Determination of Factors Affecting Individual Investor Behaviors: A Study on Private Employees.

Abstract

Introduction: Private-sector workers' investment behavior is influenced by factors such as education, income, age, employment, psychological issues, and socio-economic status. Private employees tend to be more conservative in their investment decisions due to irregular income patterns, employment instability, and limited retirement benefits. Behavioral biases like overconfidence and herd mentality also play a role in investment decisions, as they may avoid speculative investments and focus on short-term goals.

Objectives: This research seeks to explore the determinants of investment decision making of private sector employees in Ahmedabad, which includes the impact of financial literacy on investment practice, risk tolerance and its influence on investment decision making, and the cognitive behavioral influences on investment decisions.

Methods: This research employed a quantitative research design, gathering data from 500 private sector workers in Ahmadabad through a structured questionnaire. The questionnaire captured demographic data, financial literacy, risk tolerance, and behavioral biases. The data was analyzed with multiple regression and factor analysis.

Results: The study analyzed the respondents' demographic profile and investment behavior using descriptive statistics, inferential statistics, correlation, and multiple regression analyses. Results indicated that there was a strong association between financial literacy, risk tolerance, and behavioral biases and more proactive investment behavior resulting from higher levels of these factors. The coefficients for some of the behavioral biases were negative, suggesting a negative impact on investment decisions. The regression analysis of investment depicted a significant link between the amount of income by respondents and investment, with total income, age, and gender's effect on investment being through the regression equation Investment = (-) 1.105 lakhs + 0.219 (amount of income) + 0.011 (age) + 0.321 (gender). Factor analysis was performed to verify the appropriateness of the data for factor analysis through the use of KMO estimates as well as through Bartlett's test of sphericity. The study concluded that factors like safety, security, liquidity, tax benefit, good returns and stable income, knowledge of finance, risk tolerance, and behavioral biases are major determinants of investment choices.

Conclusions: The research points out the role of financial literacy and risk tolerance in shaping investment attitudes among private sector workers. The research recommends that financial education interventions be implemented to enhance decision-making skills. Criteria affecting investment choice are stability, growth, hazard, and ease. The research also emphasizes minimizing behavioral biases like overconfidence and herding in order to avert suboptimal investment choices.