Factors modelling individual investment decision: Insights from an emerging economy

Abstract

Investors’ preferences shape individual investment decisions, which ultimately influence economic patterns and market actions. This paper intends to investigate the factors influencing individual investment decisions in an emerging economy. The study was based on primary data collected from 426 investors selected using convenience sampling. A pretested questionnaire containing 28 informational items was used to collect the data. Based on the Weighted Average Score (WAS), the ranking of selected factors indicates that high returns, return stability, and principal safety are, respectively, the first, second, and third factors influencing investment in stocks. Whereas stability of returns, safety of principal, and future financial needs are, respectively, the first, second, and third factors driving investment in Fixed Deposit Receipt (FDR). However, religious views have been found to be irrelevant in stock market investment in Bangladesh, a Muslim-majority country. This study has found clear differences among the variables influencing decisions concerning investment avenues between stocks and FDR. The t-test results also show significant differences in the importance of various factors influencing investor decisions. The findings deliver value to individual investors by revealing the principal components that guide their investment decisions, thus allowing them to make more strategic investment choices.