Investment Decisions in the light of COVID-19: The Individuals' Viewpoint
Dr. Ashok Kumar Gupta
Associate Professor Department of ABST
Govt. Commerce College, Kota
E-mail: drashokkr.gupta@gmail.com
Dr. Meenu Maheshwari
Assistant Professor
Department of Commerce and Management University of Kota, Kota
E-mail: drmeenumaheshwari@gmail.com
Pragya Gaur (Corresponding Author)
Research Scholar Department of ABST
Govt. Commerce College, Kota
E-mail: gaur.pragya09@gmail.com
Investments play a crucial role for the individuals seeking to augment their income or secure their existing funds for the long-term benefit. Although, the situation of crisis may turn the table around and can affect investment plans further. The purpose of this study is to know the perception of the ordinary individuals on their investment plans and the core factors affecting their decision due to COVID-19 pandemic. The study has been conducted by a way of questionnaire filled by the individuals working in different sectors along with the retired and homemakers. The questionnaire has been sent to 320 individuals, out of which 140 individuals have responded, for which the analysis has been done through frequency tables, percentages, graphs, pie-charts and interpretations have been given therein. It has been found that pertaining to the risk associated with this pandemic, the perception of the individuals has been transformed from returns to the security and thus leading to the preference for the low-risk investment avenues. The study recommends to watch out the position of market for some time and then resort to the investment further keeping in mind the risk and the guidance of the certified financial advisors and consultants.
Keywords : COVID-19, Investment Avenues, SIP, Low-risk investment, Medium-risk Investment, High-risk investment, Security, Liquidity.
The world is experiencing the biggest havoc in a form of COVID-19 which is a never seen affair for anyone across the world. This particular disease has put a whole world into the lockdown and a huge fraction of population behind the doors. Ever since this COVID-19 situation broke out, it has not been affecting just the economy as a whole but the lives of an ordinary people financially, socially, psychologically and physiologically. It is a human, financial and societal crisis created by pandemic COVID-19 which is infecting the societies at their core.
Financial concerns have always been a part of every individual whether he has been leading a normal life or going through some issues in their professional or personal avenues. It has been earlier noted by the
94
evidences that this virus has been detrimental physically and economically to the poor people who are in vulnerable conditions. But as the time passed by and the period of lockdown has been extended for more couple of days, the people in more secure zone have also started to feel atrocious related to their economic welfare. The things are running out of stock, limited resources, job insecurity, etc.; all these thoughts have distressed the individuals to deal with their financial resources more diligently.
Before this pandemic and resulting lockdown, a great number of people used to make investments for fulfilling their diverse purposes. It may be for future savings for old age, marriage or family health, security of funds, multiplying their existing funds, creation of wealth etc. As the report of Household Finance Committee published in 2017 states that the investment of the average Indian households accounts for 95% in the physical form in a way of residential buildings, land, livestock, gold etc. While the 5% vests in the financial assets like FDs, mutual funds, LICs etc. But since a decade, the diversion of the investments has been turned towards SIP (Systematic Investment Plan) from the conventional options like real estate, gold etc. as the investors have turned sapient after their encounter with the mutual funds over the years. As per the report of India Ratings and Research the household savings has been declined from 23.6% to 16.3% in a period between 2012 to 2017as the urge of investing in financial assets has been felt to ensure the GDP improvement and macro-economic stability.
However, with a rise of this situation of global pandemic, many things have been affected including returns and security of the various investment avenues. The huge fall in crude oil prices, downfall of share market, rising gold prices, utilization of existing funds without a proportionate increase in it etc. have created a huge impact on the perception of the individuals of looking at the avenues for money making. This has led to the result that individuals are now reconsidering their investment decisions and molding their direction into the shape of an existing situation. This has somehow led to the change in their priorities, considerations for an investment of their life savings or dealing with their liquidity requirements.
Hence, this study has been designed to know about the perceptions of the individuals cater to the investments out of their income or savings. The agenda behind the study is to know about the opinions and decisions of the individuals towards various avenues of an investment and how this decision will be transformed and take a shift to other options as a result of this COVID-19 pandemic.
Mondal (2018) in his project report surveyed on Indian investors to analyze their behaviour on various investment options available in India. The information has been collected by the questionnaire filled by 125 investors from various backgrounds. It has been observed from the results that investors irrespective of their age, income, education, type of occupation are always risk averse and intends to invest into the financial products rendering risk-free returns. The study opined to the investment managers to design investment plan in such a way that it caters to the need of the risk averse investors and use TV as a medium to communicate investment plans.
Kumar (2020) tried to showcase the impact of COVID-19 on the economy emphasizing on chemical, auto, electronics, foreign trade and poultry industry. The focus has been given on the fact that at what extent India is being dependent on China pertaining to aforesaid industries. It has been opined that chemical industry will be affected by around 20% due to shutdown of logistics, auto industry will get affected by around 10%, electronics will face huge effect due to shackled production, disruptions and supply. Likewise, foreign trade is facing decline due to restriction on imports and poultry has been affected adversely due to the notion that the virus can be transmitted by the consumption of chicken.
Dev and Sengupta (2020)in their study worked upon to assess the likely impact of COVID-19 on various sections of the economy and to evaluate the policies drawn by the government as well as RBI. It has been stated that the economy of the nation will be disruptive due to dependence on informal labour, shutdowns and other measures of social distancing. Also, the results of the policy of the government are in preliminary stage. It is required for the policy-makers
to make an effort to uplift the results so that the state of shock can be prevented in both formal and informal sector.
Ozili and Arun (2020) empirically analyzed that how social distancing policies would impact the economic activities and stock indices. It has been found that extension of lockdown, decision on monetary policy and travel restrictions to abroad have a crucial effect on the economic activities and stock indices. However, there has been a positive impact of restrictions within internal boundaries and fiscal policy and a neutral impact of number of cases of coronavirus on the economic activities.
On the grounds of the studied reviewed and gone through, it has been observed that previously investment pattern of the investors has been studied and its impact on the whole economy has been discussed. There has not been a study found that has worked upon the perception of investors on the investment plans and pattern in the light of COVID-19 pandemic. Thus, in order to fill in the research gap, this study has been attempted to know the perception of investors, whether COVID-19 would impact their current preferences of investment, the reason for such change and factors affecting it.
The quantitative approach has been adopted for which data have been collected using primary and secondary sources.
The structured questionnaire has been developed and distributed to the working individuals who make investments out of their income and savings. While the secondary sources referred for the purpose of the study comprised of the research papers, articles in financial newspapers, experts' opinions in various print-media, investment or financial chronicles, web-links etc.
The individuals have been selected on the basis of convenience sampling technique covering the private and government employees, entrepreneurs, self-employed, retired and home-makers.
The data have been collected by conducting a survey by sending questionnaire to 320 individuals, out of which 140 responses have been received where the individuals responded are of different age-group, marital status occupation and income levels.
The collected data have been analyzed and interpreted through frequency tables, percentages, pie-charts and graphs. The relevant hypotheses have been developed to justify the perceptions of the individuals pertaining to the investment pattern due to the surge of COVID-19. The developed hypotheses are as follows:
Ho: There is no significant influence of annual income on preference level regarding investment pattern during COVID-19 pandemic.
Ho1: There is no significant influence of Occupational status on preference level regarding investment pattern during COVID-19 pandemic.
Decision Rule: If significant value (p-value) is below than the minimum threshold i.e., 0.05 or 5%, hence null hypothesis formulated is rejected.
These hypotheses have been tested using non-parametric Chi-square test. The findings and suggestions have been rendered in alignment with the responses received, observed and analyzed.
An analysis of the responses received by 140 individuals has been done to know the perception of an investor regarding the various investment options in the light of COVID-19 pandemic. The questionnaire has been framed containing various questions pertaining to the investment preferences of the individuals, their perception on whether
COVID-19 would impact the investment pattern, if yes, then why and upto what extent.
On the grounds of the observations from the questionnaire, interpretations and suggestions have been rendered rationally without pre-conceived notions and bias. The entire analysis followed by findings and suggestions have been thoroughly dependent on the responses of the investors.
Data Analysis
Table 1. Demographic Segmentation of Sampled Investors
As per Table 1, the demographics reveal that the out of the total sampled 140 investors, 55% (77 in number) are men while 45% (63 in number) constitute a female population depicting the inclination of responsibility of earning and investment towards male in a society. Further, maximum
population of investors are of millennials of age between 21-30 with 65% of total sampled investors while the least are from the age above 50 with 5%. The great amount of investors has been recognized as unmarried and private employees with 55.7% (78 in number) and 40.7% (57 in number) respectively having maximum of people of
income ranging from 2,00,000- 5,00,000 with 36.4% of gross sampled investors. This denotes that a reasonable amount of investors is ready for taking risk being in a category of youth investors having a good amount of income paving for the fair returns.
Table 2. Number of People Making Investment out of their Income
|
Particulars |
Number |
Percentage |
|
Yes |
98 |
70.0 |
|
No |
42 |
30.0 |
|
Total |
140 |
100 |
As per Table 2, 98 i.e. 70% out of total sampled investors of different occupational status and varied annual income have made an investment out of their income or savings while only 30% have not made an investment out their income. This denotes a great fraction of people believes in securing their funds or getting a return from it by multiplying it through various investment plans.
Table 3: Fraction of Income towards Investment
|
Particulars |
Number |
Percentage |
|
No Investment |
42 |
30.0 |
|
Less than 10% |
37 |
26.4 |
|
10-15% |
28 |
20.0 |
|
15-20% |
15 |
10.7 |
|
Above 20% |
18 |
12.9 |
|
Total |
140 |
100 |
As per Table 3, 26.4% of sampled population who make investments out of their income invests less than 10% of their income in various investment avenues followed by the investment between 10-15% with 20% of total sampled population. However, 30% of the sampled population make no investment at all. This shows the investors behaviour towards use of their income as they intend to use it in consumption and savings more as compared to the investing outside. This somewhere depicts their risk-averse nature.
Table 4: Preferred Type of Investment
|
As Table 4 depicts, 42.9% of people prefer investment in the low-risk avenues like Fixed Deposits, Govt. Securities, PPF, Post-office savings etc. as it assures the security of their funds while 23.6% of sampled investors cater to the medium risk avenues like mutual funds, LIC, etc. which renders them the fair returns in a reasonable period of time. This again depicts the mindset of the people regarding the risk taking approach in terms of investment. However, the shift from conventional methods to the strategic investments can easily be seen by the figures where only a few investors with 8.6% (12 in number) believes in investing in Gold, Real-estate etc. A few investors comprising 11.5% of sampled population also opined to adopt mix of investment avenues rather than concentrating on one.
Table 5: Factors Influencing Investment Decision
|
S.no. |
Particulars |
Number |
Percentage |
|
1 |
Security |
53 |
37.9 |
|
2 |
Returns |
30 |
21.4 |
|
3 |
Tax Savings |
25 |
17.9 |
|
4 |
Wealth Creation |
23 |
16.4 |
|
5 |
Liquidity |
9 |
6.4 |
|
|
Total |
140 |
100 |
As per Table 5, it has been observed that investors mostly keep security of their funds in mind while making investment in any form which backs the opinion of preferred investment in low risk investment options. 37.9% of sampled population asserted that security is the major factor that they consider while investing and post its assurance they rely on returns with 21.4% of sampled investors who believe it so.
|
Table 6: Source of Knowledge on Investments
As per Table 6, 40% of sampled investors rely on the discussion and opinion of their friends and family for the consideration of an option of investment. With the prevalence of the virtual environment, source of any type of information comes handy to the people in the form of internet on which 33% i.e. 47 people of sampled investors rely upon to generate any information on investment trends, plans, benefits and options. Some entrepreneurs take help from their financial advisors for investing their funds which is here reflects 13.6% of sampled investors.
Table 7: Perception on Impact of COVID-19 on Investments
|
S.no. |
Particulars |
Number |
Percentage |
|
1 |
Yes |
93 |
66.4 |
|
2 |
No |
10 |
7.1 |
|
3 |
Maybe |
37 |
26.4 |
|
|
Total |
140 |
100 |
As per Table 7, 66.4% of sampled investors believe that the situation of COVID-19 pandemic will affect the security and returns of the funds being invested while 26.4% of the investors are in a state of doubt on this concern. Only 7.1% of investors believe that it will not impact the security and returns associated with the investments.
Table 8: Perception on Change in Preference of Investment Avenues
|
S.no. |
Particulars |
Number |
Percentage |
|
1 |
Yes |
53 |
37.9 |
|
2 |
No |
42 |
30.0 |
|
3 |
Maybe |
45 |
32.1 |
|
|
Total |
140 |
100 |
As per Table 8, there has been an almost equivalent response received on the notion whether the preference of the investor on the investment option or plan will change as a result of COVID-19. 37.9% (53 in number) are of this opinion that it will impact their decision on the investment option further while people in doubt and disagreement reflects 32.1% and 30% of sampled investors respectively.
Table 9: Cross Tabulation Chi Sq.
Test of Preference Level*Annual Income
|
Annual Income |
Will your preference change regarding investment pattern as a result of this COVID-19 pandemic? |
Total |
||
|
Maybe |
No |
Yes |
||
|
Above INR 10,00,000 |
3 |
6 |
6 |
15 |
|
Below INR 2,00,000 |
20 |
13 |
18 |
51 |
|
INR 2,00,000- INR 5,00,000 |
17 |
13 |
21 |
51 |
|
INR 5,00,000- INR 10,00,000 |
5 |
10 |
8 |
23 |
|
Total |
45 |
42 |
53 |
140 |
|
Pearson Chi-Square |
Value |
df |
Sig. Value |
|
|
5.176 |
6 |
.521 |
||
Visualization of Preference Level*Annual Income
Cross-tabulation chi sq. test also known as contingency table and test of association depicts higher percentage of respondents were fallen into the bracket of below 2,00,000 to 5,00,000 INR annual income. Chi sq. test of association reveals there is no significant influence of annual income on preference level of investment pattern during covid-19 pandemic. This means p-value (sig) is 0.521 which is greater than 0.05. Hence, Ho is accepted.
Table 10: Cross Tabulation Chi Sq. Test of Preference Level*Occupational Status
|
Occupational Status |
Will your preference change regarding investment pattern as a result of this COVID-19 pandemic? |
Total |
||
|
Maybe |
No |
Yes |
||
|
Entrepreneur |
5 |
2 |
6 |
13 |
|
Government Employee |
5 |
9 |
11 |
25 |
|
Home Maker |
6 |
3 |
2 |
11 |
|
Private Employee |
23 |
16 |
18 |
57 |
|
Retired |
0 |
0 |
1 |
1 |
|
Self-Employed |
6 |
12 |
15 |
33 |
|
Total |
45 |
42 |
53 |
140 |
|
Pearson Chi-Square |
Value |
df |
Sig. Value |
|
|
12.33 |
10 |
.263 |
||
Visualization of Preference Level*Occupational Status
Table 10depicts higher percentage of respondents were private employees with 1 least retired employee. Chi sq. test of association reveals there is no significant influence of occupational status on preference level of investment pattern during covid-19 pandemic. This means p-value (sig) is 0.263 which is greater than 0.05. Hence, Ho1 is accepted.
Table 11: Investment Avenue likely to Boost post COVID-19
|
Particulars |
Number |
Percentage |
|
Saving Deposits, Fixed Deposits etc. |
31 |
22.1 |
|
Insurance Policies |
35 |
25.0 |
|
Mutual Funds |
7 |
5.0 |
|
Gold or Real-Estate |
21 |
15.0 |
|
Shares, Commodities, Forex etc. |
12 |
8.6 |
|
Debentures or Bonds |
0 |
0.0 |
|
Mix of Insurance Policies & SDs, FDs etc. |
14 |
10.0 |
|
Will depend on future income level |
20 |
14.3 |
|
Total |
140 |
100 |
As per Table 11, 25% of sampled investors opine that the inclination of investment post COVID-19 will be turned towards Insurance policies while 22.1% of sampled population believes that it will turn towards more secure investment options such as savings, fixed deposits, govt. securities etc. This depicts as this virus is costing lives and creating crisis of basic needs, people are favoring the conventional and secured options rather than running behind returns.
Table 12: Investment Avenue likely to Decline post COVID-19
|
Particulars |
Number |
Percentage |
|
Saving Deposits, Fixed Deposits etc. |
29 |
20.7 |
|
Insurance Policies |
7 |
5.0 |
|
Mutual Funds |
18 |
12.9 |
|
Gold or Real-Estate |
36 |
25.7 |
|
Shares, Commodities, Forex etc. |
32 |
22.9 |
|
Debentures or Bonds |
4 |
2.9 |
|
Can't say; Need Some time to Review |
14 |
10.0 |
|
Total |
140 |
100 |
As per Table 12, 25.7% of sampled investors believes that investment in conventional methods like gold, real-estate etc. will go down as a result of this pandemic due to its liquidity issues while 22.9% of sampled investors supposes the decline of investments in shares, commodities and forex due to its high risky nature and people's risk averse approach.
Table 13: Reason for Such Boost or Decline
|
Particulars |
Number |
Percentage |
|
Declining Market Price |
15 |
10.7 |
|
Risk of Life |
26 |
18.6 |
|
Security of Funds |
9 |
6.4 |
|
Liquidity Needs |
9 |
6.4 |
|
Need for Diversification of Investment |
3 |
2.1 |
|
Requirement of Capital Appreciation |
2 |
1.4 |
|
Multiple Reasons mentioned Above |
76 |
54.3 |
|
Total |
140 |
100 |
As per Table 13, it has been revealed that there is not a single reason which we can consider the cause behind such boost or decline. 54.3% of sampled investors determines the multiple reasons behind such increase or decrease mainly consisting risk of life, declining market prices of shares, security and liquidity needs etc.
|
Table 14: Inconvenience on making Investment Decision
As per Table 14, the high concentration of people believes that there are various difficulties they face while deciding over investment option such as lack of proper knowledge, unknown risks associated with various investment avenues, diversification in investment etc. Here also, 37.1% of sampled investors asserted that there are various inconveniences they face where 30.7% people specified it as unknown risks, 9.3% investors due to lack of knowledge etc. This varies in accordance with the qualification of an investor, accessibility of knowledge and quantum of resources available.
As a result of COVID-19 pandemic, many economic and social activities have got affected which in result have made a huge impact on the perception of individuals in context of dealing with their income, savings and investments. The crisis created by this pandemic has induced the investors to reconsider their investment decisions as it has led to the security, risk of life, liquidity etc. type of issues. This study has been intended to know whether the perception of investors will transform owing to COVID-19 and the reasons behind such transformation of opinions on investment avenues.
In this context, there are a few findings that has been encountered by the responses received from the investors. The major findings have been listed below:
in private sector having annual income upto the extent of 5,00,000. This shows being a youth having reasonable income, the investors are keen on multiplying their income or working towards their future plans more efficiently as compared to older population who tends to
be more risk-averse.
The investments in the various securities and instruments are not a new thing in household affair and every person having an appropriate amount of income prefer to invest their money either for security or returns. Whenever any crisis occurs, it usually influences the perception of an individual regarding their security of income, liquidity problems, savings they do and investments they make. In the same way, COVID-19 has such a bearing on lives and insights of ordinary people. The study concludes with a notion that it is somewhere uncertain to say anything about the future investments in different avenues as it will be reliant on the future income levels of the individuals. However, the perception of the investors has been shifted back from looking for high returns to yearning for the security of funds and risk of life. In view of this, the investors have opined to adhere to low-risk investments rather than investments possessing high degree of risk. This proves the conception of the investors that irrespective of the occupation and income, they always tend to act conservative and choose to play safe.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3 562570
Web-links
