Individual Investor Behaviour towards Investing in Low and Medium-Risk Investments: An Exploratory Study

Abstract

The present study is an exploratory attempt to analyse the factors having significant impact on the individual investor preferences for low and medium-risk investments. For aforesaid purpose, the data had been collected through primary survey by framing a questionnaire answered by 607 respondents from three districts of Punjab that is Amritsar, Jalandhar and Ludhiana. Factor analysis and multiple regression analysis had been used to analyse the data. Factor analysis revealed eight factors, that is benefits factor, pocket-friendly factor, credibility factor, friend/family recommendation factor, personal financial needs factor, pre-investment analysis factor, expert advice factor and religious beliefs factor. Findings of multiple regression analysis revealed that benefits factor had highest positive impact on overall preference for low and medium-risk investments. Further, pocketfriendly factor, friend/family recommendation factor, credibility factor, personal financial needs factor and expert advice factor had positive and significant impact on overall preference for low and medium-risk investments. However, pre-investment analysis factor was found to have significant but negative impact on overall preference for low and medium-risk investments. The study helps financial service providers in understanding the various factors that influence individual stock investors of Punjab and the one having significant impact on them to invest in low and medium-risk investments instead of investing in risky investments, and this will provide them implications to financial service providers to design the marketing activities according to the needs of such investors. As no such study has ever been conducted in Punjab, India (to the best of researcher's knowledge), this study potentially helps in abridging gaps in literature.