ASSOCIATION BETWEEN LONG TERM ORIENTATION AND INVESTOR PREFERENCE TOWARDS DIFFERENT AVENUES

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-682002 Dr.Vineeth. K. M. Assistant Professor of Commerce Maharaja s College, Ernakulam, Kerala 682011 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

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 500-800 square feet spacious house to a family of four members, whereas 50 Per cent of female respondents opted for a house of 801-1200 square feet. Sixty Per cent of Chennai based respondents preferred even smaller space (500-800. 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

Table 1 Demographic Profile of the Respondents Variable Category Frequency Percentage Male 54 45 Gender Female 66 55 Below 20 6 5 20 to 40 36 30 Age 40 to 60 69 57.5 Above 60 9 7.5 Self Employed 15 12.5 Wage Worker 18 15 Occupation Salaried-Govt/Public Sector 15 12.5 Salaried-Private Sector 33 27.5 Unemployed 39 32.5 SSLC or Below 54 45 +2/Diploma 27 22.5 Highest Educational Graduate 21 17.5 Qualification Post Graduate 18 15 Rural 67 55.8 Region Urban 53 44.2 Single 21 17.5 Marital Status Married 93 77.5 Widow/Widower 6 5 Below Rs 10000 61 50.8 Rs 10000 to Rs 25000 38 31.7 Monthly Income Rs 25000 to Rs 50000 9 7.5 Above Rs 50000 12 10 Hindu 87 72.5 Christian 27 22.5 Religion Muslim 6 5 Others 0 0 Type of Family Nuclear 111 92.5 Joint 9 7.5 Total 120 100 Source: Survey Data Table 2 Investment Avenues Preferences Investment Avenues Mean Rank P Value Inference @ 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 10.32 Others 11.88 210

# Friedman Test **Significant @ 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 Inference @ Life Inference @ 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 **Significant @ 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 33 27.5 Moderate 51 42.5 High 36 30 0.098 Not Significant 120 100.00 #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 # Inference @ Value 5% Level of Significance Gender 17.607 <.001** Significant Age 20.638.002 Significant Region 41.898 <.001** Significant Education 41.188 <.001** Significant Occupation 41.349 <.001** Significant Marital Status 6.322.176 Not Significant Monthly Income 25.535 <.001** Significant Religion 25.946 <.001** Significant Type of Family 4.049.132 Not Significant #Chi Square Test **Significant @ 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

Table 6 LTO and Most Preferred Investments(Bank Deposit & Life Insurance) Investments Chi-Square Value P Value # Inference @5%level of Significance Bank Deposits 5.947.051 Not Significant Life Insurance 2.351.309 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 46.708 <.001** Significant Mutual Funds 18.098 <.001** Significant Gold 12.369.002 Significant Real Estate 3.925.041 Significant Postal Savings/NSC 6.553.038 Significant Shares 3.002.221 Not Significant Medical Insurance 2.874.238 Not Significant General Insurance 2.477.290 Not Significant Others 6.583.037 Significant #Kruskal-Wallis Test ** Significant @ 1% level of significance Table 8 Source of Information regarding Investment Avenues Source Responses Percent Frequency Percent of Cases Newspaper 96 19.2% 80.0% Magazines 50 10.0% 41.7% TV 99 19.8% 82.5% Radio 41 8.2% 34.2% Internet 70 14.0% 58.3% Friends/Relatives 84 16.8% 70.0% Investment Advisors 45 9.0% 37.5% Bannners/Billboards and Others 15 3.0% 12.5% Total 500 100.0% 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 106 16.0% 88.3% Deposits with Banks Private Sector 33 5.0% 27.5% Deposit Schemes with Cooperatives 48 7.3% 40.0% Chit Funds KSFE 48 7.3% 40.0% Chit Funds Others 60 9.1% 50.0% Postal Life Insurance 18 2.7% 15.0% Mutual Funds Public Sector 27 4.1% 22.5% Mutual Funds Private Sector 3.5% 2.5% Shares Public Sector Companies 9 1.4% 7.5% 212

Shares Private Sector Companies 9 1.4% 7.5% Bonds/ Debentures Public Sector 6.9% 5.0% Life Insurance LIC 100 15.1% 83.3% Life Insurance Private Sector 21 3.2% 17.5% General Insurance Public Sector 24 3.6% 20.0% General Insurance Private Sector 6.9% 5.0% Gold 65 9.8% 54.2% Real Estate 21 3.2% 17.5% Postal Savings 57 8.6% 47.5% Total 661 100.0% 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