The Effect of Demographics on Investment Choice: An Empirical Study of Investors in Jammu

Abstract

As the Indian economy is growing, there is an increasing demand for wealth management functions. Wealth management requires to understand the clients' financial and investment requirements and then, providing financial planning and portfolio management services. The practical experiences of wealth management professionals emphasize that customer behavior, and psychology play a very prominent role in successfully building and sustaining a wealth management relationship. Behavioral finance is a nascent, but growing discipline, which studies investor's psychology while making financial decisions. Demographic profile and investor personality can be the two determinants for making perception about the investor psychology, which if scientifically studied, could help the wealth management professionals to advise their clients better. This study aims to investigate the effect of the demographic profile of the investor on investment choice. Such understanding could prove to be a boon for the burgeoning wealth management industry in India. Conventional theories in finance say that the world and its participants are, for the most part, rational "wealth maximizers". These traditional economic theories have always considered investors as fully rational decision making entities. However, there are many instances where emotion and psychology influence our decisions, causing us to behave in unpredictable or irrational ways. Over the past few years, behavioral finance researchers have scientifically shown that investors do not always act rationally or consider all the available information in their decision-making process. They have behavioral biases that lead to systematic errors in the way they process information for an investment decision. These errors, because of their systematic character, are often predictable and avoidable. However, they continue to occur frequently and are made by both novice and professional investors alike.