A STUDY OF INVESTMENT PATTERN ON THE BASIS OF DEMOGRAPHIC TRAITS

Investor’s behavior is influenced by many factors during investment decision making. Demographic profile of investors is also one of the decision influencing factor among others. The aim of this paper is to examine the effect of demographic factors on investor’s level of risk tolerance regarding the choice of investment. 670 investors Pune City, Maharashtra State, India were selected as sample. ANOVA, Mann Whiteny ‘U’ test, KruskalWallis test were used to explore the effect of demographic factors on investor’s level of risk tolerance regarding the choice of investment. Result of the paper showed that demographic factors of investors such as Age, Educational qualification, Income level, effect the investor’s level of risk tolerance. These results are important for managers to advise their clients about better area of investment and risk level according to their demographic profile.


INTRODUCTION
Investment has different meaning in the context of finance and economics. Finance investment is putting money into something with the expectation of gain that upon thorough analysis has a high degree of security for the principle amount, as well as security of return, within an expected period of time. In contrast, putting money into something with an expectation of gain without making thorough analysis is speculation or gambling. Thus, Finance Investment involves decision making process in order to ensure security of both the principle amount and the return on investment (ROI) within an expected period of time.
The two main classes of investments are i) Fixed Income Investment such as bonds, fixed deposits, preference shares and ii) Variable Income Investment such as business ownership (equities) or property ownership. On the basis of tenure, the investments are classified as i. Short-term Investment and ii. Long-Term Investment. Investments made for a period of one to three years are termed as short-term investments and that are invested for more than three years are termed as long-term investments. Almost everyone holding some portfolio of investment in the form of financial assets like bank deposits, bonds, stocks and so on; and real assets like motorcycle, house, gold etc.
With reference to individuals, investment decisions should be made very wisely and with proper research and analysis. Investment is always attached with the element of risk of losing the invested money and this loss is not under the control of the investor. Hence, it is always advisable to measure and analyze all risks involved before making investments. Plenty of investment avenues available for the investors make their decision making process more critical and complex. There are a number of factors which influence the people to make their investment decisions. Demographic factors of investors such as gender, age, education, family size, annual income, and savings have much significance in the Investment Decision Making Process, especially in the Indian context, it assumes greater significance. A study has been undertaken in Pune City of Maharashtra state, India to find its significance and the outcome of the study is narrated in the foregoing paragraphs.

REVIEW OF LITERATURE
To get more insight about investment pattern, researchers studied relational studies of investment pattern and demographic variables like Age, gender, income, educational background and occupation are studied.

Age and Investment Pattern
Age is found to be the most important determinants of investor style. Several researchers found the association between life cycle stages and investment pattern (Rajarajan 1994) found that the size of investment in the financial asset provides significant insight in the likely preference of individuals for particular class of financial instruments and investment approaches. The percentage of risky assets to total financial investment declined as the investor moves up through various stages in life cycle and Investment size below Rs. 50000 constitute the majority in all stages of life cycle. It can be said that the association of investment size and investors stage in life cycle does have a specific pattern. Similarly (Rajarajan 1999) concluded that the size of investment in financial assets and the percentage of risky assets in financial investment declines as the investor move up through the various stages in the life cycle.
Some researchers explored that investment choices differ according to age groups. Young investors find investing in equity shares/derivatives more comfortable, while old investors prefer PPF as their first choice. Middle aged investors prefer investing in mutual funds and NSC. (Meenu Verma 2008). Young aged investors (26-35) invest in mutual fund, while middle-aged investors (36-45) invest in debentures/bond, (Manish Mittal and R K Vyas, 2007). (Avinash Kumar Singh 2006) found that all the age groups give more important to invest in equity and except people those who are above 50 give important to insurance, fixed deposits and tax saving benefits. The studies relating to age and specific investment avenue (Karthikeyan 2001) has conducted research on Small Investors Perception on Post office saving Schemes and found that there was significant difference among the four age groups, in the level of awareness for Kisan Vikas Patra (KVP), National Savings Scheme (NSS), and deposit Scheme for retired Employees (DSRE),and the overall scores are confirmed that the level of awareness among investors in the old age group was higher than in those of young age group. Thus it can be concluded that that as age increases, the ability to take risks decreases and people go towards safer investments, On the contrary, (Gnana Desigan C, S. Kalaiselvi and L. Anusuya 2006) concluded that age of the women investors and level of awareness about investment is not associated. (P. Vinoth Raj 2012) found that there is a strong negative correlation between Age and Risk tolerance level of the investor.
Above literature reveals that life cycle characteristic as segmentation variable provides an opportunity for segmentation of investors and blurs some differences between individual investors and their financial service need.

Gender and Investment Pattern
Traditionally men were the target segment of financial institutions, while women were viewed as feeling much less confident with financial services. But recent societal developments e.g., the demise of the nuclear family, the career-seeking woman have made women more knowledgeable of financial services.
Many researchers focused on investment preferences as per gender. (Manish Mittal and R K Vyas, 2007) found that males and females differ significantly in their choice of investment. Females prefer bank /postoffice deposits and least prefers equity shares and vice versa with male. Similarly, females prefer bank FD, insurance and bullions, (Meenu Verma 2008). The difference however is insignificant with medium riskmedium return investments as debentures, mutual funds and real estate/bullions. Similarly Meenu Verma (2008) noted that males prefer real estate, PPF and equity shares as attractive avenues for investment, (Karthikeyan 2001) has found that there are no differences were observed among male and female investors except for investment avenues such as NSS and KVP.
According to risk bearing capacity in investment decision making, (Manish Mittal and Dr. R. K. Vyas 2009) (Crosnan and Gneezy 2004) concluded that women are more risk averse and prefer low risk fixed income investments. Similarly, Eckel and Grossmann (2001) found significant gender differences in choices between several risky prospects with women indicating a preference for the less risky prospect. On the other hand, although Schubert et.al. (1999) found gender differences in abstract gambling decisions, the differences disappeared with the introduction of an investment decision context. Kruse and Thompson (2003) also found no significant differences between men and women in low probability loss situations. For choices under ambiguity, Powell and Ansic (1997) found that women are more uncertainty averse than men irrespective of familiarity, framing or costs. In their experiment, individuals demonstrate ambiguity adverse behavior in unfamiliar situations when compared to familiar ones. Schubert etal. (2000) found weak differences under two different formats of ambiguity but again no differences under risk. Giridhari Mohanta and Dr. Sathya Swaroop Debasish (2011) observed that there is significant role of income and occupation in investment avenue selection by the male and female investors. Mostly male investors are found as active participant in avenue selection than female and generally they are sound in these two respects than female investors. Also (Srinivasan Sakthi K, Lakshmi Devi S 2006) concluded that there is significant relationship between gender and percentage of income saved by the respondents.
Therefore it is evidence that women are more risk averse then men in general and this translates to investing in less risky assets in their investment plans. Differences in financial literacy between men and women also explain differences in their investment decisions. It reveals that gender-based segmentation is always useful for financial services marketers in order to adapt their communications policy to the degree to which the genders understand the complex nature of financial services.

Income and Investment
Income is very important determinant of investment decision making. Investment pattern changes according to different income group such as lower, middle and higher income group. Every group is having different savings and different investment preferences. Respondents from lower income groups i.e less than Rs. Above studies reveal that the investment preferences are different among various income groups. As the income rises, the proportion of investment arises. Very few studies have been conducted in this context. Therefore preferred Investment Avenues and income group segmentation can be widened to get more insight in financial service industry.

Education and Investment
Education is also playing vital role in making choice of an investment. Manish Mittal and R K Vyas, (2007) found that Investors with less education prefer high-risk investments, such as, equity and derivatives. Undergraduate investors invest in high risk, high-return investments, such as, derivatives and real estate/bullion. Graduates prefer moderate risk and moderate return investments like debentures/bonds, while postgraduates and professionals invest in mutual funds and equity. They concluded that the propensity to take risk decreases with increase in education Above literature reveals that very few studies have been made in relation to education and investment. Therefore it is difficult to depict exact trend of association between education and investment pattern.

Occupation and Investment Pattern
Individuals belonging to different occupations exhibit varying investment pattern. Every occupation is having different income. Some occupations are having fixed income and vice versa. Accordingly investment choices are different. Generally Service class, Profession, Businessman, Students and retired persons are the major classes under the head of occupation.
Service class people invest their savings in equities and Mutual Fund (Mittal Manish, 2007), PPF and Post Office schemes (Verma, 2008). Business class prefer to invest in debentures, bonds, real estate and bullions (Mittal Manish, 2007), real estate and bullions (Verma, 2008), Professionals invest in post office schemes and derivatives (Mittal Manish, 2007), Mutual Funds and insurance (Verma, 2008). Housewives prefer safe investments like real estate, bullions (Mittal Manish, 2007), bank FD's and bullions (Verma, 2008) Students choose high risk investment like derivatives and equities (Mittal Manish, 2007) and equity and MF (Verma, 2008 Above studies reveal that occupation of investors play important role in investment decision making. Investment choices on the basis of occupation are mainly associated with risk bearing capacity of investors.
From the above literature, demographic variables are one of the major determinants which influence investment decision making of investors. Demographic factors, apart from other factors, exhibit the major characteristics of individual investors. Investment decisions differ from individual to individual who in turn differ demographically. The study is to find whether the demographic factors, to what extent, such as gender, age, education, occupation, and income, have influence over several elements of investment decisions.

RESEARCH METHODOLOGY
Present study is based on Empirical Research. Present research work is set to test following hypotheses.
Ho1 -There is no significant difference into investment pattern of individual investor on the magnitude of demographic profile. The demographic profile includes Age, Gender, Occupation, Income, Educational qualification.
Structured Schedule was used to collect primary data. It was divided into five parts. The structures were Percentage of existing investment and future preferences, Objectives behind Investment, Guiding Factors, Sources of information availed and demographic profile of sample respondents. The scope of the research was the metropolitan city of Pune. Stratified convenient sampling technique was used to draw sample from population. Stratification is done on the basis Socioeconomic Classes. These Socio-economic Classes are defined on the basis of number of household items owned and educational qualification. Samples from all groups were approached conveniently. Total sample Size was 670. Collected data are classified using electronic spread sheet; various statistical tools like ANOVA, Mann Whiteny 'U' test, Kruskal-Wallis test are used to analyze the data.

DATA ANALYSIS AND DISCUSSIONS
Above stated hypotheses are tested with respect to existing investment made by samples in respective investment instruments. All stated investment instruments are taken for testing of hypotheses.

Investment Instrument Wise hypotheses testing Hypothesis Testing for Gender and Investment pattern
Hypothesis related to Gender is tested with the help of Independent sample 't' test Following table shows independent sample 't' testing of existing investment in investment instruments on the basis of Gender          To verify the results of ANOVA, Kruskal Wallis Test is also performed    To verify the results of ANOVA, Kruskal Wallis Test is also performed.    To verify the results of ANOVA, Kruskal Wallis Test is also performed.

MAJOR FINDINGS
It is found that by using parametric test such as Independent sample 't" test and ANOVA and nonparametric test such as Mann-Whitney Test and Kruskal Wallis Test, there is significant difference in investment pattern on the magnitude of demographic factors such as Age, Income and Educational Qualification.

CONCLUSION
The study on people's choice in Investment Choices has been undertaken with the objective, to analyze the investment pattern of investors on the magnitude of demographic traits all the age groups give more preference to invest in Insurance, NSC, PPF and Bank Deposit. Income level of a respondent is also an important factor which affects portfolio of the respondent. Middle age group, Lower income level groups respondents are preferred to invest in Insurance, NSC, PPF and bank deposit rather than any other investment avenues. The purpose of this study was to determine whether the variables such as demographic characteristics (age, gender) and investment patterns could be used individually or in combination to both differentiate among levels of men and women investment decisions and risk tolerance and develop some guidelines to the investment managers to design their investment schemes by considering these views of individuals.