The purpose of this paper is to obtain a market-oriented approach to segment individual investors in terms of their attitudes and behaviour towards investment. It also attempts to understand the impact of certain demographic variables like gender, age and education on the behaviour of individual investors in the emerging urban Indian market.
A structured questionnaire was used to obtain a total of 340 valid responses which were collected from March 2016 to August 2016. Factor analysis was used to explore the components. Based on these components, cluster analysis was used to identify different subgroups. Statistical techniques, namely, t-test, analysis of variance and Fisher’s least significant difference test were used to examine the impact of demographic variables.
Factor analysis displayed five components, namely, interest in financial matters, anxiety for money, logical decisions, concern for future and spending tendency. Cluster analysis indicates that individuals can be divided into five clusters based on these components. It further substantiates that gender and education have a significant association with each subgroup.
Individual investor segments that were identified and profiled may provide an opportunity for advisors, financial analysts, organisations and investors to improve investment decision making. In this way, financial service firms can identify and provide services based on group-specific needs.
To the best of the authors’ knowledge, this study is the first of its kind to segment Indian investors into different homogeneous groups based on their attitude and behaviour towards financial matters.
