This study seeks to understand the Concept of investment culture around the globe and the attitude of Mauritians to investment. It aims to gain knowledge about key factors that influence investment behavior and thus trying to bring an insight and educate the population on the factors that need to be considered when selecting an investment portfolio. The focus will be based mostly on the Study of the Mauritian Population as a whole consisting of at minimum one income-earning member. It is by using different age groups along with Gender and demographic factors that synergism between investors can be reached. On the basis of segmentation we will carry out surveys. We planned for a minimum sample of around 2000 individuals would be selected for the study. Questionnaires would be distributed amongst various groups of people, depending on their Age, Gender and social status (targeting factors), dwelling in both rural and urban regions. The data collected would be assess and analyze using percentage, statistical methods and correlation to test the hypothesis. Thus keeping this in mind, that our aim is to explore the concept of investment culture, the study should have a degree of variation enough to avoid bias in our outcomes. Along with surveys and questionnaires, tools to collect data can include documentation review, observation, and even the collection of physical artifacts. Talking about outcomes, what we expecting from this analysis is to conclude whether: Mauritians are well aware of investment decisions and factors affecting these decisions; the level of investment undertaken by Mauritian is directly influenced by their Income level, Gender, Demographic factors as such; they are conscious of the importance of investment and there is enough incentives to prone Mauritians towards investment, compared to the Investment culture around the Globe? The point is how will these outcomes help and to whom would it be beneficial? We believe that this groundwork would help the Government and Investment Institutions in particular. Let’s assume that the results show that Mauritians, if their income rises will tend to interest more in investment thus the government can establish necessary incentives in a view to encourage investment by minimizing savings. Eventually, Investment bodies can also develop investment schemes that would attract investors.
InvestmentA is putting money into something with the expectation of profit. We often consider investment as deferred consumption meaning income earned but not consumed and kept for future consumption. Globally we can note that for the last decade people had been more open to investing their money in financial institutions compared to earlier whereby they use to go more towards consumption. Global economic growth has increased and thus standard of living which all together can be attributed to the fact that investment level has risen. Economist however, has argued that it is not possible to set out for investment without first considering savings. It should be acknowledged that without savings there can not be investment. This is because when an entrepreneur starts business, he is actually using other people’s savings. Therefore, savings is essential for investment. While saving is viewed as forgone consumption, investment is limited to “real” investments that give rise to the national output in future. Investment has two major attributes: Risk and Time. As such, we have investment Financial investment and Real Investment. The latter, is money invested in tangible and productive assets such as machineries, land or factories. Real asset what constitutes of real investment that determines the productive capacity of any economy. Financial investment is the investment of funds/capital into financial instruments, such as bonds, equities and securities. These financial assets are purchased with a view for future cash flows and may increase or fall in value in regards to capital gains or losses to investors. Mauritians do to some extent carry out financial investment, just to mention suppose an individual buys stocks of the State Bank of Mauritius or the Barclays Bank PLC which is a sort of financial investment in those particular companies, and hence, with the return expected the individual can invest in real assets like buying lands or buildings. So we can deduce that individuals have choice of consuming today or investing their wealth today for future consumption. Talking about investment decisions, Behavioral finance is an integral part as it lays emphasis on irrational behaviour of investors. Behavioural finance depicts individual investors as unrational investors who are faced to cognitive & psychological biases, who often portrayed risk seeking behaviour and their expectations are biased. Different investors have different investment objectives as such the selection of investment alternative for the investor should be considered first to know what are the objectives of investors. Objectives of investors ( vary across individuals) could be: Risks, Return and safety Current income v/s capital appreciation Capital preservation Ease of management Liquidity consideration Tax factors On a global perspective, it has been notice that investment by individuals much rely on trust which is one side of culture. The degrees of trust vary from one country to another; China, Norway, Finland, Sweden as such tend to have a high level of trust in doing business and investment. Conversely, we note rather low levels of trusts in France and Italy and much lower in Mexico and West Indies. This throws up questions like does cultural background affects financial attitudes? In Japan for instance one need billions to enter the financial market, one reason why it is the last option for investors. Zimbabwe has a relatively high inflation rate thus the government encourage its people to invest in market securities rather than saving their money. They are being prone to start up their own business by being provided with resources. Taking the example of China and the United States, the difference in their investment cultures lies in the collectivism of Chinese culture as opposed to the self-centred behaviour of American culture. In China indifferent to the highly risky assets and the high probability of low return, there is still a guarantee of family or friend’s support even in case of bankruptcy. The Americans on the contrary they do not benefit from the same support. This is the cultural safety net that we trying to pictured and how it differs across countries and cultures. Facts from the Central Bank of Mauritius, the Ministry of Finance and other Financial Institution made a report stating that in Mauritius investment is regarded in a different angle, where the desirable investment is 95.9% towards banking savings and deposits while 7.14% have invested in SIT and the stock market. 10 % expressed hesitation to invest in risky sectors and the rest were reluctant and showed confidence in the banking system for safety reasons. The main reason why there is little investment by Mauritian is: the lack of adequate information, no proper financial education, income tax reasons, unprepared for downturns and the saving rate and the agreement (too bulky to read that discourages investment ). Mauritians are a bit reluctant to invest in the stock exchange, they are risk averse. They rather seek for secure returns. In Mauritius much investment are made my foreigners (FDI). The belief is that in Mauritius the incentives to invest is here but the people are well unaware of the available investment opportunities. Recently, the Mauritian Government has decrease the Repo Rate aiming at discouraging people to save and hence divert their money towards investment.
Poor level of investment on behalf of Mauritians may translate to low national productivity and also to a slackening in the standard of living of local people unlike in European Countries and China. The Government should be focusing how to reassure its population to accept the culture of investing along with saving. That is creating an investment environment that provides both for a variety of saving and investment opportunities. As noted, recently the Government has increase the Repo rate to 5.25% in a view to encourage people to invest more and save less. It is a major problem as Mauritians are not aware of investment prospects and how to start out investing. Disregarding of the level of income of any individual, it should be able to save and invest a portion of its income for future consumption. This reluctant behaviour of people might be responsible for the lack of development and goals achievement for both local people and the society. The research is based mainly on finding out the investment culture of Mauritians with a view to find out the factors casting doubt on the right attitude to investment. The problem is also that people do not have a clear idea about factors that need to be considered when taking up an investment decision. They are confuse like to invest in which asset, which one would bring more returns, which one is riskier or which one have the higher yield to maturity? So the mandate is to how to bring to the population the right information and tactics of wise investment. It would be of no harm if along with Foreign Investors ( FDI) local people would participate in the investment portfolio for a better development. Indeed, there is a misconception towards investment amongst Mauritians but its time that things need to be changed and people are made more prone to investment. We need to study their investment behavior.
Investigating on the actual perception of the people to investment and the future outcomes of investing part of their income would bring light to areas such as: determine if people believe in investment, is there an investment culture, if so to what extent; find out what percentage of the income is allocated to investment; if they invest, what do they aim at, reasons for investment; what type of market or investment instruments attracts Mauritians and why; investigating on the fundamental basis of the reliability of the decisions taken by the people.
In order to reach the goal of our study two types of empirical researches would need to be conducted: Quantitative Questionnaires and Face-to-face interviews (see in appendix). Interviewers would be employed to carry out the Interviews and analysts to interpret and examine the data and information collected. The population targeted for this study consisted of all Mauritians made up of a minimum one income earning member indifferent of their income. A random sample of 2000 people would be selected for the study. Its surely does not represent the whole population but at least it would define to some extent our aim as the selection would be from a broad range of people from all around the island. The questionnaire would be anonymous and confidential with minimal personal questions for reliability reasons. Prominent questions would be income level, age, education level to mention a few. Using questionnaire as data collection instrument primary data would be collected. It would be divided into 4 categories: background information; employment and income; investment culture/ attitude to investment and awareness of government incentives and investment prospects. One should be aware that the results from the questionnaires are not 100% reliable but they do project to some extent the trends that the study is aim at. To complement the questionnaire and make the research more accurate deep interviews would be carried out. That is a random of 300-500 people would be interviewed face-to-face. The people would be selected as far as possible from different background and age groups spread over different regions both rural and urban. Then combining all the results and responses they would be analysed using percentages and weighted mean while statistics would be employed to validate the hypotheses.
The research will give much better understanding of consumer behaviour regarding investment decisions, overview of the steps consumers go through before making the actual investment, and to what extent they have adopted investment culture. The research will show the main motive to investment and the factors that restrain investment also. The study will show whether adequate information are available to investors before they deciding upon investment decisions. The analysis would be equally beneficial to the Government as well as the investors. The Research will justify whether or not the main issues why Mauritians decides not to invest is hardly attainable or understandable information.
A budget analysis is a detailed financial plan for the future whereby all the expected expenditures are allocated a certain amount. It is always favorable to carry out your research work in the minimal possible costs. Budget analysis will allow a good planning of how to use our available resources in carrying out the research study. Plans cannot be ignored once in place. There is a need to check regularly that the objectives are still within reach. As far as possible the expenses should be within the budgeted amount to avoid significant deviation in budgeted and actual expenditure costs. Below are the budgeted expenses, estimated on a monthly basis that would be encountered during the research and surveys:
Operating costs: Travelling Variable costs: Materials/ stationeries Printing Purchase research Papers Telephone Bills Fixed cost: Rent / Electricity Salaries: 4 interviewers 2 Analysts Miscellaneous costs
Rs 500.00 1,000.00 2,000.00 1,500.00 2,500.00 7,500.00 20,000.00 25,000.00 500.00
Note: These expenses are approximate and can be less or more subject to changes as we proceed with the survey. But they should be within the range as forecasted and budgeted.
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