Review on Financial Risk Management and Analysis for Private Investors

The degree of risk a person is willing to take while managing their finances is becoming more important. Investments that one person views as high risk may be seen by another as low risk due to differences in risk tolerance and perspective. An essential responsibility of investment managers and advisers is to categorise clients according to their risk tolerance and then provide the best possible investment portfolios for each individual investor. Demographic factors such as marital status, yearly income, investing experience, sex, age, and employment have all been shown to be significant. In most cases, researchers will resort to an experimental questionnaire that asks participants to respond to a series of hypothetical situations and/or make a series of hypothetical investment decisions. In this technique, investors are polled using a questionnaire designed to elicit responses revealing their risk preferences and comfort levels. Investing in a number of various investment possibilities may be seen as a significant factor in the growth of a nation's economy. There are just too many options for investors in India's financial industry. There is no doubt that the typical individual can make money in the stock market, even if the market isn't one of the best or deepest.Growth in the economy relies on capital creation, which in turn depends on the investment made by individuals, financial institutions, government agencies, and other organisations. In order to produce savings, a person gives up some of his current needs. These savings may then be invested in numerous investment possibilities. Anyone's investing choices will be impacted if they do not have a thorough understanding of all pertinent issues. Investment means making a trade-off between the now and the future. When you put money into an opportunity or is impossible to distinguish between savers and investors. Individuals who deposit their savings in a bank account anticipate their money to increase, but those who keep their money in a safe deposit box or somewhere in their home do not. As a result, we might argue that the anticipation of return is a fundamental feature of investing. An investor hopes to make a profit on the money it has invested, whether it's in the form of tangible or intangible assets like stocks or bonds. A financial asset, such as a stock or bond investment, mutual fund, ULIPS, or a fixed deposit at a bank, is distinct from a physical asset like a home, gold, or land.

In the financial markets, public engagement (i.e., individual investors) is a significant aspect. Markets are dynamic and liquid because of the large number of households and individual investors who supply a pool of cash and a variety of decision-making. Because of this, the most generally quoted summary figure showing investor diversity is the number of stockholders, fixed depositors, Bond holders, or investors in a variety of mutual funds, insurance-linked investment plans in households and individuals.Financial markets and policymakers may benefit from having access to this data in order to better understand and plan for future developments. Government, business, and people all have a role in the investing process, and each may be a source or an investor of money. Individuals may save their money in a savings account, invest in a publicly traded firm, invest in debt instruments, or invest in different types of property, depending on their own investing goals and ambitions.

The paper's goals are met through conducting a survey. A sample of roughly 50 investors from the Ambala District is used to gather primary data.Financial risk tolerance revisited: in this study the occurrence of a risk assessment tool, John Grable R. H. (1999). Financial service investors have a lot to think about when making judgements, but there aren't a lot of widely accepted, legitimate, and reliable ways to evaluate family financial decisions.According to research conducted by Dr Naveen Prasadula (2022), which analyses the risk tolerance of individuals with different income levels, women are less willing to take financial risks than males. Its significance lies in the fact that it influences the investment choices of individuals and families, which in turn influences their ability to build wealth. According to Chen's (2006) study, seasoned investors are exposed to higher risk than novices.Taqadus Bashir's (2014) study "investigates the effects of risk tolerance with a demographic feature on the issue of risk belief and quantify the extreme nature of financial dangers. This study shows that men and women differ in their responses to surveys on investing. This research is part of Mitali Baruah's 2018 effort to create a model for analysing the combined effects of individual risk aversion and socioeconomic status on investment decisions, in this case concerning the total amount invested.The "Determinants of financial Risk Tolerance and its effect on Investment choices" is the topic of Praba's (2019) research. The rational framework presupposes that investors and management alike have the cognitive capacity to assess risk. From the ideas presented in this research, the notion of market efficiency has emerged. Both traditional and behavioural financial theories relied heavily on this concept. According to a research ,titled "Influence of Socio-Demographic Characteristics, Financial Literacy, and Mood on Financial Risk Tolerance," the relationship between good emotions and older age tends to be strong and statistically significant.This study demonstrates a positive relationship between financial risk-tolerance and a variety of socioeconomic factors, such as higher income and savings, higher levels of education, and older age, among male business graduates.

The study's primary goal is to discover how well the residents of Hyderabad City understand the present capital market and the various investment options available to them. The following are some other secondary goals: 1. To ascertain the level of capital market knowledge. 2. An investigation on the investing habits of Hyderabad's residents. 3. To see whether there is a reason to invest in a certain investment avenue. 4. Methods of investigation (methods of study)

For this research, the population will be made up of all the people who trade stocks in Jamnagar city, with a sample size of 120 people.

Based on primary data, the research is concluded. Structured Questionnaires will be the major source of data for this project. Additionally, magazines, studies on stock market trends and development, books, and other web sites might provide valuable information.

• Only investment options available to investors in financial markets were utilised in this analysis.

• Surveys are done only in one city at a time.

• The investigation is also constrained by the constraints of time, location, and funding.

Lessthan25 19

25-35 25 35-45 46

Morethan45 30 Total 120

There are 19 people who are less than 25 years are investing inst ckmarket.There are 25 people who are between age of 25 to 35 are investing instockmarket,there are 46 people who are between age of 35 to 45 are investing in stock market and in this group, people are investing more than any other group, there are30 people who aremore than45 years areinvestingin stockmarket.

UnderGraduate 32 Graduate 45 PostGraduate 23 ProfessionalDegree 20 Total 120

The biggest number of persons participating in the stock market is made up of 45 graduates, 32 undergrads (which is the highest number compared to any other education), postgrads (which is 23), and professionals (20), all of whom are investing in the market.

Businessman 65 Professional 18 GovernmentEmployee 14 AnyOther 1 Total 120

In the stock market, 65 people are businessmen, 21 people are non-government employees, 18 are professionals, 14 are government employees, and one is a non-governmental employee.

CLASSIFICATION(inranks)

Equity 98 Commodity 61 FutureandOption 36 MutualFund 28

IPO 28

All 4

It is the greatest number ever recorded of investors in equities, at 98 individuals. There are 65 commodities investors, 36 future and option investors, and one futures and option investor. In mutual funds, 28 individuals are investing; in IPOs, 28 people are investing; in all categories, there are four persons.

Most stock investors are in the 35-45 year old age bracket. People above the age of 45 are more likely to invest in commodities. People who are 35-35 years old are the most likely to invest in the future and have a variety of options. Older investors account for the majority of all mutual fund inflows. The majority of stock investors are students. mutual funds and IPOs. Investing in equities is mostly done by businesspeople. In commodities, futures, and options, all groups participate, but businesspeople are the biggest investors. All segments of the market participate equally in mutual funds and initial public offerings (IPOs). Individual investors' risk aversion is represented as a dependent variable in the study's research model. Investors' willingness to take on financial risk is affected by their investment decisions, the depth of their investment knowledge, and the way they perceive and frame risk. Individual investors' choices in the stock market are being affected by demographic factors. Investment Decisions factors include prior risk taking, present risk tolerance, and the kind of risks people are willing to accept. Investment Awareness may be studied by focusing on the following factors: financial literacy, budgeting, saving, debt management, investing, and long-term financial planning. Trust, confidence, investment volatility, the accuracy of predictions made by financial experts, and the belief in the value are some of the characteristics that have been discovered for the study of Risk Perception.

SIZE AND METHOD OF SAMPLING

Individual investors in Hyderabad are used as a representative sample for this study, and they are characterised by a number of demographic variables including but not limited to age, gender, occupation, level of education, income, marital status, risk aversion, and level of financial experience. For this research, we are sampling from a pool of 153 individual investors. This study used the Convenience Sampling Technique as its sampling strategy.

SOURCE OF DATA

The source of data is the main data was acquired by survey from 153 respondents. Secondary data was acquired via reading different publications regarding financial risk tolerance of individual investors.

BetweenGroups 9.691 5 1.93 1.63 .154 Within Groups 174.322 147 1.18 Total 184.013 152

Results of table 1 shows p value(.154) is more than 0.0 5 hencenull hypothesesis accepted. There is no signific ant difference between among various occupation and risk tolerance. H0 2: There is no difference between investment decisions with respectto gender.

Results of table2 shows P(.122) is greater than 0.05 is greatert han 0.05 hencenull hypothesis is accepted. There is no significant difference between investment decisions will respect to gender. H0 3: There isno significant difference among various annual income and risk to lerance level.

RISK TOLERANCE

Sum of Squares df Mean Square F Sig. Between Groups 25.147 3 8.382 7.862 <.001 Within Groups 158.866 149 1.066 Total 184.013 152 * significance at 5% level

ANOVA was performed to examine the difference among various income level on Risk tolerance Results of table 3 shows the investors with below 2 Las annual income are higher(mean3.10) Pvalue(.001)islessthan0.05 hencenull hypothesisis rejected. There is significant difference among various income level and risk tolerance. H0 4: There is no relationship between Risk toleranc endInvestmentKnowledge.

* At the 1% level, the correlation is substantial. Table 4 shows an inverse relationship between risk aversion and financial literacy regarding investments. Because the P value (.000) is smaller than, we may conclude that the null hypothesis is false because of the correlation. There is a little negative link between one's degree of risk tolerance and investing awareness, but it is not statistically significant. Neither of these variables are connected to one another, as seen by the -.423 value for the correlation coefficient.

* At the 1% level, the correlation is substantial.

Investors are very concerned about the protection of their money. They're looking for greater security and dependability. Investors care less about the current fashion and ease of access than they do about security and trustworthiness. Investment companies have a lot of room for business since most individuals spend their money in a variety of different sectors. Investors are also drawn to the financial industry because of its large returns, but many avoid it owing to unpredictability and a lack of expertise. However, investors who are well-versed in the market and prepared to assume some risk do so in the equity market. When banks' interest rates have been steadily falling for a number of years now, many investors have been shifting their money to alternative investment options including mutual funds and bonds. As a result, investors in Tiruchirappali city are looking for a combination of safety, dependability, and return on investment when deciding where to put their money. Understanding the financial risk tolerance of individual investors allows for more informed portfolio management choices. Demographic characteristics such as marital status, yearly income, investing experience, sex, age, and employment were included as independent variables. Risk tolerance, risk perception, investing knowledge, and investment choice were selected as the dependent variables from the questionnaire.Researchers were taken aback by the fact that gender, financial expertise, and profession had no significant roles. Nonetheless, respondent's level of Risk tolerance was affected by their level of income. Those in the higher income bracket were more comfortable taking risks. Another variable that was linked to one's level of risk Hyderabad is particularly risk-averse.

1. Bhalla,V.K.(1983),InvestmentManagement,S.Chand&Co,NewDelhi. 2. Bhole,L.M.(2004),IndianFinancialSystem–Reforms,PoliciesandProspects,1stEdition,NewCenturyPublications,NewDelhi. 3. ChandraPrasanna(1995),TheInvestmentGame–HowtoWin,TataMcGrawHillPublication,NewDelhi. 4. Gitman,L.J.andJoehnk,M.D.(1990),FundamentalsofInvesting,4thEdition,HarperCollinsPublishers,NewYorkCity 5. Manoj Kumar Dash, ‗Factors Influencing Investment Decision of Generations in India: An Econometric Study‘, International Journal of Buss. Mgt. Eco. Res.,VolumeNo. 1 (2010), IssueNo.1, pp.15-26. 6. Suman&D.P.Warne,‗InvestmentBehaviourofIndividualInvestorinStockMarket‘,InternationalJournalofResearchInFinance&Marketing,VolumeNo.2(2012), IssueNo. 2(February), pp. 243-250 7. John Grable. R. H. (1999), ―Financial risk tolerance revisited: the development of a risk assessment instrument―.FinancialServices Review,Vol.No.8, pp163-181. 8. Rui Yao and S. D. (2005), ―The Effect of Gender and Marital Status on Financial Risk Tolerance ―. Journal ofPersonalFinance, VolNo. 4(1), pp66-85. 9. ChenandJ.E.-J.(2006),―DoInvestmentRiskToleranceAttitudesPredictPortfolioRisk?‖JournalofBusinessandPsychology,Vol.No.20(3),pp369-381 10. TaqadusBashirandS.S.(2014),―TheImpactofDemographicCharacteristicsandRiskToleranceonInvestor‘sRiskPerceptionandPortfolioManagement‖TheLahoreJournalofBusiness,Vo.No,2(2). 11. Sachithanantham R. D. (2016),‖ Role of Risk Tolerance in Portfolio Management ―. International Conferenceon―InnovativeManagementPractices‖OrganizebySVCET,Virudhunagar,Vol.No 1(1),pp 263-267. 12. Sasmita Mishra, M. M. (2016), ―Financial

500.

13. Mitali Baruah. A. K. (2018), ―Impact of Risk Tolerance and Demographic Factors on Financial InvestmentDecision‖. InternationalJournalofFinancialManagement,Vol.No.8(1),pp36-47 14. Praba R. S. (2019), ―Determinants of Financial Risk Tolerance and its Influence on Investment decisions‖DJAME Journal ofManagementResearch, VolNo.1(2) pp15-28. 15. Oztop A O. and Kuyu.E.(2020), ―Influence od Socio Demographic Characteristics, Financial Literacy andMoodonFinancialRiskTolerance‖. JournalofBusiness Economicsand Finance,VolNo.9(3)pp209-222. 16. Shah N.H. and W. K. (2020), ―An Empirical Analysis of Financial Risk Tolerance and Demographic Factors ofBusiness Graduates in Pakistan‖. International Journal of Economics and Financial Issues, Vol. No. 10(4), pp220-234. 17. Yilmaz Bayar, H. S. and et.al. (2020), ―Financial Literacy and Financial Risk tolerance of Individual Investors:MultinominalLogistic Regression Approach―SAGE Open,Vol.No.10(3),pp1-11.

Associate Professor, Holy Mary Institution of Technology & Management Hyderabad