allocation of money towards various assets, the Indian investors are shifting their preferences from traditional physical and financial assets towards new investment avenues such as mutual funds and equity shares (Karvy Private Wealth, 2019). The most preferred asset class for the respondents of the study is equity shares followed by mutual funds as per the Garrett Ranking. The asset allocation is done by the investors keeping in mind their investment objectives, the respondents of the study said that the prime three objectives of their investment includes wealth creation (Samudra & Burghate, 2012), regular income and tax planning. The assets prefered by the respondents are in sync with their investment objectives.

The investor asset choices are also governed by factors such as age, gender, occupation and income etc. (Mittal, 2017) concluded that demographic parameters like education, occupation and family income have an impact on investment decisions. The researchers with the help of data analysis have established that there is an association between the asset choices of individuals and income for certain assets like equity shares, insurance, commodities, public provident funds and government bonds and also occupation has an association with preference for assets like mutual funds, equity share derivatives and public provident fund. The market regulators like SEBI, AMFI, broking houses and private wealth management firms keep conducting research in this area to improve the participation of individuals in capital markets, to guide them in achieving their financial goals and to develop new financial products and services to meet their financial objectives.

Keywords: Investor behavior, Demographic factors, Investment Alternatives, Investment choices

JEL Classification: G11, G10