Chapter 1

THE PROBLEM

Background of the StudyRX

As financial products continue to grow, professionals are enticed to learn

the different investment strategies in order to earn additional income for their

future. Most wealthy individuals asks for the assistance of people who has

expertise in financial services for a well informed decision in investing for a better

yield.

Today we live in an era where investments are comprised of many arrays

and choices. There are many complex and varied financial instruments available

to serve as vehicle in planning for the future. This study will provide basic

knowledge about young professionals on their level of awareness in investing.

Investment is the employment of funds on assets with the aim of earning

passive income and for capital appreciation. Investment means putting money to

work to earn more money in other words, it is sacrificing money today for future

return. Investing is one of the most successful ways to make financial provisions

for the future, where most of the conditions are uncertain and unpredictable.

With well planned investment, one find satisfaction, of and financial security in

life in life (Prabhu 2018).

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Economic status of a rural investor is one of the significant factors in

selecting and investing in a particular financial product. Despite the spread of

education and increased literacy level, financial literacy is much slower in villages.

The rural investor needs to be well informed about investment principles, risks

involved and the different instruments yielding high returns (Akhande, 2018).

People easily fall into confusion between savings and investment, while

thinking about the investment as a means of savings, they think that saving is

the same with investment because the value of money increases when you add

money on the money they saved. This becomes as one of the factors to reduce

the tendencies of making investment among people (Lokhande, 2015).

Selvakumar et al., (2012) explained that awareness about investment

avenues is very low among rural people compared to urban people. They also

found that print media and websites are two most important sources of

information that helped investors to make investment decisions. Investments

generate income and assets. People invest their money in hope of getting

good returns, enough liquidity and safety

Kasilingam and Jayapal (2010) pointed out that the choice of individual

investors is affected by family income, the timing of investment and savings

motives. Saving is income not spent, or deferred consumption. Savings of an

individual is determined by his/her ability and willingness to save.

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According to Chidambaram and Ramchandran (2012), it was noticed that

age, gender, educational qualification, occupation, and annual income do not

influence the type of investment avenues.

Filipino millennials, like the rest of the world, are more exposed to digital

media and are more socially connected than the rest of the world (Facebook,

2015). Meanwhile, they enjoy a wider variety of investment options which were

not earlier available, like mutual funds and online trading in stock market.

The primary market starts from broad environmental factors to the

industry, which influences the share price and finally the tendency to analyze the

knowledge potential by considering possible risks associated with securities for

public investing. Income and risk factors play a significant role while selecting a

product of an investment as it can create an opportunity for one product and

may not for other products. Study on investment confirms that the impact of

income and risk on the investment patterns of investors is important (Prasana,

2012).

This research will be conduct to know how young professionals manage

their salaries and income and also on how they prepare for their future. This

study aims to determine the investment practices of young professionals in

Urdaneta City.
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Statement of the Problem

The purpose of this research is to determine the investment practices of

young professionals.

Specifically, this study seeks to answer the following problems:

1. What is the personal profile of the young professionals in terms of:

a. age;

b. sex;

c. civil status;

d. highest educational attainment;

e. position;

f. number of years in service;

g. monthly salary;

h. sources of investment decisions; and

i. types of investments?

2. What are the investment practices of young professionals in terms of:

a. savings;

b. investing; and

c. purchasing?

3. What educational program can be proposed to increase the knowledge

and awareness of the young professionals?

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Assumptions of the Study

Basing from the problems stated in this research, the assumptions of the

researchers were the following:

1. The researchers assume that the sources of investment decision of

young professionals is through internet such as social media and websites.

2. The researchers assume that the young professionals search for

information about the investment first before making investment decision that

could generate more passive income.

3. The researchers assume that through educational program it will help

young professionals will gain knowledge about investment that eventually will

help them to improve their investment decisions and increase their return

from investments.

Significance of the Study

The findings of the research will benefited the following:

Young Professionals. This research will enlighten the young

professionals in terms of investing and will be more aware towards investments.

Financial Institutions. This research will help the investment companies

because they are the one who will benefited if the young professionals invest

their money.

Researchers. This will help the researchers to learn about how young

professionals invest and will help the researchers to gain more knowledge about

investments.
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Future Researchers. This research will help and guide the future

researchers in their pursuit of deeper studies related to the study of the

investments practices of young professionals.

Scope and Delimitation of the Study

This research will focus on the investment practices of young professionals

in Urdaneta City. The respondents on this study are the young professionals who

work in different banks at Urdaneta City.

The purpose of the study is to identify the respondents’ personal profile in

terms of age, sex, civil status, highest educational attainment, position on work,

number of years in service, the monthly salary of young professionals, source of

investment decision, and type of investments. The investment practices and the

problems that the respondent’s encountered in terms of saving, investing and

purchasing

There will be eighty (80) who will serve as the respondents of this study.

Definition of Terms

For the purpose of giving the respondents a clarification, the following

terms used by the researchers in the study are defined lexically and/or

operationally as follows:

Banks. It refers to a financial institutions and it also refers to the

workplace of the respondents.

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Financial Management. It refers to planning, monitoring, organizing,

and controlling of the monetary resources of an organization. It also refers on

how young professionals allocate and invest their hard earned money.

Investing. It refers to the practices of young professionals in utilizing

their money in generating income to achieve their goals.

Practices. It refers to the performance or behavior of young

professionals in investing.

Investments Practices. In this research, it refers to the commitment of

money or capital to buy financial instrument or assets in order to generate

profitable return in the form of interest, income, or appreciation of the value of

the instrument.

Risk. It refers to the possibility of loss which the respondents may

encounter on their investment practices.

Savings. It refers to the money saved by young professionals and its

practices to use for necessity.

Young Professionals. In this research, they are the respondents at least

under 35 years of age and they work in the bank.

Purchasing. It refers to the process young professionals go through in

acquiring investments after an informed decision is made.

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Chapter 2

REVIEW OF RELATED LITERATURE AND STUDIES

This chapter gives an analytical view of what different researchers and

writers said on the subject matter through the use of books, conferences and

others resources such as internet materials to measure the level of investment

practices of young professionals regarding to their general knowledge in saving,

investing, and purchasing aspects. The literature review provides background

and justification for the research undertaken. The review will be made based on

related areas, definition of concepts, investment practices, the benefits of

knowing techniques on investment, the risk of not knowing anything about

investments, how investment practices influences a person in making a decision

together with the theoretical framework.

Foreign Literature

Every individual investor possesses different mindset. When they decide

putting their money in a particular investment avenue such as stocks, bonds,

mutual funds, fixed deposit, real state and many other kinds of investment, they

only not desire to invest and earn but they also want their mone to be invested

in most secure and liquid assets. However, the decisions varies for every
 9

individual depending on their appetite for taking risk taking this ability to cope

with losses and their goal in investing their hard earned money. The purpose on

investment can be closely related with saving objectives. Each individual investor

selects investment option for certain period matching it with their personal

financial goals. Investing behavior of individuals depends on their degree of

desire to allocate this surplus financial resources to various available instruments

for investments. The investment behavior avenues questions such as why they

want to invest, how much of their disposable income are they willing to invest,

for how long do they want to invest and most importantly when is the righ timing

of such investment (Bhayani, 2016).

Balakrishnan and Shanmugasundaram (2011), conducted research to

analyze the factors influencing the behavior of investors in capital market. Which

concluded that demographic factors influences the investors investment

decisions.

Female investors dominate the investment marker in India. According to

their survey, majority of the investors are found to be considering two or more

information to make investment decisions. Most of the investors’ decision with

their family and friends before making a final investment decision.

Recent research from UK found out that most consumers have basic

understanding of the risk-reward relationship (i.e. higher risk meant potentially

greater rewards; lower risk means they stand to lose less but in turn the rewards
 10

would be less). However, understanding was limited. Most did not have a clear

idea of what these risks actually were and many felt that long-term investments

were riskier, mainly because they will not be able to access their money in the

case of unexpected events (Institute of Solid State, 2008).

There seems to be considerable confusion among UK consumers about

the levels of risk associated with different investment products and fund types.

Most consumers in a recent study believed (wrongly) that there was no capital at

stake in low-risk investments (Institute Fuer Festkoerperforschung Research,

2008). The Baseline Survey of Financial Capability indicates that some risk-averse

consumers may take out investment products unaware with the presence of

financial risk involved (Atkinson et al., 2009).

Empirical research (a large-scale survey mostly in the US) demonstrates

fairly consistently that women are more risk averse than men in their attitudes

and behaviors towards investment decisions, including those that relate to

pensions. A review of psychological studies suggests that this reflects a lower

tolerance to risk among women generally, financial or otherwise (Byrnes et al.,

2009).

A number of studies have also determine the age, education, income,

wealth and marital status, and found a gender difference exists independently of

the influence of these characteristics. For example, analysis of the US Survey of

Consumer Finances found that the proportions of wealth held in risky asset
 11

classes grew more steeply for men with increasing wealth (Jianakopolos, 2010).

A small-scale survey of university academics in the US (Bernase, 2011) also

found that the lower levels of stocks in women’s pension plans held true

regardless of marital status (as well as financial decision-making responsibilities

within couples).

Some studies indicate that marital status and wealth play bigger roles than

gender, in some cases supplanting the effects of gender. Analysis of the US

Survey of Consumer Finances (Sunden, 2009) found that gender differences in

DC pension fund allocations could only be understood in combination with marital

status: other things being equal, single women and married men were less likely

than single men to choose "mostly stocks" (a riskier portfolio) and married

women were more likely than single women to choose this. The tendency for

women to invest in less risky asset classes than men appeared to be attributable

to differences in wealth, as measured by net worth and expectation of an

inheritance (Embry 2012). An Australian study concluded that, despite evidence

of gender differences in risk preferences, lower income was the main contributor

to lower projected retirement benefits among women (Watson and McNaughton,

2014). The explanations for gender differences observed in research have been

summarized with reference to gender inequalities in wealth and the different

gender roles that impact on these inequalities (Bajtelsmit and Bernasek, 2015).

The authors suggest that the explanations can be categorized in terms of

outcomes (wealth, income and employment) and these outcomes are caused by
 12

gender discrimination in labor and credit markets, investment advice and

information on investment decision making, education, skills and training and

responsibility for the care of dependents.

People nowadays are so desperate in looking after the different aspects in

their financial affairs. People no longer just look only on the short term financial

concerns such as money savings and borrowings but also in long term prospects

(Mohamed Ibrahim, 2013).

Having knowledge about financial issues can helps individuals to make

wise and economic decisions for them and the society as a whole. Financial

matters play a significant role in the development of the community. Thus it is

very significant to the person and as to the whole society as well to be

knowledgeable about financial matter. Financially educated individuals are vital to

the productivity of economic system (Hilgert, 2009). The financial markets

regulations, methods and availability of different financial products causes impact

to study and measure the utilization of personal finances among individuals

especially professionals who receive salary every month (Servon, 2008).

On the financial side Remund (2010) discussed that knowledge in finances

focused on five domains. These domains are knowledge and financial concept,

ability to communicate about financial concept, aptitude in managing personal

finances, and skills in making appropriate financial decisions, and confidence in

planning effectively for future financial needs.

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Local Literature

Financial management is unique for every individual. For some it means

taking control of money earned from work and making sure it is adequate to

sustain for standard of living. For others, financial management is more than

meeting present needs but more importantly, securing the need in times of

difficulty and life after employment, thus allotting a proportion of earning for

saving. A survey conducted in the Philippines, it was revealed that Filipinos value

the importance of saving for the future but only 1 out of 10 Filipinos is

consciously saves for retirement (Duplito, 2008).

Managing finances is not only about savings, checking accounts and time

deposits; it is also pertains to investing, budgeting, insurance, taxes and estate

planning (Riezie, 2005). He further discussed that personal finances are

managing one’s financial resources allocating it to the necessities and saving to

achieve life goals.

The dilemma is that students, especially graduating students and even

professionals does not have the knowledge regarding financial management.

Financial education is not the priority of the government that is why most people

are still financially illiterate, meaning people lack knowledge regarding budgeting

and saving.
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Efren Cruz, the head of the personal finance Advisers of the Philippines

said that the most efficient way to trace resources of income as to how fast they

are spent and where were they used is by keeping a record of every single

transaction or expenditure through daily money tracker. Budget stays applicable

and achievable if there is accuracy in keeping records, consistency of effort and

discipline in controlling spending. He advices every individual to pay down debt

first and immediately before saving anything.

Foreign Studies

Accordingly, responsible investment is a way for investors to take into

account the corporate social responsibility of the companies they invest in (Cox

et al., 2012), and indeed, advance the Corporate Social Responsibility (CSR)

agenda (Solomon, 2008). Corporate Social Responsibility (CSR) is the principle

that society has expectations for corporate processes that extend beyond

traditional economic and legal expectations (Cox and Schneider 2010). As a

result, firms should consider the impact of their corporate activities on

stakeholders which are “any individual or group likely to be affected either

positively or negatively, in the short or long term, by corporate activities, policies

or decisions” (Cragg, 2016).

Responsible investment essentially emerged at the beginning of the 21 st

century in an attempt to reconcile sustainability considerations with profit

maximization. Modern portfolio theory, a development of the second half of the

 15

20th century, has been the norm for main stream financial actors such as pension

funds, insurance funds, mutual funds and investment banking and it essentially

implied a focus on the maximization of total returns of diversified investments at

various levels of risk (Lydenberg, 2010).

Demographic trends that signal that Millennial investors are likely to drive

demand for sustainable investing well into the future. According to a study

conducted by Nielsen, half of the most sustainability-focused consumers globally

are Millennials. As Millennials begin to accumulate more wealth and invest

accordingly, their perceptions of sustainability are likely to have a significant

impact on the financial services sector. Asset managers creating investment

products for individual investors cannot ignore these trends (Stanley, 2015).

There are also other people who developed the habit of making money

out of their earnings by engaging in different investing activities such as buying

stocks, government bonds and real state. Depending on their risk profile, these

people put money in investments instruments that can potentially improve their

financial worth (Gallery, 2010).

Some people are successful in managing finances and some end up short

of money to meet their needs. As a result, they resort to borrowing cash from

other people or securing loans from financial groups or institutions. The most

common types of financial institutions are banks, micro financing, credit unions,
 16

and savings and loans association. These organizations offer wide range of

financial products services to assist those who are financially needy.

Much of the literature on investment choice behavior comes from the field

of behavioral economics. The evidence base for this literature comes largely from

the US, much of it in relation to the behavior of participants in 401(k) retirement

savings plans. Most of the evidence is drawn from survey data, and includes

observations of actual behavior as well as some observations from experimental

studies. Various authors have reviewed the behavioral economics literature

relating to pension investment choice, including (Gallery, 2005). In addition,

Tapia and Yermo (2007) carried out a review for the Organization for Economic

Cooperation and Development (OECD) of mandatory individual account pension

systems, which share some of the characteristics of the proposed personal

accounts scheme in the UK. According to modern portfolio theory, rational

investors should hold diversified portfolios that include the most efficient

combinations of assets to optimize risk and return, and which reflect investor

utility preferences and time horizons (Gallery, 2005).

The behavioral economics literature indicates that individuals often do not

arrive at an investment decision with firm preferences. The most frequently cited

work, carried out in the US, found that pension plan participants appeared to

have relatively weak preferences for the portfolio they had selected themselves

(Thaler, 2001). In this experimental study, participants were given the choice

between the distribution of retirement outcomes implied by the actual asset

 17

allocation in their 401(k) plan and the distribution implied by the average

allocation among all participants in the same plan. Most participants preferred

the average distribution that based on their own allocation. The authors

characterized this as an example of an aversion to ‘extremeness’ because most

participants had portfolios that were, almost by definition, more extreme than

the average. Such results seem to call into question individuals’ ability to choose

an optimal asset allocation (i.e. the most favorable allocation that would best

meet their financial needs). As Tapia and Yermo (2007) note, this may be

symptomatic of a deeper lack of knowledge and understanding of the choices

offered.

In their review of mandatory individual account pension systems, Tapia

and (Yermo, 2007) identify some countries (Chile et al., 2007.) that offer pension

plan to participants at a limited range of fund choices, typically no more than

five, where the funds are differentiated mainly by the proportion invested in

equities. In contrast, other countries (US, Sweden, Australia) offer relatively

unlimited investment choices to plan participants. The most recent statistics for

Sweden, for example, show that in 2007 there were 86 fund management

companies with a total of 785 funds registered with the premium pension system

(Premium Pension Authority, 2007).

A survey of US employers indicates that the average number of

investment options offered by employers in their pension schemes increased

from 14 to 17 in 2007 (including ‘premixed’ portfolios) (Hewitt Associates LLC,

 18

2007). Administrative data from one large pension plan provider indicate that the

average plan offered 23 investment options in 2007, up from 13 in 2000. They

note that plan sponsors (i.e. employers) add fund options at a faster rate than

participants use them. Nearly half of plans (47 per cent) offered between 11 and

20 options, but 56 per cent of participants used only one, two or three options

(Vanguard, 2008).

Iyengar and Lepper (2000) found that, while people generally value

choice, they can easily be overwhelmed by it. They suggest that choice overload

may be exacerbated in contexts (such as decisions about major stock purchases)

where the costs associated with making the ‘wrong choice’ or even the belief that

there are truly ‘wrong’ choices are much more worrying to an individual (cited in

Singh et al., 2005). Rather than promote consumer choice and active decision

making, increased fund choice has been shown to depress the probability of

employee participation in 401(k) retirement savings plans. Analysis of

administrative data from 401(k) plans indicates that, other things being equal,

every ten funds added was associated with a 1.5 to 2 per cent drop in

participation rates (Sethi-Iyengar et al., 2004).

In recent research conducted with people in the target group for

automatic enrolment under the UK Government’s workplace pension reforms,

most participants suggested that between three and five investment funds would

be a manageable number to choose from. They also felt strongly that funds
 19

should be clearly differentiated in terms of risk, in order to help people choose

between them (Collard and Breuer, 2009).

Evidence from the field of behavioral economics (largely based on

research carried out in the US) indicates that individuals use what are called

naïve diversification strategies in order to make complex decisions like invest

ment fund choice.

In keeping with this, qualitative research in the UK that explored

investment decisions generally (not specifically pensions) found that level of risk,

charges and fund size were mainly only considered by respondents who were

more financially sophisticated. Among those with lower financial sophistication,

investment performance was generally only considered in consultation with an

adviser, and even then comprehension remained poor (Conquest Research

Limited, 2004). UK survey evidence (which used gambling scenarios to assess

people’s attitude to risk) suggests that consumers more often focus on avoiding

losses than on maximizing possible gains (Distribution Technology, 2005).

Several studies have shown that framing effects and investment menu

design have a significant effect on individuals’ investment decisions, which may

result in suboptimal investment choices that are unlikely to meet the individual’s

financial needs in retirement. Notably, there is a positive relationship between

the proportion of equity funds offered by a pension plan and the proportion of

overall plan portfolios invested in equities (Choi et al., 2004). Analysis of US

 20

401(k) administrative data shows that this holds true for other asset classes as

well (Brown et al., 2007). Consequently, it appears to be possible to influence

the portfolio allocation of participants by altering the mix of equity and bond

funds that are offered, even if the overall investment fund offering remains the

same.

The same conclusion has been reached in the UK, based on evidence from

experimental studies. One study concluded that people choosing from a range of

investment options tended to select the middle option whether the overall range

is low or high in value (Goodman, undated). Another study found that various

measures of risk aversion (in the form of questions about the amount of risk that

respondents were prepared to take, how concerned they were about their

financial future and whether or not they would take a gamble to increase their

earned income) did not account for the amount of risk taken by respondents in

each experimental condition (Vlaev et al., 2007). According to the authors, these

findings support the notion that individuals’ decisions can be influenced by

manipulating the range of choice options.

Recent UK survey data indicates that around 50 percent of private pension

purchasers received advice pre-purchase, where an adviser either recommended

a product or recommended a product and went on to arrange a sale (Finney and

Kempson, 2008).
 21

The quality of financial advice that consumers receive has, however, been

called into question by a number of research studies. UK consumer research

(both qualitative and quantitative) has highlighted disparities between consumer

and adviser definitions of ‘low risk’ (Conquest Research Limited, 2004) and the

risk involved in different investment products (Diacon, 2002). Mystery shopping

among 50 firms offering financial advice found that just over a quarter of firms

established customers’ attitudes to risk ambiguously, and a few did not establish

it at all (Financial Services Authority, 2006).

In Australia, shadow shopping in relation to superannuation schemes

highlighted that in some cases advice was not appropriate for the customers’

needs in some way, or the adviser had not made sufficient enquiries to assess

appropriateness. Where advice was provided on switching investment funds, in

about a third of cases it was assessed that there was clearly or probably not a

reasonable basis for the advice. The main problems involved advice to switch to

higher-fee funds with no countervailing benefits or the loss of important

insurance cover through fund switching (Australian Securities and Investments

Commission, 2006).

Most prior in the 401(k) savings decision has been entered on

straightforward neoclassical models, using either administrative or survey data,

and considering employee choices in a voluntary enrolment setting. Overall, the

research using administrative data suggests that three key demographic

variables are positively related to 401(k) participation-income age, and job

 22

tenure. Several theories have been suggested to explain the positive income and

plan participation relationship (Agrawal, 2008).

In particular, low-income household may participate less that higher-

income households because they are more likely to be financially constrained.

They face lower (or negative) tax rates and derive little (or no) tax benefit from

401(k) saving: or they need to save less because of progressive benefits

structure of Social Security. In terms of age, a general lifecycle model suggests

age-related variation in savings. As well, as employee’s age the importance of

savings may become more salient, making participation in a retirement plan

more likely. Job tenure is also strongly linked to 401(k) plan participation. One

reason may be that longer-tenured employees may find plan participation more

attractive due to the vesting of benefits over time, another may be growing

familiarity over time with the employer’s retirement plan.

National Savings are of crucial importance i.e. maintaining a higher level

of investment which is a key factor for economic up-raise. Households are liable

for a considerable share of saving in both developed and developing countries.

More savings draw out more investment. Among various income groups,

household behavior regarding saving and investment are different. It usually

depends on choices or preferences, disposable income and wealth of the

households. Saving is affected by the age structure of the population which in

turn affects the development of a country through investment. It was found that
 23

people of age group between 30 to 50 years are more interested in investment

issues than people in other age groups (Burns et al., 2007).

Education being an important component as it enhances the saving

efficiency of people and they can better invest their money. Highly educated

people can better understand inflation and are able to protect themselves from

it. Well educated families save for benefitting their children while less educated

families save to maintain their current income (Solomon, 2018).

Garrett (2000) reports positive links between educational offering and

participation in retirement plans. Compared to firms that did not offer financial

education, participation rates are 12 percentage points higher for companies that

offered financial education. In firms that offered financial education, participation

rates are 20 percentage points are higher for employees who chose to attend.

Education increased new savings of all types as a percentage of income by 1.7

percentage points. Effects may be greatest for people who saved little before

they received education.

People invest in order to make money. Investment is done to gain larger

returns than the cost of borrowing. There are several mediums where people can

invest such as purchasing Gold, Bank Accounts, National Savings and

Investments, Bonds and Gilts, Property, Equities (shares), Investment “Funds”

(Ahmad, 2004).
 24

In addition studies of individual 401(k) plans indicate that increased in

financial education can greatly increase both and the average percentage of

salary deferred by employees (Richardson, 2001). Moreover, in workplace

seminars employees attribute positive changes in their financial behaviors to

financial education seminar and workshops (Garman et al., 2000). Similarly,

personal finance classes for high school students positively impacts financial

knowledge and savings behavior for teens (Boyce et al., 2003), and ultimately

raises the rates at which individuals save as adults (Bernheim et al., 2001).

According to Schiffman (2004) that the consumer made the purchase

decision is influenced by several measurements, the measurement of culture,

which has the most influence and the most extensive behavior of the consumers

so that marketers need to understand the influenced of culture, sub culture and

social class of consumers; social measurement, which needs can affect consumer

responses; personal measurement which consist of the age and stage of

lifecycle, occupation and economic situation, lifestyle, personality and self-

concept affects the consumers on what to purchase; and psychological

measurement, include motivation, perception, learning and beliefs and attitudes

also influence the selection consumer’s purchases.

Previous researchers have reported that many workers tend to invest their

retirement assets too conservatively, and in particular that women are less likely

than men to invest in risky assets such as stocks. In the presence of an equity

premium, a lower prosperity by women to invest in stocks could translate into

 25

large differences in the accumulation of financial wealth for retirement (Sunden

and Surette 2003).

Investment decisions are made by investors and investment managers.

Investors commonly perform investment analysis by making use of fundamental

analysis, technical analysis and judgment. Investment decisions are often

supported by decision tools. It is assured that information structure and factors

in the market systematically influence individual’s investment decision making to

explain why people buy or sell stocks. These factors will focus upon how

investors interpret and act on information to make investment decisions.

Behavioral finance is defined by Sheriff (, 2000) as a rapidly growing concept

that deals with the influence of psychology on the behavior of financial

practitioners.

Individual investments behavior is concerned with choices about

purchases of small amounts of securities for his or her own account (Nofsinger

and Richard, 2002). No matter how much an investor is well informed, has done

research, studied deeply about the stock before investing, he also behaves

irrationally with the fear of loss in the near future. This different behavior in the

individual investors is caused by various factors which compromise the investor

rationality. An individual investor is one who purchases general small amounts of

securities for his or her own account.

 26

Research in behavioral finance has been developed rapidly in recent years

and provides evidence that investors financial decisions are also affected by

internal and external factors It is generally believed that market decisions are

often supported by decision tools. Factors influencing investment behavior,

suggested that classical wealth–maximization criteria are important to investors.

The study of PubMed they categorized by age into young adults (ages 18-

35 years), middle-aged adults (ages 36-55 years), and older adults (aged older

than 55 years) (Gerontologist, 2002).

Local Studies

Investment includes the practicing that concern the ability of an individual

to earn, therefore, they know how to control their earnings. One of the threats in

attaining the investment is the presence of different financial instruments today.

From the study conducted by the Bangko Sentral ng Pilipinas, it was found

out that overseas Filipino households spent the majority of their money on basic

needs, for education and payment of debts (Dumlao, 2008). Based on their study

retirement is one of the major expenses of every working individual that needs to

be considered.

According to report of the PSE from the Stock Market Investor Profile,

data of which came from a survey of 18 online brokerage firms in the country

that less than 1 million Filipinos are investing in stocks – 640,565 to be exact.

The good news is that from 2013 to 2014, the number of Filipinos trading and
 27

investing in stocks have grown, rising by 9.4% from 585,652 to 640,665 in 2014.

The bad news, though is that numbers still represents a very small percentage of

the total Philippines population. Stock investing, it appears, remains to be an

activity for the elite few; not even reaching 1% of the country’s population.

Most Filipino millenials are employed in the services sector, particularly in

information technology, marketing, and financial services; these industries in

particular yield higher-than-average salary ranges (JobStreet Survey, 2016). It

reflects continuing employment security for the younger workforce, and thereby,

should stabilize the income levels of our millennials (NEDA, 2016).

More Filipinos are becoming savvy in changing their spending habits to

boost their household savings (Neilsen Consumer Index Report, 2015). The

national savings rate continue to go down for the past five years, mainly

contributed by the declining disposable incomes for people with ages 25-35, i.e.

the millennial group age (Asian Development Bank, 2013). Much of the savings

of this age group are accumulated in future purchases of condominiums with

increasing priorities for travel, leisure, and consumption of high-ticket items

(Euromonitor, 2015).

One of the notable traits of the Filipino culture is its extended family

structure is its close ties among the members of the household that one member

share responsibility even if they no longer live with their family. Most millennials

still prefer to live in their parents houses. This kind of accommodation has helped

them avoid certain fixed costs like rent and utilities, while funneling these
 28

expenses instead on communication, airline travel, and purchases of high ticket

items (Santos, 2016).

Initially believed to be economical in terms of spending, Filipino millennials

are becoming more confident due to their employment security and increasing

purchasing power, supported by the country’s solid economic performance

(Euromonitor, 2015). Consumers are buying higher-quality essentials: healthy

food, environment-friendly household products and other big-ticket items, such

as passenger vehicles. Greater demand for big-ticket items was boosted by a

wider availability of consumer credit by the growing middle class (Philippine

Institute for Development Studies, 2015).

Synthesis of the Study

The researchers believed that the reviewed literature and studies stated

by different authors and experts are similar to the present study. The researchers

were motivated to use the perception provided by the different authors that will

be a great help for the present study. The above-stated literature highlighted,

the essence of improving investment practices. They also served as the guiding

factors and reference of the present study.

Further, the studies cited have similarities and differences to the present

study regarding the respondents, locales, subject areas, objectives and the

methods used in gathering data. With the supported studies cited, the

researchers gained knowledge and ideas as to what conduct and process should

be accorded to the present study.

 29

The literature of Duplito (2008) and Dumlao (2008) says that some

Filipino thinks that savings is all about taking control of money earned from work

or their income and making sure that it is enough to sustain for their daily needs

but for others, savings is more than meeting present needs but more essentially,

securing the future and what is needed in difficult times. Despite the appreciation

of the Filipinos of the value of the saving for the future, only 1 out of 10 Filipinos

are intently saving for future. And though the number of people engaging in the

savings and investing increased, it still represents a very small number compared

to the overall population of the Philippines. This literature has a significant

relationship with the present study, the foundation is that though the financial

literacy among Filipinos with regards to savings, most of Filipinos do not engage

in investing due to some reasons, one of which is their income or the money they

earned from work is not enough to finance their daily needs and nothing is left

for them to save.

The literature of Riezie (2005) and Personal Finance Advisers headed by

Efren Cruz is related with the present study and the basis of this is that people

nowadays managed their finance not only through savings but also through

investing and budgeting. They discussed that Filipinos saved money by limiting or

controlling their spending and purchasing habit and the excess to the money

they spend will be directed to their savings and investing.

On the studies of Gallery (2010) and Sheriff (2000), they noted that

investors’ financial decision came through performing investment analysis. Their

 30

studies connected to the present study wherein the foundation is that collecting

information helps individual to decide where should they invest or what

instrument should they buy. Their decision also depends on their risk profile,

whether these people put money in investment instruments that will enhance

their financial worth.

The literature of Institute of Solid State (2008) and Byrnes et al. (2009),

included in this research have a significant relationship with the future study and

the sense of investment. The foundation is the acknowledgement of individuals

on risk-reward relationship. Though most of consumers know that the higher the

risk, the higher the return, the understanding is still limited because there are

some individuals who are risk averse in terms of investing. They further

discussed that women are more risk averse than men in their attitudes and

behaviors towards investment decisions.

On the literature of Balakrishnan and Shanmugasundaram (2011), they

pointed out that some of the investors, especially the individuals who are new on

the nature of investment, they look for two or more information before allocating

their funds. And most of them, their decision comes from their family and

friends. Their literature has a significant relationship with the present study

where before entering on the investment world, people need to find a financial

analyst or portfolio manager who will help them to know what’s best for them for

investing and to also help them to be financially literate.

 31

On the other hand, Sunden (2009), Embry (2012), Watson et al. (2014)

and Bajtelsmit et al. (2015), said that the gender, marital status and wealth play

a bigger role on the investor’s investment decisions. Their literature has a

significant relationship with the present study where the foundation is that in

terms of gender, females are more risk averse than males. While in terms of

marital status, single men are more likely to engage in risky portfolio than

married men while married women are more likely than single women to choose

this kind of portfolio. And with regards to their wealth, individuals with lower

income have a lower fund to put on their investment than individuals who have a

higher income.

Theoretical Framework of the Study

The researchers adapt the theory of Ann Henderson, “The Bucket Theory

of Financial Management”. The buckets represent the basic needs, financial

security, family’s insurance needs, quality of life and investments. Filling the first

bucket until the last bucket represents the responsible financial management.

The goal of every individual is to become financially worry-free, and it is hard to

achieve it unless you are working on it responsibly. The bucket theory of financial

management helps the individual to have an assurance for the future. It helps

the individual to use their money properly and control their expenses that the

excess will served as their savings for future purposes.

 32

According to the theory of (Ando et al., 2010), “The Life Cycle Hypothesis

of Saving” is the spending and saving habit of people over the course of a

lifetime. Every individual needs to work to earn money to use it in the future. The

money that they saved is expected to have benefit in the future time. This theory

relates to the present study regarding securing the future through saving.

Conceptual Framework

The schematic paradigm that presented on the next two page illustrates

the conceptual framework of the research. The research aims to enhance the

knowledge about the Investment Practices in terms of saving, investing and

purchasing.

In this research, the input variables include respondents profile in terms of

age, sex, civil status, highest educational attainment, position, and the monthly

salary and types of investment, and there investment practices utilize by the

respondents as to saving, investing and purchasing.

The legal basis of this study is the Investment Management and Personal

Finance by Nenita Mejorada that was copyrighted in 2009. It states about

personal finance and different factors it consists.

Personal investment is one of most important personal finance

ingredients. Investments are additional source of income ensuring regular capital

to meet of personal needs and to implement financial purposes, the main of that

the financial independence. In a broad sense investment is financial resources of

 33

investment in various assets which have value growth trend temporal in respect

of. Therefore, personal finance planning is the preparation prospective household

needs satisfy. When planning a secure financial future, financial purposes and

appropriate measures to achieve them changes depending on the person’s age.

For most people in life are stages when income exceeds the needs of and periods

when income is insufficient to ensure the basic needs. Population savings is one

of the major domestic financial resources and credit sources, which stimulate

economic growth.
 34

The Research Paradigm

Input Process Output

Respondents’
profile in terms
of:

a. age;
b. sex; Gathering Educational
c. civil status; information, program can be
d. highest analysis, propose to increase
educational identification of the knowledge and
attainment; Practices of Young awareness of
e. position; Professionals investing of young
f. monthly salary; professionals.
and
g. type of
investment

Investment
Practices of
Young
Professionals

a. savings;
b. investing; and
c. purchasing
 35

Figure 1. The Research Paradigm showing the Input, Process and Output of the

research.

Chapter 3

RESEARCH METHODOLOGY

This chapter will present a discussion on the methods of research and in

the making of this study. This includes the research design, subjects of the study

and sampling scheme, data gathering instrument, collection of data and

statistical treatment of the data.

Research Design

The researchers will use the descriptive survey method where it

ascertained the prevailing condition at a particular time. The investment practices

of young professionals will be considered for the survey. It includes the profile of

the respondents in terms of their a) age, b) sex, c) civil status, d) highest

educational attainment, e) position, f) number of years in service, g) monthly

salary, h) sources of investment decision and i) types of investment, the

investment practices of young professionals in terms of a) saving, b) investing, c)

 36

purchasing and what educational program can be propose to increase their

knowledge of the investment practices.

Subject of the Study and Sampling Scheme

The respondents of the study are the young professionals who work in

different banks at Urdaneta City. There are eighty (80) young professionals as

the sample size.

Data Gathering Instruments

The questionnaire checklist prepared by the researchers will be validated

by three (3) experts, sheets for the content validity of data gathering that will be

used.

The questionnaire consists of three parts. Part 1 intend to gather the

information of the profile of the respondents. Part 2 is concerned with the data

on the investment practices of young professionals into three (3) major factors:

Savings, Investing, and Purchasing. Part 3 is concerned on what educational

program can be propose to increase the knowledge and awareness of young

professionals in investing. Some of the questions will be improved by the

validators, and some will be taken from the unpublished theses that is connected

to the study.

Collection of Data
 37

The questionnaire will be distributed with the copies of letter of permission

to the banking institutions to ask permission regarding the conduct of the study,

once approved by Financial Research Adviser, and proper authority. The

researchers will approach the respondents politely and will explain clearly the

necessity in answering questions honestly. The researchers will personally

administer and retrieve the questionnaires from the company’s branch managers,

loans officers and government employees.

Statistical Treatment of Data

Appropriate statistical tools will be used to come up with the valid and

credible interpretation of data.

To answer problem number one which is the profile of respondents which

are the young professionals in terms of age, sex, civil status, highest educational

attainment, position, number of years in service, monthly salary, source of

investment decision and types of investment frequency counts and percentages

will be use as shown below:

𝑭
𝑷= (𝟏𝟎𝟎)
𝑵

Where:

P= Percentage equivalent

F= Number of respondents
 38

N= Total number of respondent

To answer problem number two which is the investment practices of

young professionals in terms of saving, investing, and purchasing, frequency

counts, and the weighted average mean formula will utilize. The formula is

shown on below:

∑ 𝑾𝑴
𝑨𝑾𝑴 =
𝒄

Where:

AWM= average weighted mean for each area

f= number of respondents each bracket

x= point value per classification

n= total number of respondents

c= total number of categories

The descriptive equivalent (DE) of each category and area will be base on

five–point Likert’s scale shown below:

Point Classification Value Statistical Limit Descriptive Rating

1 4.50 – 5.00 Highly Practiced (HP)

2 3.50 – 4.49 Practiced (P)

3 2.50 – 3.49 Moderately Practiced (MP)

4 1.50 – 2.49 Seldom Practiced (SP)

5 1.00 – 1.49 Not Practiced (NP)

 39

To answer the problem number three which is the educational program that can

be proposed to increase the knowledge of the respondents on their investment

practices, survey results will be the basis.