An Empirical Study on the Determinants of an Investor’s Decision in Unit Trust Investment

Abstract

Unit trust is a convenient way of investing and a sensible way to build one’s wealth in the medium term and subsequently in the long-term. Investment specialists will manage the investments and spread the risks through careful diversification. The basic nature of the unit trust is that it carries a low-level of risks and accordingly determines a lower level of returns compared to other financial instruments. There is a lack of research that empirically investigates the factors that influence an investor’s decision in unit trust investment, particularly in a Malaysian setting. The purpose of this study is to analyse the factors that influence an investor’s investment decision in purchasing a unit trust. This paper aims to narrow this research gap, whereby financial status, risk taking behaviour, investment revenue and related information are hypothesized to exert statistically significant influences on the investor’s decision in unit trust investment. The empirical study uses a quantitative research approach whereby survey data have been sampled from 202 participants using a convenient sampling technique. This research is cross-sectional and uses primary data for analysis. Data analysis has been carried out using multiple regression analysis. The empirical research finds that financial status, risk taking behaviour, and sources of information significantly influence the investors’ investment behaviours in unit trusts. However, there was not enough evidence to support the claims that investment return and revenue have a statistical relationship to the investors investment behaviours regarding unit trusts. The findings from this research will have huge implications for investors and for financial institutions. This paper helps fund managers and brokers to understand the behaviours of an individual investor in response to a unit trust. On the other hand, this helps them to better target their customers, and persuade customers to make their investments in a unit trust effectively and efficiently, thereby helping them to manage their financial wealth with less risk but better future prospects.

Multidimensional Risk and Religiosity Towards Indonesian Muslims’ Sharia Investment Decision

“…This is why Muslims with low risk attitudes feel more inclined to invest in Sharia instruments since they have no desire to experience more significant losses or risks. Previous studies also found that risk attitude had a positive influence on investment decisions (Annamalah et al, 2019;Gakhar, 2019;Kemp et al, 2018). However, the result from our study provides new evidence that Muslims' risk attitudes negatively influence their investment decisions in Sharia instruments.…”

“…Previous studies have also shown that an individual's investment behaviour is associated with risk attitude (Annamalah et al, 2019;Gakhar, 2019;Kemp, Chan, Chen, & Helton, 2018). Raut, Das, and Kumar (2018) found attitude towards risk to be the most significant predictor for the investment intention of Indian investors.…”

“…Previous studies have shown that individuals' investment behaviour is related to their financial risk tolerance (Annamalah, Raman, Marthandan, & Logeswaran, 2019;Jacobs-Lawson & Hershey, 2005;Jamaluddin & Gerrans, 2015;Pak & Mahmood, 2015). For instance, risk-tolerant investors nearing retirement do not reduce their bond allocations to buy more stock (Hariharan, 2000).…”

“…Satvaya (2017) also found a difference among retail investors regarding financial risk-taking capacity in their investment. Annamalah, Raman, Marthandan, and Logeswaran (2019) studied risk-taking behaviour in terms of its capacity among investors and found that it had an influence on investors' investment behaviours, as indicated by the ability to tolerate more risks due to investor financial resources.…”

The Change of Investment Behavior during Covid-19 Pandemic in Indonesia Stock Market

“…Investment behavior is influenced by internal and external factors [20]. The internal factors come from the personal characteristics of an individual investor.…”