DATA ANALYSIS

INDIVIDUAL INVESTORS ATTITUDE TOWARDS INVESTING:

1. Investment Avenues in which people have invested through the years:

The above graph (figure 1) depicts the list of investment avenues in which the respondents
have ever invested in throughout the years. The data has been represented in a descending
order rank of the investment avenue in which most of the people are investing in to the least
preferred investment avenue. The magnitude of bar beside each investment avenue
represents the percentage of total respondents who have ever invested in that particular
avenue.

It can be observed that the majority (28.4%) of the respondents prefer to allocate their
savings as Fixed Deposits. This behavior may be owing to the fact that fixed deposits are
one of the safest forms of investment avenues giving constant returns. Mutual funds and
equity investments can also be observed to be popular forms of investment avenues
amongst the respondents with around 17.6% and 15.3% of the respondents investing in
them respectively. The popularity of these avenues may be owing to the fact that they offer a
high-risk premium that attracts investors. It was found that the majority of the respondents
who were investing in these avenues (Mutual funds and Equity) had also parked their money
in fixed deposits, thus, diversifying their risk profile. Insurance (14.7%) also occupies a
significant position in the investment portfolio of the respondents. Whereas the other
avenues like PPF, Commodity markets, Real Estate, schemes like NSS & NSC, bonds and
debentures, pension schemes, government securities, money market securities, etc are
found to be less popular investment avenues. These avenues were found to be less popular
because of less awareness among the respondents about these avenues. It was found that
more than 50% of the respondents had never heard of all these other investment avenues
and amongst the respondents who had heard of these avenues, only a few were willing to
invest in them due to less confidence and negligible knowledge.

1.

Preferred duration/term of Investment

DEMOGRAPHIC- INVESTMENT RELATION

1. GENDER-INVESTMENT RELATION
2. AGE-INVESTMENT RELATION

Investigating:

1. If there is a significant relationship between Age and risk appetite of an

individual
2. If there is a significant relationship between Age and level of financial literacy
of an individual.

Table 1: Descriptive Statistics

Mean Std. Deviation N

Age 2.49 1.066 410

Risk 3.97 .903 410

FL 2.23 .722 410

Table 2: Correlation Analysis

Risk FL

Age -.134** -.259**

Risk .012

Financial Literacy
(FL)

**. Correlation is significant at the 0.01 level (2-tailed).

Results:

A Pearson product-moment correlation was conducted to examine the relationships between

age, risk level, and level of financial literacy. (Table 2)

Pearson product correlation of Age and Risk level was found to be low negatively correlated
and statistically significant (r = -.134, p < .01) i.e., Age of an individual has a weak negative
correlation with their risk appetite. This shows that as an individual becomes older, his/her
risk-taking capacity decreases. The effect size of age (r2= .017) indicates that the age of an
individual accounts for a very low(1.7%) of the variability in the level of risk of that individual.

Pearson product correlation of Age and Financial literacy from investments was found to be
moderately negatively correlated and statistically significant (r = -.259, p < .01) i.e., Age of an
individual has a considerable negative correlation with their level of financial literacy. This
shows that older people tend to be more financially literate as compared to younger people.

Analysis:

This data analysis establishes a significant relation which depicts that as individuals age,
their risk appetite often tends to decrease to a certain degree. This can be explained due to
various factors. One primary reason can be the increased awareness of their limited time
horizon for financial recovery in case of losses. Older individuals may have fewer years left
in their working lives and may not have the time or opportunity to recover from substantial
financial losses. Additionally, as retirement approaches, the need for financial stability and
security becomes more prominent, and the desire to protect accumulated wealth tends to
outweigh the appetite for taking on high-risk investments. Age-related changes in cognitive
abilities, such as decreased cognitive flexibility and increased aversion to uncertainty, can
also influence risk appetite in older individuals. Overall, a combination of factors, including
reduced time horizon, increased focus on financial security, and changes in cognitive
abilities, contribute to the decrease in risk appetite as individuals age.
However, the collected sample data shows that the effect of age of an individual is very low
on the level of risk taken by them. This is because risk appetite is a multifaceted concept that
is influenced not only by age but also by a variety of other factors, including an individual's
financial goals, personal circumstances, financial knowledge, experience, and emotional
tolerance for risk. Different individuals may have different risk tolerances at the same age, as
their unique circumstances, financial situation, and investment objectives play a significant
role in shaping their risk appetite. For example, a financially secure older individual with a
high net worth may have a higher risk appetite compared to a younger individual with limited
financial resources and responsibilities. Thus, age alone does not solely determine an
individual's risk level in investing.

This data analysis establishes a significant relation which depicts that older individuals tend
to have higher levels of financial literacy compared to younger individuals. This is supported
by the understanding that as individuals age, they typically have more life experiences and
opportunities to develop financial knowledge and skills through various stages of their lives.
They may have gone through multiple financial decisions, such as investing, saving for
retirement, and managing their finances, which can enhance their financial literacy over time.
They also tend to have more exposure to financial products and services, including
retirement plans, investments, and insurance, which might have contributed to their financial
knowledge. Additionally, older individuals may have had longer periods of time to accumulate
wealth and assets, which can necessitate a higher level of financial literacy to manage and
protect their financial resources effectively. Overall, age and life experiences positively
impacts financial literacy levels in older individuals.

3. OCCUPATION-INVESTMENT RELATION

Occupation based classification of investors

Homemaker Retired
3% 1%

Student
Self Employed Salaried
37% Student
Business 50%
Salaried
Homemaker
Retired

Business
4% Self Employed
5%

The above graph shows the occupation wise distribution of investors from the collected
sample data. It can be observed that majority of the respondents were students (50%),
followed by salaried individuals (37%), Self-employed and business professionals (9%),
homemaker (3%) and retired (1%).

4.EDUCATION-INVESTMENT RELATION
 Education based classification of investors
Attended school High School
Professional 1%
11% 3%
Graduate
Postgraduate 27%
20%

Attended school
High School
Graduate
Undergraduate
Postgraduate
Undergraduate
Professional
37%

The above graph shows the distribution of investors on the basis of their highest educational
qualification from the collected sample data. It can be observed that majority of the
respondents are undergraduates (37%), followed by graduates (27%), postgraduates (21%),
professionals (11%), high school graduates (3%) and only attended school (1%). Thus, it
would be appropriate to say that the data has been collected from the literate population
segment.

FINANCIAL LITERACY

1.Cross Sectional Classification Of Investment Avenues & Financial Literacy

Investment Avenues 1 2 3
1. Fixed Deposit 18 87 113
2. Equity Investment 5 36 73
3. Mutual Funds 8 36 82
4. Public Provident Fund 5 36 65
5. Bonds & Debentures 4 14 24
6. Post Office Savings Scheme 3 23 42
7. Insurance 5 38 70
8. Commodities 4 24 63
9. Real Estate and REITS 0 17 44
10. Pension Policies 0 10 25
11. Government Securities 0 7 18
12. NSS & NSC 0 6 26
13. Money market funds 2 15 16
14. Others 0 8 12
15. None of these 34 57 25
 Cross Classification of Investment Avenues and
Financial Literacy
120
100
80
NO. OF PEOPLE INVESTING

60
40
20
0
nd e
s it en
t ds re
s m ce es TS es es
NS
C ds rs se
e po tm F un t Fu tu che ran d iti R EI l ici riti f un t he the
n u o o u & .O
D es al en e S ns d P
Se
c S et of
xe
d
Inv u tu vid D eb ngs .I m
m an i on t NS a rk 14 ne
i o i 7 o t e s n . o
1.
F ity M Pr &
Sa
v
8.
C ta en e 12 m N
qu 3. lic nds e Es .P rnm ney 15.
E b c l 0 o
2. Pu Bo ffi ea 1 ve
.M
4. 5. s tO 9 .R . Go 13
Po 11
6.
INVESTMENT AVENUES

1 2 3

2. Investigating the relationship between financial literacy and investment behaviour:

Investigating:

1. If there is a significant relationship between financial literacy and level of income

invested.
2. If there is a significant relationship between financial literacy and level of
satisfaction with investment.

Table 1: Descriptive Statistics

Mean Std. Deviation N

FL 2.47 .632 216

Investment 2.80 1.119 216

Satisfaction 3.41 .890 216

Table 2: Correlation Analysis

IL SL

Financial literacy .216** .153*

 Investment Level (IL) .140*

Satisfaction Level
(SL)
**Correlation is significant at the 0.01 level (2-tailed).
*Correlation is significant at the 0.05 level (2-tailed).

Results: A Pearson product-moment correlation was conducted to examine the

relationships between financial literacy, level of investment, and level of satisfaction from
those investments. (Table 2)

Pearson product correlation of financial literacy and Investment level was found to be low
positive and statistically significant (r = .216, p < .01) i.e., level of financial literacy is less
strongly positively related to the level of investment. This shows that an increase in the level
of financial literacy would lead to a higher level of investment by an individual but at a low
magnitude. The effect size for financial literacy (r2 = .046) indicates that the level of financial
literacy of an individual accounts for a moderate (4.6%) of the variability in the level of
investments made by an individual.

Pearson product correlation of financial literacy and satisfaction level from investments was
found to be very low positive and statistically significant (r = .153, p < .05) i.e., level of
financial literacy is even less strongly positively related to the level of satisfaction from those
investments. This shows that an increase in the level of financial literacy would lead to a
slight increase in the level of satisfaction of an individual from their investments but at a very
low magnitude. The effect size of financial literacy (r2= .02) indicates that the level of
financial literacy of an individual accounts for a low (2%) of the variability in the level of
satisfaction from investments made.

These findings indicated that an increase in financial literacy does lead to an increase in the
level of investments made by individuals but only a slight increase in the satisfaction level
derived from those investments.

Analysis:

This research establishes a significant relation which depicts how a person who is financially
literate is more likely to allocate a larger percentage of their income to various types of
investment avenues. This behaviour is encouraged by the fact that a person who is
financially literate is more aware about the importance of investing early and consistently to
accumulate a significant pool of wealth in the long run through the power of compounding.
Apart from that, financially literate people have clear financial goals and a strategy for
achieving them. They prioritise long-term financial stability over short-term expenditure, and
understand that investing is an essential instrument for accomplishing their goals.They are
therefore more motivated to invest a sizable portion of their income in order to benefit from
the effect of compounding and achieve their financial objectives more quickly. While this is
true, it should also be noted that the portion of investment made by an individual is not solely
influenced by the level of financial literacy but also by the level of income, age, risk apetite
and number of dependents in the family of an individual.

This research found that a person who is financially literate tends to be more satisfied with
the investments that they have made. This is because people that are financially literate are
also adept at controlling and managing their investments. They are aware that all
investments have some level of risk, and use strategies like risk assessment, diversification,
and asset allocation to maintain their risk appetite. By investing in a variety of industries,
they diversify their portfolio and lower their risk exposure. Also, people who are financially
literate tend to make wiser decisions than those who are less financially literate. This link
shows that someone with superior financial understanding will be able to make wise financial
decisions and has a tendency to end up in a better financial situation with more satisfaction
than someone who doesn't have any financial knowledge. While this is true, it should also be
noted that there is not a very strong correlation between increasing levels of financial literacy
and satisfaction which can be owed to the possibility that as people fulfil their primary goals,
their wants and expectations increase more and they desire for an even more higher return
but markets are imperfect and fluctuations persist in every domain so they tend to have
lower satisfaction. In other words, financially literate individuals are at a better place than
those who are not financially literate but still have less satisfactions due to their high
expectations of return.

FUTURE TRENDS