“Perception of people towards Various Avenues of

Investment for their savings”

RICHA GUPTA, AMANDEEP KAUR, TANIA SHARMA

RIMT-IMCT, MBA-II (A)

MANDI GOBINDGARH

Abstract

India is thought to be the first rate investment. India has a vast potential for foreign investment and foreign players find it their next investment destination. There are various opportunities available in India for investing the savings of the person like mutual funds, fixed deposits etc. Savings form an important part of the economy of any nation. With the savings invested in various options available to the people, the money acts as the driver for growth of the country and attitude towards saving depends on the demographic and socio economic factors. In this research paper we tried to evaluate that which is the most favorable option in which people like to invest their savings and which factors do generally considered by people while making investments in available avenues. For this we conducted our survey in the areas of Mandi Gobindgarh, Ludhiana and Patiala and 100 respondents were analyzed to know their perception regarding the various avenues of investment. Most of the respondents belong to the age group 25 to 35 years.

Introduction

Savings form an important part of the economy of any nation. With the savings invested in various options available to the people, the money acts as the driver for growth of the country. Indian financial scene too presents a plethora of avenues to the investors. Though certainly not the best or deepest of markets in the world, it has reasonable options for an ordinary man to invest his savings. The money people earn is partly spent and the rest saved for meeting future expenses. Instead of keeping the savings idle they may like to use savings in order to get return on it in the future. This is called Investment. One needs to invest to and earn return on your idle resources and generate a specified sum of money for a specific goal in life and make a provision for an uncertain future. The various avenues of investment are:

a) MUTUAL FUNDS b) STOCK MARKET c) BONDS d) INSURANCE POLICIES

e) FIXED DEPOSITS f) GOVERNMENT SECURITIES g) REAL ESTATE h) COMMODITY MARKET

a.MUTUAL FUNDS- A mutual fund is a collection of stocks, bonds or cash-type investments such as a money market fund—or some combination of these. Reasons to invest in mutual funds include: they are easy to buy and sell, are managed by someone other than you, and they give you a better. Basically Mutual fund is a pool of money collected from investors and is invested according to stated investment objectives.

b.BONDS- A bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) and/or to repay the principal at a later date, termed maturity. It is a formal contract to repay borrowed money with interest at fixed intervals.

c.COMMODITY MARKET - A commodity is a normal physical product used by everyday people during the course of their lives, or metals that are used in production or as a traditional store of wealth and a hedge against inflation. The market in which the trading regarding these commodities takes place is called commodity market. d.STOCK MARKET- A stock market or equity market or industrial security market is a private or public market for the trading of company stock and derivatives of company stock at an agreed price; both of these are securities listed on a stock exchange as well as those only traded privately i.e. it is a market in which stocks are bought and sold.

e. GOVERNMENT SECURITIES- Government securities (G-secs) are sovereign securities which are issued by the Reserve Bank of India on behalf of Government of India, in lieu of the Central Government's market borrowing programme. The term Government Securities includes: · Central Government Securities. · State Government Securities · Treasury bills

f.INSURANCE POLICIES- An insurance policy is primarily meant to protect the income of the family’s bread earners. The idea is if any one or both die their dependents continue to live comfortably. The circle of life begins at birth follower by education, marriage and eventually after a lifetime of work we look forward to life of retirement. Insurance is a provision for the distribution of risks that is to say it is a financial provision against loss from unavoidable disasters.

g.REAL ESTATE- Real estate is a legal term that encompasses land along with improvements to the land, such as buildings, fences, wells and other site improvements that are fixed in location -- immovable. Real estate law is the body of regulations and legal codes which pertain to such matters under a particular jurisdiction and include things such as commercial and residential real property transactions. h.FIXED DEPOSITS- Money may be placed with a bank, merchant bank, building society or credit union for a fixed term at a fixed rate of interest which remains unchanged during the period of the deposit. Depositors may have to accept an interest penalty if they break the deposit, ie, ask to take the money out before the agreed period has expired.

Scale of measurement

Measurement is the foundation of any scientific investigation. Everything we do begins with the measurement of whatever it is we want to study. Definition: measurement is the assignment of numbers to objects. Scales of measurement refers to ways in which variables/numbers are defined and categorized. Each scale of measurement has certain properties which in turn determine the appropriateness for use of certain statistical analyses .Four levels of measurement scales are commonly distinguished: nominal, ordinal, interval, and ratio. The levels of measurement are as follows:

1. Nominal Data - A set of data is said to be nominal if the values / observations

belonging to it can be assigned a code in the form of a number where the numbers are

simply labels. You can count but not order or measure nominal data. It is the lowest

scale of measurement. For example, in a data set males could be coded as 0, females as

1; marital status of an individual could be coded as Y if married, N if single.i.e.

2. Ordinal Data- A set of data is said to be ordinal if the values / observations belonging to it can be ranked (put in order) or have a rating scale attached. You can count and order, but not measure, ordinal data.The categories for an ordinal set of data have a natural order, The numbers represent a quality being measured (identity) and can tell us whether a case has more of the quality measured or less of the quality measured than another case (magnitude) for example, suppose a group of people were asked to taste varieties of biscuit and classify each biscuit on a rating scale of 1 to 5, representing strongly dislike, dislike, neutral, like, strongly like. A rating of 5 indicates more enjoyment than a rating of 4 ,so such data are ordinal.

3. Interval Data - Interval data have the properties of:

identity magnitude

equal distance

The equal distance between scale points allows us to know how many units greater than, or less than, one case is from another on the measured characteristic. So, we can always be confident that the meaning of the distance between 25 and 35 is the same as the distance between 65 and 75. Interval scales DO NOT have a true zero point; the number "0" is arbitrary. More powerful than ordinal scale due to concept of equality of interval. For example: Measurement of temperature on Fahrenheit or Celsius scales.

4. Ratio Data - Ratio scales of measurement or data have all of the properties of the abstract number system.

identity magnitude equal distance absolute/true zero

These properties allow us to apply all of the possible mathematical operations (addition, subtraction, multiplication, and division) in data analysis. The absolute/true zero allows us to know how many times greater one case is than another. Scales with an absolute zero and equal interval are considered ratio scales. Money can be its good example.

Scaling techniques

Generally when we conduct a research or any experiment which is performed outside the laboratory or in real world. We came across some sort of data which can further be analysed as numeric or non-numeric data set, further when we do market surveys most of the time, we work on scales and even in project of HR. We develop scales to conduct or research. Generally we have lot of scales available depending upon our questionnaire like likert scale, arbitrary scale, differential scale, cumulative scale, factor scale, multidimensional scales.

All the scales are associated with non-numeric dataset generally classified as ordinal or nominal dataset.

ARBITRARY SCALES

Arbitrary scales are developed on ad hoc basis and are designed largely through the

researcher’s own subjective selection of items. The researcher first collects few

statements or items which he believes are unambiguous and appropriate to a given

topic. Some of these are selected for inclusion in the measuring instrument and then

people are asked to check in a list the statements with which they agree.

The chief merit of such scale is that they can be developed very easily,

quickly and with relatively less expense. They can also be designed to be highly specific

and adequate. Because of these benefits, such scales are widely used in practice.

At the same time there are some limitations of these scales. The most

important one is that we do not have objective evidence that such scales measure the

concepts for which they have been developed. We have simply to rely on research’s

insight and competence.

DIFFERENTIAL SCALES (OR THURSTONE-TYPE SCALES)

The name of L.L.Thurstone is associated with differential scales which have been

developed using consensus scale approach. Under such an approach the selection of

items is made by a panel of judges who evaluate the items in terms of whether they are

relevant to the topic area and unambiguous in implication. The detailed procedure is

as under:

The researcher gathers a large number of statements, usually twenty or more, the

express various points of view toward a group, institution, idea or practice(i.e.

statement belonging to the topic area).

These statements are then submitted to a panel of judges, each of whom arranges

them in eleven groups or piles ranging from one extreme to another in position.

Each of the judges is requested to place generally in the first pile the statements

which he thinks are unfavourable to the issue, in the second pile to place those

statements which he thinks are next most unfavourable and he goes on doing so

in this manner till in the eleventh pile he puts the statements which he considers

to be the most favourable.

This sorting by each judge yields a composite position for each of the items. In

case of marked disagreement between the judges in assigning a position to an

item, that item is discarded.

For items that are retained, each is given its medium scale value between one and

eleven as established by the panel. In other words, the scale value of any one

statement is computed as the “median” position to which it is assigned by the

group of judges.

A final selection of statements is then made. For this purpose a sample of

statements, whose median scores are spread evenly from one extreme to the other

is taken. The statement so selected, constitute the final scale to be administrated

to respondents. The position of each statement on the scale is the same as

determined by the judges.

After developing the scale a stated above, the respondents are asked during the

administration of the scale to check the statements with which they agree. The median

value of the statements that they check is worked out and this establishes their score or

quantifies their opinion. It may be noted that in the actual instrument the statements

are arranged in random order of scale value. If the values are valid and if the

opinionnaire deals with only one attitude dimension, the typical respondent will choose

one or several contiguous items(in terms of scale values) to reflect his views. However,

at times divergence may occur when a statement appears to tap a different attitude

dimension.

The Thurstone method has been widely used for developing differential

scales which are utilized to measure attitudes towards varied issues like war, religion,

etc. such scales are considered most appropriate and reliable when used for measuring a

single attitude. But an important deterrent to their use is the cost and effort required to

develop them. Another weakness of such scale is that the values assigned to various

statements by the judges may reflect their own attitudes. The method is not completely

objective; it involves ultimately subjective decision process. Critics of this method also

opine that some other scale designs give more information about the respondents

attitude in comparison to differential scales.

SUMMATED SCALES (OR LIKERT-TYPE SCALES)

Summated scales (or likert-type scales) are developed by utilizing the item analysis

approach wherein a particular item is evaluated on the basis of how well it discriminates

between those persons whose total score is high and those whose score is low. Those

items or statements that best meet this sort of discrimination test are included in the

final instrument.

Thus, summated scales consist of a number of statements which express

either a favourable or unfavourable attitude towards the given object to which the

respondent is asked to react. The respondent indicates his agreement or disagreement

with each statement in the instrument. Each response is given a numerical score,

indicating its favourableness or unfavourableness, and the scores are totalled to

measure the respondent’s attitude. In other words, the overall score represents the

respondents position on the continuum of favourable –unfavourableness towards an

issue.

Most frequently used summated scales in the study of social attitudes

follow the pattern devised by likert. For this reason they are often referred to as likert-

type scales. In a likert scale, the respondent is asked to respond to each of the

statements in terms of several degrees, usually five degrees (but at times 3 or 7 may also

be used) of agreement or disagreement. For example: when asked to express opinion

whether one considers his job quite pleasant, the respondent may respond in any one of

the following ways:

Strongly agree

Agree

Undecided

Disagree

PROCEDURE:

1. As the first step, the researcher collects number of statements which are relevant to the attitude being studied and each of the statements express definite favourableness or unfavourableness to a particular point of view.

2. After the statements have been gathered, a trial test should be administered to a number of subjects.

3. The response to various statements are scored in such a way that a response indicative of the most favourable attitude is given the highest score of 5 and that with the most unfavourable attitude is given the lowest score of say, 1.

4. Then the next step is to total the score of each respondent which is obtained by adding his score that he received for separate statements.

5. The next step is to array these total scores and find out those statements which have a discriminatory power. For this purpose, the researchers may select some part of the highest and the lowest total scores say the top 25 per cent and the bottom 25 per cent. These two extreme groups are interpreted to represent the most favourable and the least favourable attitudes and are used as criterion groups by which to evaluate individual statements. This way we determine which statements consistently correlate with low favourability and which with high favourability.

6. Only those statements and correlate with the total test should be retained in the final instrument and all others must be discarded from it.

ADVANTAGES:

The Likert-type scale has several advantages. Mention may be made of important ones.

a) It is relatively easy to construct the Likert-type scale in comparison scale type comparison to Thurston-type scale because Likert type scale can be performed without a panel of judges.

b) It is also considered more reliable because under it respondents answer each statements included in the instruments. As such it also provides more information And data then thus the thurstone-type scale.

c) Each statement included in the Likert-type scale is given an empirical test for

discrimination ability and as such unlike Thurstone-type scale, the Likert-type

scale permits the use of statements that are not manifestly related to the

attitude being studied .

d) Likert-type scale can easily be used in the respondent centered and stimulus

centered studies i.e. through it we can study that how responses differ between

people and hoe responses differ between stimuli.

LIMITATIONS:

One important limitation is that with this scale we can simply examine whether

respondents are more or less favorable to a topic. But we cannot tell how more or less

they are. There no basis for belief that the five positions indicated on the scale are

equally spaced. The interval between strongly agree and agree may not be equal to the

interval between agree and undecided. This means that Likert scale does not rise to a

stature more than that of ordinal scale where as the designers of Thustone scale claim

the thustone scale to be an interval scale. One further disadvantage is that often the

total score of an individual respondent has little clear meaning since a given total score

can be secured by a variety of answer patterns. It is unlikely that the respondent can

validly react to a short statement on a printed form in the absence of real life qualifying

situations moreover their remains a possibility that people may answer according to

what they think that they should fell rather than how do they feel. This particular

weakness of Likert-type scale is met by using a cumulative scale.

In spite of all the limitations the Likert-type scales are regarded as the

most useful in situation. Where in it is possible to compare the respondents score with

the distribution of the scores from some well defined group. They are equally useful

when we are concerned with a change or improvement in which case we can use the

scales to measure the attitudes before and after the programmes of change or

improvement in order to assess whether our efforts have had the desired effects.

Types of scales

Before we can conduct a statistical analysis, we need to measure our dependent variable. Exactly how the measurement is carried out depends on the type of variable involved in the analysis. Different types are measured differently. To measure the time taken to respond to a stimulus, you might use a stop watch. Stop watches are of no use, of course, when it comes to measuring someone's attitude towards a political candidate. A rating scale is more appropriate in this case (with labels like "very favourable", "somewhat favourable" etc.). For a dependent variable such as "favourite colour", you can simply note the colour-word (like "red") that the subject offers.

Although procedures for measurement differ in many ways, they can be classified using a few fundamental categories. In a given category, all of the procedures share some properties that it is important for you to know about. The categories are called "scale types", or just "scales", and are described in this section.

1.Nominal Scale - This is a very simple scale. It consists of assignment of facts/choices to various alternative categories which are usually exhaustive as well mutually exclusive. These scales are just numerical and are the least restrictive of all the scales. Instances of Nominal Scale are - credit card numbers, bank account numbers, employee id numbers etc. It is simple and widely used when relationship between two variables is to be studied. In a Nominal Scale numbers are no more than labels and are used specifically to identify different categories of responses. Following example illustrates -

What is your gender? [ ] Male [ ] Female

2. Ordinal Scale- Ordinal scales are the simplest attitude measuring scale used in Marketing Research. It is more powerful than a nominal scale in that the numbers possess the property of rank order. The ranking of certain product attributes/benefits as deemed important by the respondents is obtained through the scale. Example 1: Rank the following attributes (1 – 5), on their importance in a microwave oven.

a. Company Name b. Functions c. Price d. Comfort e. Design

The most important attribute is ranked 1 by the respondents and the least important is ranked 5. Instead of numbers, letters or symbols too can be used to rate in a ordinal scale. Such scale makes no attempt to measure the degree of favourability of different rankings.

3.Interval Scale- Herein the distance between the various categories unlike in Nominal, or numbers unlike in Ordinal, are equal in case of Interval Scales. The Interval Scales are also termed as Rating Scales. An Interval Scale has an arbitrary Zero point with further numbers placed at equal intervals. A very good example of Interval Scale is a Thermometer. The data obtained from the Interval Scale can be used to calculate the Mean scores of each attributes over all respondents. The Standard Deviation (a measure of dispersion) can also be calculated.

4.Ratio Scale- Ratio Scales are not widely used in Marketing Research unless a base item is made available for comparison. In the above example of Interval scale, a score of

4 in one quality does not necessarily mean that the respondent is twice more satisfied than the respondent who marks 2 on the scale. A Ratio scale has a natural zero point and further numbers are placed at equally appearing intervals. For example scales for measuring physical quantities like – length, weight, etc.

Results and Analysis:

The study was conducted on 100 respondents. The survey was carried out in and around Mandi Gobindgarh, Ludhiana and Patiala region. This survey focuses on the perception of the people towards various investment options available in market for their savings.

Table 1

From the table, we can interpret that maximum respondents who invest their money in

various avenues are lying under the age group between 25 years to 35 years i.e. 42%

invest their savings in different investment options lying under the age group of 25 to 35

years and from these 10 are single and 31 are married and most of the respondents on

whom survey is conducted are residing in urban areas and only 9% respondents belongs

to rural areas.

Table 2

The above table gives us the idea about the relationship between the total work

experience and the amount saved. It shows that on an average the people having a work

experience between 0-5 years save Rs. 6132, , the people having a work experience

Number of respondents (100)

Age – group

25 -35 yrs(42)

35 – 45 yrs(38)

45 – 55 yrs(15)

Above 55 yrs

Number of Respondents 42 (42%) 38 (38%) 15 (15%) 5 (5%)

Martial Status

Single 10

8 5 3

Married

31 30 10 3

Locality Urban 35 35 15 6

Rural 6 3 - -

Total Work Experiences (yrs-group)

0 -5 yrs

5 – 10 yrs 10 – 15 yrs 15 -20 yrs 20 -35 yrs

Amount Saved ( Rs )

Average Rs 6132 Rs 5894

Rs 7992 Rs 8164 Rs 15666

Range (Rs)

2000 – 10,000

3000 – 10000

1000 – 20000

5000 – 15000

6000 – 30000

between 10-15 years save on average Rs.7992, the people having a work experience

between 15-20 years save amount Rs.8164, the people having a work experience between

20-35 years save amount Rs.15666.So it shows that as the work experience of people

increases the amount saved by them also get increased gradually. And it also shows the

range of savings in which there is maximum variation is between 6000 to 30000 for the

people having work experience of 20 to 35 years.

Table 3

The above table shows that most of the people prefer to save their amount in banks and

monthly insurance premium. And generally in terms of maximum profit for investment

the people prefer real estate, fixed deposits, insurance policies keeping in the mind the

factors safety, regular income flow, risk coverage. The basis for investment is market

sentiments, after consultations and past performance.

Graph 1

Analysis of adjacent graph was between amount saved and health status of respondents. On analysis there was negative trend as the amount of saving decreases corresponds to health status i.e. as health status becomes worse the respondents tends to save less. .

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Health Statusvery good = 1 good = 2 bad = 3 not bad = 4

Series1

Linear (Series1)

Response Preferred Options

for savings Others, Savings in banks, Monthly insurances premium

Investment in terms of maximum profit

Real Estate, Fixed Deposits, insurances policies

Factors considered while investment

Safety, Regular Income Flow, Risk Coverage

Basis for investment Market Sentiments, after Consultations, Past Performances

Graph 2

Graph 3

Graph 4

The graph gives the relationship between the number of dependents in a family and amount of saving along with the trend line between two with mathematical equation. people tends to save more if number of dependents are more in family and on average they are savings Rs 5050 and with each increment of family member they are adding on average Rs 970 to their savings. Eg: if 2 dependents increased then the amount saved will become Rs.6090

Graph 5

y = 970.7x + 5050.R² = 0.125

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Number of dependents

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Analysis of adjacent graph was between amount saved and region of the respondents. This graph shows that the people living in urban areas liked to save more amount of money in comparison to the person residing in rural areas.

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Regionurban = 1 rural = 0

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CONCLUSION: In this research paper it was found that most of the people like to secure their future and for

this they prefer to invest their savings in real estate, insurance policies and fixed deposits

keeping in mind the factors like safety, regular income flow, and risk coverage. Generally

as the work experience of the person increases the amount saved by him/her also starts

increasing. In fact health also have a great influence on the savings of the person

because as the health of the person gets worse the amount saved by him also start

decreasing. Besides the above number of working members, number of dependents in a

family, education level,region etc. all have an impact on the savings made by the person.

This graph gives relationship between number of family members working and amount in savings along with negative trend which means if number of family members are working more they tend to save less i.e. if single person is working he is saving 10450 but with the increment of additional working member they are reducing the amount of saving by Rs 1008.Eg:If in a family 2 more persons started working then the amount saved become Rs.8444

y = -1008.x + 10460R² = 0.02

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No. of working members

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