ASSOCIATION BETWEEN LONG TERM ORIENTATION AND INVESTOR PREFERENCE TOWARDS DIFFERENT AVENUES

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1 ASSOCIATION BETWEEN LONG TERM ORIENTATION AND INVESTOR PREFERENCE TOWARDS DIFFERENT AVENUES Sreethamol P S Assistant Professor (FDP Substitute) P G & Research Department of Commerce The Cochin College, Kochi, Kerala Dr.Vineeth. K. M. Assistant Professor of Commerce Maharaja s College, Ernakulam, Kerala ABSTRACT In today s competitive business environment, different avenues of investment are availableit includes share market, debentures or bonds, money market instruments, mutual funds, life insurance, real estate, precious objects, derivatives and non-marketable securities. In such a situation, investors tend to get confused about how and where to invest. All are differentiated based on their different features in terms of risk, return, term etc. All investment areas have advantages and disadvantages. Selection of investment avenues depends on the needs and preference of the investor. Before investing in any area every investor needs to analyse each investment alternatives in terms of their risk, return, term and convenience etc. Both time and goal play vital role in selection of investment avenues. So there may be a relationship between long term orientation and investment avenue selection. If an investor is giving more importance to the future return he might be giving less importance to the short term materials or even short term emotional satisfaction in order to prepare for the future(geert Hofstede). There are number of investment areas with different features and an investor s preference depends on his objective. The proposed study tries to find any association between long term orientation and investors preference. The study employs both primary and secondary data. Primary data is proposed to be collected through structured questionnaire using Long term orientation scale (Bearden, Money and Nevins, 2006). Both descriptive and inferential statistics shall be applied to support the study. Key Words: Investment avenues, Long term orientation, Investor Preference Introduction In the modern world competitive business environment has so many investment avenues.in layman s language, investment means the use of money with the expectation of making more money. In finance, investment means the purchase of a financial product or other item of value with an expectation of favourable future returns.it means investment is the current commitment of money for a span of time in order to facilitate future returns that will compensate the investor for the time the funds are committed, the expected rate of inflation, and the uncertainty of the future payments.different avenues and alternatives of investment include share market, debentures or bonds, money market instruments, mutual funds, life insurance, real estate, precious objects, derivatives, non-marketable securities etc. These are differentiated on basis of their features in terms of risk, return, term etc.all personal investmentsare made to achieve some financial or personal objectiveswhich may be tangible or intangible.for example financial security, future return, value for money, peace of mind, life time needs etc. Also selection of an investment avenue may depend on the interest of the investor like long term orientation or short term orientation. When an investor is focused on the future he will be willing to delay short term material or social success or even short term emotional gratification in order to prepare for the future. It means he is perseverant, thrift, hardworking, family based and focussed on the future (Greet Hofstede).This is called long term orientation. In this caseto identify and analyse the preference of an investor towards different investment avenues needs a study which examines Association between Long Term Orientation and Investor Preference. Hence, 208

2 to fulfil the objectives of the study here applied long term orientation scale by William O. Bearden, R Bruce Money, Jennifer L. Nevins (2006). Therefore, this paper attempts to understand association between long term orientation and investors preference. Literature Review Dr. V. L. Shobhana and J. Jayalakshmi in their study titled Investors Awareness and Preferences A Study (2006) has assessed the level of investor awareness about investment options and investment risks. In this study it was revealed that the investment in real estate is the first choice of majority of the respondents. Bank deposit isthe second most preferred investment. Demographic variables such as age and education do not have important influence over investor s awareness while difference in occupational status leads to discrepancy in the awareness level of Investors. A survey was conducted by Intelligent Investors (A Fortnightly magazine) (1998) about the home instincts of investors. The survey was planned to understand the average Indian s preference to housing, residence and real estate. 40 Per cent of male category opted for square feet spacious house to a family of four members, whereas 50 Per cent of female respondents opted for a house of square feet. Sixty Per cent of Chennai based respondents preferred even smaller space ( sq. feet) for a family of four members, 34 Per cent of male and 28 Percent of female respondents expressed their willingness to have a house of their own even before their marriage. But among the total respondents, 34 Per cent wanted their own house after having children. Fifty eight per cent of Calcutta based respondents and 48 Per cent of Chennai based respondents were willing to own a house before their retirement. Rajarajan V (2000) had conducted a study on the title of Investors life styles and investment character. The study revealed that there are two type of investors ie active investors and passive investors. Active investors are in the age group below 35 years and passive investors are in the age group of 35 to 50 years. Active investors group and passive investors group have short term goals while making their investment decision. Singh (2004) has established that middle class salaried investors and professionals preferred invest in Mutual Funds in order to get higher tax rebates. Further, it is evidenced that small investors considered Mutual Funds to be a better investment alternative and public sector investments to be less risky. Madhumathi.R (1998) in her study titled Risk Perception of Individual Investors and its Impact on their Investment Decisions made an attempt to understand the risk perception of 450 individual investors, selected at random from major metropolitan cities in India, dividing them into three groups as risk seekers, risk bearers and risk avoiders. The major finding of the study wasthat majority of the investors were risk bearers and their investment decisions were highly influenced by the company s performance. They were also influenced by the advice of share brokers and investment consultants. The risk seekers generally took decisions based on market conditions, industrial positions and social changes. They also explored various newspapers and reports for gathering information. Risk avoiders did not have any specific traits and were very objective and looked for facts and certainty in their investment decisions. They trusted the advice of their friends and relatives. Uma Shashikanth (2011) in her article titled In the current investment environment, a long term orientation always helps has established that investment means thinking for the long term, and can treat all other endeavours under speculation activity. Statement of the Problem In the past several research studies were conducted to understand the factors that contribute towards the selection of investment avenues. But there were hardly any attempt toanalyse and understandthe relation between Long term orientation and investors preference. Having reviewed several studies and identified the gap, felt an imperative need to undertake this present investigation. Objectives of the Study 1. To understand investors Preference towards different investment avenues. 2. To analyse the association between socio economic variables and investor preference in most preferred investment area. 3. To analyse the association of Long Term Orientation and Investors Preference. Hypotheses The presents study hypothesises the following based on the objectives: H1 : There is no significant difference in the investment avenues preferred by investors. H2 : There is no association between the socio economic variables and most preferred investment avenues. H3 : There is no significant difference in the level of Long term orientation among investors. H4 :There is no significant association between socio economic variables and Long term orientation H5 : There is no significant association between the level of Long term orientation and most preferred investment avenues. Research Methodology The study is empirical in nature based on primary data collected from 120 sample respondents and secondary data from published sources.primary data for this study was collected by using structured questionnaire. Secondary data from published materials was collected from various journals, reports, and magazines. Sample selection was done on our discretion, focusing on people who were above 18 years of age. Instrument: For Present study, structured questionnaires were used Analysis: Long term orientation was assessed adapting the scale developed by William O. Bearden, R Bruce Money, Jennifer L. Nevins (2006). Both descriptive and inferential statistics have been applied to arrive at the conclusions based on the study. Data Analysis and Results 209

3 Table 1 Demographic Profile of the Respondents Variable Category Frequency Percentage Male Gender Female Below to Age 40 to Above Self Employed Wage Worker Occupation Salaried-Govt/Public Sector Salaried-Private Sector Unemployed SSLC or Below /Diploma Highest Educational Graduate Qualification Post Graduate Rural Region Urban Single Marital Status Married Widow/Widower 6 5 Below Rs Rs to Rs Monthly Income Rs to Rs Above Rs Hindu Christian Religion Muslim 6 5 Others 0 0 Type of Family Nuclear Joint Total Source: Survey Data Table 2 Investment Avenues Preferences Investment Avenues Mean Rank P Value 5% Level of Significance Bank Deposits 1.70 Chit Funds 4.68 Shares 7.17 Mutual Funds 6.69 Life Insurance 2.90 Health/Medical Insurance 5.67 General Insurance 6.91 < 0.001** Significant Postal Savings/NSC/etc 6.59 Gold 5.12 Real Estate 8.38 Futures/Forwards/Options/Swaps Others

4 # Friedman Test 1% level of significance H1:The mean rank of all the investment avenues by using Friedman test is presented in Table2.Among the investment avenues Bank deposit possess first rank (1.70) then Life insurance (2.90) third position goes to Chit funds(4.68) then Gold(5.12) and so on. From this analysis it is clear that there is a difference in the investment avenues preferred by the investors. So we can reject the null hypothesis. Table 3 Association of Bank Deposit/Life Insurance Preference and Socio Economic Variables Variable Bank Life Deposit P 5% Level of Insurance value # Significance P value # 5% Level of Significance Gender.355 Not Significant.017 Significant Region.627 Not Significant.906 Not Significant Type of Family.561 Not Significant.051 Not Significant Age.182 Not Significant.142 Not Significant Education.183 Not Significant.002 Significant Marital Status.013 Significant.009 Significant Monthly Income.010 Significant <.000** Significant Religion.334 Not Significant.146 Not Significant Occupation.413 Not Significant.065 Not Significant #Mann-Whitney U Test/Kruskal-Wallis Test 1% level of significance H2: Table 2 reveals that there is significant difference in the case of marital status and monthly income to preference of bank deposit. Gender, Education, Marital Status and Monthly income are found to be significant with respect to life insurance. Since most of the variables are found to be not significant, the null hypothesis is accepted with the exceptions. Table 4 Level of Long term orientation among Investors Level Frequency Percentage P value # Inference Low Moderate High Not Significant #Chi Square Test H3: Table 4 shows that the respondents on an average exhibit a moderate level of Long term orientation and is not found to be significantly different. Hence the null hypothesis is accepted. Table5 Association of Long term orientation and Socio Economic Variables Variable Chi Square P value # Value 5% Level of Significance Gender <.001** Significant Age Significant Region <.001** Significant Education <.001** Significant Occupation <.001** Significant Marital Status Not Significant Monthly Income <.001** Significant Religion <.001** Significant Type of Family Not Significant #Chi Square Test 1% level of significance H4:Table 5 shows that there is significant association between socio economic variables and Long term orientation except marital status and type of family.therefore we reject the null hypothesis. 211

5 Table 6 LTO and Most Preferred Investments(Bank Deposit & Life Insurance) Investments Chi-Square Value P Value # of Significance Bank Deposits Not Significant Life Insurance Not Significant #Kruskal-Wallis Test H5: Table 6 reveals there is no significant relation between LTO and most preferred investment avenues. Hence we accept the null hypothesis. Table 7 LTO and Other Investments Investments Chi-Square Value P Value# Inference@5% level of Significance Chit Funds <.001** Significant Mutual Funds <.001** Significant Gold Significant Real Estate Significant Postal Savings/NSC Significant Shares Not Significant Medical Insurance Not Significant General Insurance Not Significant Others Significant #Kruskal-Wallis Test ** 1% level of significance Table 8 Source of Information regarding Investment Avenues Source Responses Percent Frequency Percent of Cases Newspaper % 80.0% Magazines % 41.7% TV % 82.5% Radio % 34.2% Internet % 58.3% Friends/Relatives % 70.0% Investment Advisors % 37.5% Bannners/Billboards and Others % 12.5% Total % 416.7% Source: Survey Data Table 8 shows that TV and News Paper are found to be the major source of information. Table 9 Investment Avenue Frequencies Investment Avenues Responses Percent of N Percent Cases Deposits with Banks - Public Sector % 88.3% Deposits with Banks Private Sector % 27.5% Deposit Schemes with Cooperatives % 40.0% Chit Funds KSFE % 40.0% Chit Funds Others % 50.0% Postal Life Insurance % 15.0% Mutual Funds Public Sector % 22.5% Mutual Funds Private Sector 3.5% 2.5% Shares Public Sector Companies 9 1.4% 7.5% 212

6 Shares Private Sector Companies 9 1.4% 7.5% Bonds/ Debentures Public Sector 6.9% 5.0% Life Insurance LIC % 83.3% Life Insurance Private Sector % 17.5% General Insurance Public Sector % 20.0% General Insurance Private Sector 6.9% 5.0% Gold % 54.2% Real Estate % 17.5% Postal Savings % 47.5% Total % 550.8% Source: Survey Data Table 9 affirms that Bank Deposit & LIC are the most preferred investment avenues among the respondents under the study. Discussion and Conclusion The study reveals that Bank deposit and Life insurance are the most preferred investments. TV and Newspaper found to be the major sources of information for investment avenues. Gender, Marital status, education and monthly income are associated with Life Insurance investment. But in the case of Bank deposit marital status and monthly income have association. Other Socio economic factors are not found to have an association. Long term orientations among investors are found to be moderate. Long term orientation does not have an association with most preferred investment like Bank deposit and Life Insurance. But in the case of Gold, Mutual Funds, Real estate andchit funds there is an association with long term orientation. Limitation of the Study and Suggestions for Future Research This study is based on the responses obtained from the respondents in Kerala only. It would be appropriate and relevant to conduct the study using national samples. Hence, the findings are not true for Indian customers. Accuracy of the result is based on the assumption that all the responses given by the respondents were true. A comparative study can be conducted (both long term orientation and short term orientation) between investment avenues. References 1. Borad, S. B. (2018). Various Avenues and Investment Alternatives. efinancemanagement. 2. Dominic Barton, M. W. (2014, Jan- Feb). Focusing capital on the long term. Harward Business Review. 3. Hofstede, G. (n.d.). Hofstede Cultural dimension. Retrieved January 1, 2017, from htt:/greet-hofstede.com. 4. Sairam. (2016). A Study on investment pattern amongst academicians in Bangalore. Retrieved from Shodhganga.inflibnet.ac.in. 5. Shashikanth, U. (2011). In the current investment environment a long term orientation always helps. The Economics Times. 6. Sinha, S. (2015). Six best investment avenues in the current scenario. The Economic Times, Wealth. 213