Page 1 of 28

Journal for Studies in Management and Planning

Available at http://internationaljournalofresearch.org/index.php/JSMaP

e-ISSN: 2395-0463

Volume 01 Issue 02

March 2015

Available online: http://internationaljournalofresearch.org/ P a g e | 49

To Study Investors Perception Regarding

Investment Management

Jaspreet kaur

Email id :-Jsprt86@gmail.com

INTRODUCTION

Behind every buy and/or sell order, there is

an investor. Trade takes place because

investors have different opinions and

outlooks and it cannot be expected from any

theory aimed at explaining how the financial

markets function, to neglect how the

investors, as one of the fundamental actors

of the markets, make their decisions as to

purchase or sell a stock. Explanations based

on the Efficient Markets Hypothesis, which

we may call the traditional finance, focuses

on the notion of rational human beings to

explain how people should make their

decisions. However, this is not the

answer to how they make their decisions.

It can be said that the question about how

people in general and investors in particular

make their decisions is a subject matter of

behavioral psychology. However, this

approach does not justify the thought of the

traditional finance that psychology does not

contribute to financial explanations. The

aversion of the traditional approach to

understand and explain the decision

processes of investors was the main reason

to trigger the emergence of behavioral

finance as an approach which tries to

identify and understand the meaning of

psychological decision processes for

financial markets. The main approach of

behavioral finance is that investors are not

rational and they are under influence, as

opposed to traditional finance.

As such each investor has different decision

making criterions and apprehensions about

the market, yet there are certain variables

that are found among the masses. This

project tries to analyze their such behavior,

way of working and expectations that drives

him to invests? What factors have a bearing

on his trade decisions? How comfortable he

feels in investing his funds in volatile capital

markets? Based on these concepts, this study

presents the results of a survey aimed at

understanding and interpreting their

behavior and decision process of investors.

However, in the financial literature, there are

no models which explain the influence of

these “perceptions” and “beliefs” on

“Expectations” and “Decision Making”.

Because of our own inability to understand

the sources of motivations and the basis of

these expectations we tend to ignore it. No

doubt, reality is so complex that trying to fit

an individual investor’s beliefs into a model

is impossible. But, to a certain extent, we

can borrow concepts from social

psychology where behavioural patterns,

rational or irrational, are developed and

empirically tested. On the same lines, we

can develop certain models to test the

Page 2 of 28

Journal for Studies in Management and Planning

Available at http://internationaljournalofresearch.org/index.php/JSMaP

e-ISSN: 2395-0463

Volume 01 Issue 02

March 2015

Available online: http://internationaljournalofresearch.org/ P a g e | 50

financial behaviour, to the extent of the

availability of the explanatory variables.

Such models can help to understand the

Why? and How? aspect of investor

behaviour, which can have managerial

implications for policy makers.

Saving and investing is all about putting

money aside. Whilst saving tends to be

about putting aside money for the short to

medium term, investing is more about

putting aside money for longer periods of

time.

Having savings or investments may make it

easier for investors to:

• Cope financially if they loose their

job or couldn’t work.

• Take first step onto the property

ladder.

• Have that dream wedding.

• Afford to have children.

• Fulfill your dreams of retiring early.

Investing in various types of assets is an

interesting activity that attracts people from

all walks of life irrespective of their

occupation, economic status, education and

family background. When a person has more

money than he requires for current

consumption, he would be coined as a

potential investor. The investor who is

having extra cash could invest it in securities

or in any other assets like or gold or real

estate or could simply deposit it in his bank

account. The companies that have extra

income may like to invest their money in the

extension of the existing firm or undertake

new venture. All of these activities in a

broader sense mean investment.

1.1 INVESTMENT

An investment is a commitment of funds

made in the expectation of some positive

rate of return. If the investment is properly

undertaken, the return will be commensurate

with the risk the investor assumes. We can

define investment as the process of,

“sacrificing something now for the prospect

of gaining something later”. So, the

definition implies that we have four

dimensions to an investment- time, today’s

sacrifice and prospective gain.

Investment Objectives

All personal investing is designed to achieve

a goal, which may be tangible (a car, a

house) or intangible (security, social status).

Therefore, goals should be classified into

various types based on the way investors

approach them.

Near- Term High Priority Goals:

These are goals, which have a high

emotional priority to the investor, and he

wishes to achieve these goals within a few

years at the most. For example: a new house.

As a result; investment vehicles for these

goals tend to be either in the forms

equivalent to “cash or as fixed income

‘instruments with maturity dates in

correspondence with the goal dates. Because

of the high emotional, importance these

goals have, investor, especially the one with

moderate means will not go for any other

form of investment which involves more

risk especially where, his goal is just in

sight.

Long-Term High Priority Goals: For

most people, this goal is an indication of:

their need for financial independence at a

point some, years ahead in the future eg.

financial independence at the time of

Page 3 of 28

Journal for Studies in Management and Planning

Available at http://internationaljournalofresearch.org/index.php/JSMaP

e-ISSN: 2395-0463

Volume 01 Issue 02

March 2015

Available online: http://internationaljournalofresearch.org/ P a g e | 51

retirement or starting a fund for the higher

education of a three-year old child.

Normally, we find that either because of

personal preference or because the

discounted present value is larger in relation

to their resources, the time of realization for

such goals is set around 60 years of age for

people of moderate means. Because of the

long-term nature of such goals, there is not a

tendency o adopt more aggressive

investment approaches except perhaps, in

the last 5 to 10 years before retirement. Even

then, investors usually prefer a diversified

approach using different classes of assets.

Low Priority Goals: These goals are

much lower down in the scale of priority and

are not particularly painful achieved. For

people with moderate to substantial wealth,

these could range from a world tour to

donating funds for charity. As a result

investors often invest in speculative kinds of

investment either for the fun of it or just to

tryout some particular aspect of the

investment process.

Entrepreneurial or Money making

goals: These goals pertain to individuals

who want to maximize wealth and who are

not satisfied by the conventional saving and

investing approach. These investors usually

put all the spare money they have into stocks

preferably of the company in which they are

working/owing and leave it there until it

reaches some level which either the

individual believes is enough or is scared of

loosing what has been built-up over the

years.. Even then the process of

diversification and building up a

conventional portfolio usually takes him a

long time involving a series of opportunities

and sales spread over many years.

Constraints of investments

An investor-seeking fulfillment of the above

mentioned goals operate under certain

constraints:

Liquidity

Age

Need for regular income

Risk Tolerance

Tax liability

The change in investment management,

therefore, lies in choosing the appropriate

investments and designing a unit that will

meet the investment objectives of the

investor subject to his constraints. To take

on this challenge, the first step will be to get

acquaintained with the different types of

investment alternatives available to the

investors in our financial market.

Features of an Investment

Safety of Principal

Liquidity

Income Stability

Appreciation and Purchasing Power

Stability

Legality and Freedom from Care

Tangibility

Tax Benefits

1.5 Investment Alternatives

1.5.1 MUTUAL FUNDS

A Mutual fund is an organization that

invests in a diversified portfolio of financial

securities on behalf of a pool of subscribers

to its schemes. These securities can be in the

form of equity, debt instruments, money