Study on Investment Behavior and Preferences of

Salaried Employees
Submitted to
Shri Ramdeobaba College of Engineering and Management, Nagpur
in partial fulfilment of VI Semester of

Master of Business Administration (Integrated)

in specialization
FINANCE

Submitted by Project Guide

Vaishnavi Nandedkar Prof. Ajay Ghangare
&
Niharika Naik

2018-19

Department of Management Technology

Shri Ramdeobaba College of Engineering and Management, Nagpur
(An Autonomous Institute affiliated to Rashtrasant Tukdoji Maharaj Nagpur University,
Nagpur)

April 2020

i
Study on Investment Behavior and Preferences of
Salaried Employees
Submitted to
Shri Ramdeobaba College of Engineering and Management, Nagpur
in partial fulfilment of VI Semester of

Master of Business Administration (Integrated)

in specialization
FINANCE

Submitted by Project Guide

Vaishnavi Nandedkar Prof. Ajay Ghangare
&
Niharika Naik

2018-19

Department of Management Technology

Shri Ramdeobaba College of Engineering and Management, Nagpur
(An Autonomous Institute affiliated to Rashtrasant Tukdoji Maharaj Nagpur University,
Nagpur)

April 2020

2
 SHRI RAMDEOBABA COLLEGE OF ENGINEERING AND
MANAGEMENT, NAGPUR

(An Autonomous Institute affiliated to Rashtrasant Tukdoji Maharaj

Nagpur University, Nagpur)

Department of Management Technology

CERTIFICATE

This is to certify that the Thesis on “Study on Investment Behavior and Preferences of
Salaried Employees is a bonafide work of Vaishnavi Nandedkar and Niharika Naik
submitted to the Rashtrasant Tukdoji Maharaj Nagpur University, Nagpur in partial
fulfillment VI Semester of MBA (Integrated). It has been carried out at the Department of
Management Technology, Shri Ramdeobaba College of Engineering and Management,
Nagpur during the academic year 2019-20.

Date:
Place: Nagpur

Prof. Ajay Ghangare

Project Guide

Dr. Chandan Vichoray Dr. Rajiv Khaire

Head, Department of management Coordinator-MBA (Integrated)
Technologies

Dr. R. S. Pande
Principal
Shri Ramdeobaba College of Engineering and Management, Nagpur

III
 DECLARATION

I, hereby declare that the project titled Study on Investment Behavior and

Preferences of Salaried Employees submitted herein, has been carried out in

the Department of Management Technology of Shri Ramdeobaba College of

Engineering and Management, Nagpur. The work is original and has not been

submitted earlier as a whole or part for the award of any degree / diploma

at this or any other institution / University.

Date: 15th April 2020

Place: Nagpur

Vaishnavi Nandedkar (26)

Niharika Naik (13)

IV
 ACKNOWLEDGEMENT

This Project would not have been possible without the support and help
of many Individuals. I would like to extend my sincere thanks to all of
them. I am highly indebted to Dr. Chandan Vichoray, Head of the
Department, DMT, Prof. Ajay Ghangare my project guide for their
Guidance and constant support as well as for providing necessary
information regarding the project and also for their support in completing
the project. I would like to thank all the faculty member for their support
and guidance whenever needed.

Date: 15th April 2020

Place: Nagpur

Vaishnavi Nandedkar
&
Niharika Naik

V
 Shri Ramdeobaba College of Engineering and Management, Nagpur
Department of Management Technology

APPROVAL SHEET

Name: Vaishnavi Nandedkar & Niharika Naik

Student Id:
Specialization: Finance
Name of the Project Guide: Prof. Ajay Ghangare
Title of the Project:
Study on Investment Behavior and Preferences of Salaried
employees.

For Supervisor’s Use Only:

Remarks:
a) Approved
b) Approved with modifications
c) Rejected
Remarks/Suggestions:
__________________________________________________________
__________________________________________________________
__________________________________________________________
___________________________

Date:
Signature of Guide: _____________________________
Signature of Student: _____________________________

VI
Shri Ramdeobaba College of Engineering and Management, Nagpur
Department of Management Technology

Name: ______________________________________________
Student Id: __________________________________________
Specialization: _______________________________________
Name of the Project Guide: ______________________________

Sr no Date of Time Purpose Signature Remarks

visit

VII
 EXECUTIVE SUMMARY

The investment management and environment have become more and more
complex at present. Types of instruments and financial products, types and
number of intermediaries and the overall investment process, all have
witnessed a revolution. At present salaried employees have a variety of
investment alternatives at their disposal and that too as per their investment
objectives or the benefits sought by them through their investments.

Investment is all about mobilizing and canalizing the savings by those who
have surplus in those avenues where there is a demand of funds. In the recent
times, mutual fund industry has emerged as the most dynamic segment of
Indian financial system. Reforms in Indian economic system and opening up
of the economy have been the main reasons for the tremendous growth of
Indian capital market.

This study attempts to note and analyze the impact of different demographic
variables (e.g. age, gender, income and education) on the investment
preferences of salaried employees. Apart from this, the study also focuses
attention on various benefits (e.g. Return, Safety, Liquidity, Convenience &
Affordability) sought by the investors through their investments. The study
reveals that the salaried employees have different investment preferences
depending upon their demographic profiles. Again, they also differ in terms of
the benefits sought through their investments.

VIII
 TABLE OF CONTENTS

Chapter No. Chapter Name Page

Chapter 1 Introduction 1–4

Chapter 2 Literature Review 5- 9

Chapter 3 Objective of research 10-11

Chapter 4 Research Methodology 12-18

Chapter 5 Result and Interpretation 19-28

Chapter 6 Analysis 29-31

Chapter 7 Conclusion 32-33

Chapter 8 References 34-36

Chapter 9 Appendices 37-38

IX
 CHAPTER 1
INTRODUCTION

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1.1 INVESTMENT MANAGEMENT

Investment is means to invest money in various types of investment assets such

as fixed deposits, saving certificates, provident fund, equity shares, bonds,
mutual funds, gold, real estate and life insurance policies etc. Analysis, decision
making and processes involved in the allocation of funds to various investment
assets and more specifically, the selection of one or other investment asset is
known as investment management.

To invest is an interesting activity that attracts people from all walks of life
irrespective of their age, gender, income, education and family when a person
has more money than he requires for current consumption, he is coined as a
potential investor. Investment is the employment of funds with the aim of
achieving additional income or growth in value.

The essential characteristic of an investment is that, it always waits for a reward.

It involves the commitment of resources which have been saved or put away
from current consumption in the hope that some benefits will accrue in future.
Again, by investing an investor commits the present funds to one or more assets
to be held for some time in expectation of some future return in terms of interest
or capital gain.

Investment can be defined as the commitment of funds that is expected to

generate additional money. It may also be described as a vehicle into which
funds are placed with the expectation that the funds would increase in value or
would generate some return. Keeping idle cash in a cupboard is not an
investment as it does not generate any income rather its value may be eroded
by inflation. However, keeping money in a saving bank account is an
investment as it generates interest. An investor buys shares of a particular

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company in expectation of getting dividend or getting a capital gain in terms of
appreciation in the market price of his holding. Similarly when an investor is
subscribing to the debentures or bonds of a company or depositing money in
the fixed deposit scheme of a commercial bank, he is expecting a fixed interest
for the given period and return of a redemption value at maturity. If a person
buys a house, he invests his money now and uses the house for his own dwelling
or for rental income. When he resells it, he gets the market value. In all these
cases, there is sacrifice or commitment of funds or other resources at present by
an investor in expectation of some future returns or benefits.

So, investment is the commitment of current funds in anticipation of receiving

larger inflow of funds in future, the difference being the returns. In case of a
salaried employee the investment may take the form of Bank Deposits, Post
Office Deposits, Equity Shares, Bonds or Debentures, Mutual Funds, Real
Estate and Gold.

Further, in the present day financial markets, investment has become very
complicated. One makes investments for a return higher than what he can get
by keeping the money in a commercial or cooperative bank. In the field of
finance it is well known that the money or finance is scarce and investors try
their best to maximize returns on that. If the return is higher, the risk will also
be higher. Risk and return go hand in hand. All investments are risky to some
extent except a few.

The art of investment is characterized with the maximization of return and

minimization of risk. Moreover, it is generally said that necessity is the mother
of invention. Innovation has always been the spirit of the human nature. In the
financial sector also, several new instruments have been innovated in tune with
the market needs. The constraints of banks to provide growth with market yields

-3-
for the investors’ section of society has already given birth to a no. of
investment instruments.

-4-
 CHAPTER 2
LITERATURE REVIEW

-5-
2.1 Neha Shukla (2016) An insight into the savings and
investment pattern of salaried employees.

It was concluded that the majority of the women preferred traditional mode of
investment.

2.2 C.K Osundo (2015) A study on preferred investment avenues

among salaried people in Pune.

Studied that household’s reserves play a significant part in the economic

progress of developed and developing nations.

2.3 B.Thulasipriya (2014) an insight into the savings and

investment pattern of salaried employees.

The main avenues of investment are bank deposits and the purpose is for
children education, marriage and security.

2.4 Vasagadekar Priya (2014) A study of investment perspective

of salaried employees.

Women generally prefer to invest in safe investments avenues like Post office
savings scheme and FD in banks.

-6-
2.5 Karthikeyan (2001) Financial planning for salaried employee
and strategies for tax saving.

Confirmed that the level of awareness among old people was higher than in
those of young people.

2.6 Puneet Bhushan (2014) Relationship between financial

literacy and investment behavior of salaried employees.

It was concluded that financial literacy level affects awareness regarding

financial products as well as investment preferences.

2.7 Sujatha G.S. (2014) Savings and investment pattern of

employees in public sector companies with innovative financial
products.

Savings and investment pattern of employees in public sector companies with

innovative financial products.

2.8 Agarwal et al. (2010) evaluated financial literacy of online

Indian investors of Hyderabad city.

The findings suggest that participants are generally financially literate.

Variations in financial literacy level were observed across demographic and
socio-economic groups.

-7-
2.9 Avinash Kumar Singh (2006) A study on preferred
investment avenues among salaried people in Bangalore.

Study conducted in Bangalore which concluded that investors are more aware
about investment avenues.

2.10 Chaturvedi and Sood on the topic “Insights into awareness

level and investment behavior of salaried individuals.”

Overall results suggested that people must be made more aware about new
investment opportunities, so that they can get advantage of earning high returns.

2.11 Volpe et al. (2002) examined investment literacy of 530

online investors. They found that level of investment literacy
varied with people’s education, experience, age, income and
gender.
Women had much lower investment literacy than men and older participants
performed better than young participants.

2.12 Syed Tabassum Sultana (2010) the study confirms on Indian

individual investors behavior and it also made an effort to
understand about the depositors profile and characteristics in
order to know about the performance regarding the investment.

-8-
2.13 Dr. Varsha Virani (2012) studied the investment behavior of
100 school teachers.

It was found that the school teachers are saving funds as bank deposits and
government securities as their investment preferences.

2.14 V.R. Palanivelu and K. Chandrakumar (2013)

It highlight’s that certain factors like age, educational qualification, knowledge

about the financial system affect the decision regarding the choice of investment
avenues.

2.15 Sonali Patil and Dr. Kalpana Nandawa (2014) analyzed that
salaried human resources consider the security as well as good
return on savings.

Respondents are conscious about the investment avenues offered in India

excluding female investors.

-9-
 CHAPTER 3
OBJECTIVE OF RESEARCH

- 10 -
 To study the investment preferences while selecting the
securities by salaried employees of Nagpur region.

 To know the factors influencing investment behavior of

salaried employees

- 11 -
 CHAPTER 4
RESEARCH METHODOLOGY

- 12 -
4.1 Significance of Research

 Salaried employees have a fix flow of income and their investment patterns
are also different. It will be helpful to understand the investment preferences
of investors.

 The study will throw a light on the awareness of the investment avenues in
India.

4.2 Research Problem

A research problem is a specific issue, difficulty, contradiction, or gap in

knowledge that we will aim to address in our research.

Various national and international reports have indicated the scenario of

Indians that they have high propensity to save, but they choose to put their
money in low yielding financial instruments and one of the responsible factors
for such a situation is lack of financial awareness. Unless the investors
became more aware, it is difficult to convert a country of savers into country
of investors.

- 13 -
4.3 Limitations of Research

 The analysis has been limited to only 150 salaried employees.

 An interpretation of this study is based on an assumption that the
respondents have given correct information.
 The economy is so wide and comprehensive that is it difficult to
encompass all the relevant factors influencing investment behavior of
salaried employees.

4.4 Research Design

For the purpose of this study, Nagpur is taken as an area of study. All those
salaried individuals of Nagpur, whether in government or non-government job
were considered as the population for this study.

Primary data from the respondents was collected by using a non-disguised

structured questionnaire. The questionnaire was prepared with utmost care
incorporating all necessary information by using close-ended questions.

Descriptive correlational study will be adopted since there is relationship

between two quantities.

- 14 -
 Sample size – The sample size of 150 salaried employees is selected for the
current study. It would be taken into consideration that these employees will
represent various sectors such as manufacturing , banking etc. (public or
private)

 Data collection - Primary data is collected through a structured

questionnaire. The questionnaire would be designed in such a way that the
respondent needs to pick 1 out of 4 or 5 available options.

 The study might also require secondary data collected from journals,
magazines, and official websites.

4.5 Research Methodology

For the purpose of the study a survey was conducted amongst salaried
individuals of Nagpur. Within the area of study, respondents were selected
conveniently using some common criteria like place of work (urban or rural),
occupational status (government or non-government employee) so as to get
representative sample of the population. Primary data from the respondents was

- 15 -
collected by using a structured questionnaire. A total of 150 respondents
constitute a sample for this study.

4.6 Statistical Tools

4.6.1 Chi- Square (Test of Independence)

The Chi-Square test of independence is used to determine if there is a

significant relationship between two nominal (categorical) variables. The
frequency of each category for one nominal variable is compared across the
categories of the second nominal variable.

 Step 1: First we have to calculate the expected value of the two nominal
variables. We can calculate the expected value of the two nominal variables
by using this formula:

E = (Row total) * (coloumn total)

N

Where:

E = expected value
Row total = Sum of row of each category
Coloumn total = Sum of column of each category
N = Sample size

- 16 -
 Step 2: After calculating the expected value, we will apply the following
formula to calculate the value of the Chi-Square Test of Independence

The equation to calculate a chi square is

 Step 3: Once the value of Chi-square calculated / Chi-square statistic is

obtained, we need to find Chi-square critical, which is calculated as follows:

DF = (r-1)*(c-1)

Where
DF = Degree of freedom

- 17 -
 r = number of rows
c = number of columns

 Step 4: Hypothesis testing:

Hypothesis testing for the chi-square test of independence is as it is for other

tests like ANOVA, where a test statistic is computed and compared to a
critical value. The critical value for the chi-square statistic is determined by
the level of significance (typically 5%) and the degrees of freedom.
If the observed chi-square test statistic is greater than the critical value, the
null hypothesis can be rejected, and vice versa.

- 18 -
 CHAPTER 5
DATA INTERPRETATION

- 19 -
 Table 1 gives the summary of the demographic and socio-economic
characteristics of the respondents. A look at demographic and socio-
economic detail shows that percentage of male respondents is
49.33% and female respondents is 50.67%.
 41.33% of the respondents fall in the age group of 25-35 years and 7.34%
fall in the age group of above 55 years.
 The respondents also constitutes public sector (48%) and private sector
(52%) employees.
 30.30% of the respondents have their monthly income between Rs.60,
000-80,000 followed by 24.30% respondents who earn between Rs.
20,000-40,000 monthly.

- 20 -
 Table 1. Demographic and Socioeconomic Details of the
Respondents

Variable Frequency Percentage

Male 74 49.33%
Gender
Female 76 50.67%
25-35 62 41.33%
35-45 33 22%
Age (in years)
45-55 44 29.33%
above 55 11 7.34%
Basic knowledge 54 35.50%
Level of knowledge about the
investments Average knowledge 72 48.70%
Advanced knowledge 24 15.80%
Nature of employment Public sector 72 48%
Private sector 78 52%
Monthly Income 20000-40000 36 24.30%
40000-60000 43 28.90%
60000-80000 46 30.30%
above 80000 25 16.40%

- 21 -
Hypothesis 1:

 H0: There is no association between income and financial literacy level of

salaried individuals.
H1: There is an association between income and financial literacy level of
salaried individuals.

Table 2. Association between Financial literacy and Income

Observed value

20000- 40000- 60000- 80000 and

Financial literacy Total
40000 60000 80000 above
Basic knowledge 23 19 10 2 54
Average
11 22 27 12 72
knowledge
Advanced
2 2 9 11 24
knowledge
Total 36 43 46 25 150

Expected value

Monthly Income
Financial literacy 20000- 40000- 60000- 80000 and Total
40000 60000 80000 above
Basic knowledge 12.96 15.48 16.56 9 54
Average
17.28 20.64 22.08 12 72
knowledge
Advanced
5.76 6.88 7.36 4 24
knowledge
Total 36 43 46 25 150

- 22 -
Diagram 1. Association between income and financial literacy

 For chi square, we have calculated the expected

frequencies.
 Here, chi square
calculated = 35.4078
 At 5% level of significance for 6 d.f ,tabulated value of chi
square = 12.592

- 23 -
  Since chi square calculated > chi square tabulated, so we reject
the null hypothesis, and conclude that there is an association
between income and financial literacy of salaried individuals.

Hypothesis 2:

 H0: There is no significant difference between gender and level of

awareness about the investments.
H1: There is a significant difference between gender and level of awareness
about the investments.

Table 3. Association between Gender and level of awareness

Level of awareness Gender Total

Male Female
Mutual funds 57 35 92
Bank Deposits 68 60 128
Post office savings 50 47 97
Gold/Real estate 46 47 93
Debentures 23 21 44

- 24 -
 140
120
100
80
60
40
20
0
Mutual funds Bank Deposits Post office Gold/Real estate Debentures
savings

Male Female

Diagram 2. Association between gender and level of awareness

From the above diagram it can be concluded that irrespective of the gender of
respondents, the investment avenue about which there is high level of
awareness is Bank deposits followed by Post office savings.

Hypothesis 3:

 H0: There is no association between nature of employment and financial literacy of salaried
individuals.
H1: There is an association between nature of employment and financial literacy of salaried
individuals.

- 25 -
 Table 4. Association between Financial literacy and nature of employment

 Observed values:

Financial literacy Nature of employment

Total
Public Private
Basic knowledge 19 35 54
Average knowledge 36 36 72
Advanced knowledge 16 8 24
Total 71 79 150

Expected Values:

Financial literacy Nature of employment Total

Public Private
Basic knowledge 25.56 28.44 54
Average knowledge 34.08 37.92 72
Advanced knowledge 11.36 12.64 24
Total 71 79 150

- 26 -
 160
140
120
100
80 Public
Private
60
40
20
0
Basic knowledge Average Advanced Total
knowledge knowledge

Diagram 3. Association between financial literacy and nature of employment

- 27 -
 For chi square we have calculated the expected
frequencies.
 Here, chi square calculated = 7.35
 At 5% level of significance for 2 d .f ,tabulated value of chi
square = 5.991
 Since chi square calculated > chi square tabulated, so we reject
the null hypothesis, and conclude that there is an association
between nature of employment and financial literacy of
salaried individuals.

- 28 -
CHAPTER 6
ANALYSIS

- 29 -
 Association between Income and financial literacy level
The results of the Diagram 2 indicates that more the income, more will the
level of financial literacy. Diagram 2 shows that financial literacy level is
highest for respondents having income level between Rs 60,000- Rs 80,000
followed by those who earn between Rs. 40,000- Rs 60,000. From the table
it can be seen that chi-square value is significant- at 5% significance level.
Hence H0 of hypothesis 1 - There is no association between income and
financial literacy level is rejected. Thus it can be concluded that financial
literacy level depends on the income of a person.

 Relationship between Gender and Level of awareness about the

investment.

The present study reveals that out of 150 respondents surveyed 97 (i.e. 64.66%)
respondents are aware about Post Office Deposits, 44 (i.e.29.33 %) respondents
preferred to invest in Debentures Bonds. 92 (i.e. 60 %) are aware about Mutual
funds, 93(i.e. 62%) in Real Estate/ gold and 128(i.e. 13 %)respondents are
aware about bank deposits. The gender of respondents and their investment
preferences are significantly associated i.e. the respondents’ gender influences
their investment preferences significantly. 57 men and only 35 women are
aware about mutual funds. When it comes to bank deposits, 60 women and 68

- 30 -
men are aware about it. 50 men whereas 47 women are aware about post office
savings.

 Association between nature of employment and financial literacy of

salaried individuals.
On the basis of nature of employment we have divided the respondents into
two categories i.e. Public and Private employees. Diagram 3 shows that
Private employees have higher financial literacy level as compared to
Public employees. From the table it can be seen that chi-square value is
significant- at 5% significance level. Hence H0 of hypothesis 3-There is no
association between nature of employment and financial literacy level is
rejected. Thus it can be concluded that nature of employment influences
financial literacy level.

- 31 -
CHAPTER 7
CONCLUSION

- 32 -
The present study reveals that the majority of the salaried employees still prefer
to invest in safe investment avenues like “Bank / Post Office Deposits”. Apart
from this, they also invest in real assets like “Real Estate” and “Gold” but they
have still not formed a positive attitude towards investment in “Equity Shares”
and “Mutual Funds”, the reason being their apprehension about the security of
funds and surety of returns on them.

Moreover, as far as the impact of demographic variables on the investment

preferences of the salaried employees is concerned; gender, income and
education have been found influencing the investment preferences significantly,
whereas, the variable, age has not been found influencing the investment
preferences of the salaried employees. Again, as far as the benefits delivered to
the investors through their investments are concerned, “Safety” and “Return”
have been perceived to be most attractive by the investors, followed by
“Liquidity” and “Convenience & Affordability”.
Also respondents having low financial literacy primarily invest in traditional
and safe financial products and do not invest much in those financial products
which are comparatively more risky and can give higher returns. Thus it can be
said that financial literacy level affects awareness regarding financial products
as well as investment preferences towards financial products.

This clearly implies that due to low level of financial literacy, individuals invest
their money in traditional financial products and are not able to take advantage
of new age financial products which can offer them higher returns. Thus it
becomes the need of the hour that government as well as policy makers take
necessary steps to improve the level of financial literacy among the population.

- 33 -
CHAPTER 8
REFERENCES

- 34 -
[1] Journal of Business Management & Social Sciences Research (JBM&SSR)
ISSN No: 2319-5614 Volume 3, No.5, May 2014, Relationship between
Financial Literacy and Investment Behavior of Salaried Individuals.

[2] Parihar and K.K.Sharma. An Empirical Study of the Investment Preferences

of Salaried Employees B.B.S. TECHNOFAME- A Journal of Multidisciplinary
Advance Research.

[3] Sood, P. B., & Medury, Y. (2012). Investment preferences of salaried

individuals towards financial products. International Journal of Management
and Behavioural Sciences, 1(1), 95-107

[4] Samudra, A., & Burghate, M.A. (2012). A Study on investment behaviour
of middle class households in Nagpur. International Journal of Social Sciences
And Interdisciplinary Research, 1(5), 43-54.

[5] Bashir, T., Ahmed, H. R., Jahangir, S., Zaigam, S., Saeed, H., & Shaft, S.
(2013). Investment preferences and risk level: Behavior of salaried individuals.
IOSR Journal of Business and Management, 10(1), 68-78.

[6] Desigan Gnana, Kalaiselvi S. & Anusuya L., "Women Investors' Perception
towards Investment -- An Empirical Study", Indian Journal of Marketing, April
2006.

- 35 -
[7] Punnet Bhushan, Yajulu Medury (2014), Financial Literacy and its
Determinants. International Journal of Engineering, Business and Enterprise
Applications (IJEBEA).

[8] Anand S. & Murugaiah V., "Marketing of Financial Services: Strategic

Issues", SCMS Journal of Indian Management, July-Sept. 2004.

- 36 -
CHAPTER 9
APPENDICES

- 37 -
 The primary source of data collection in this study was through a structured
questionnaire created through a Google form. In order to assess the behavior
and preferences of salaried employees, 150 respondents were selected for
the purpose of this study.

Link for the questionnaire is attached below, which consists of total 18

questions based on demographic and socio-economic factors.

https://docs.google.com/forms/d/e/1FAIpQLSf1Yao_YPCQT8XDcX5UKelol
eQ5UB4fJswkn1UnOikJjizI1g/viewform?usp=sf_link

- 38 -