TABLE OF CONTENTS

1.0 Introduction.......................................................................................................... 2

2.0 Data Collection Method....................................................................................... 4

3.0 Investment Involvement and Investment Choices amongst Malaysians........5

4.0 Advantage of Investment.....................................................................................9

5.0 Disadvantages of Financial Investment...........................................................10

References....................................................................................................................12

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1.0 Introduction

The investor's choice of an investment will determine whether it is successful or

unsuccessful. Nevertheless, a wide range of factors might have an impact on
investment choices. Investors must make wise investment judgments and select the
appropriate investing approaches. Each person will have a different set of
considerations and feelings while making a decision, thus their approaches to choosing
an investment will also differ. Even if two investors are similarly educated, their points of
view may differ when choosing an investment.

Investors might be either natural or legal individuals. Investment agreements often base
nationality only on the law of the state of claimed nationality for natural people. A
condition of residency or domicile is another potential criterion introduced by some
investment agreements. More complex questions surround the nationality of legal
people. Today's business practices might make it very challenging to identify a person's
country. When assessing the nationality of a juridical person, tribunals typically use the
test of incorporation or seat rather than control, unless the test of control is specified in
the agreement. Therefore, it is customary in investment agreements to describe in detail
the specifics that constitute a legal person as a national or investor of a Party for the
purposes of the agreement. Some treaties contain "denial of benefits" clauses that
permit the exclusion of investors who fall into specific categories when the objective
criteria applied may include investors to whom a Party would not desire to give the
treaty protection.

According to Kahneman, Knetsch, and Thaler (1991), psychological factors have a

direct bearing on financial decisions. They consider the application of behavioral finance
to how investors' emotional traits influence their decision-making to be a complement
and advancement of the conventional financial theory. However, according to
conventional financial theory, investors can rationally choose the best investments and
determine their greatest expected utility. These logical investors are expected to make

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decisions that are error-free and rational. In reality, investors typically base their
decisions on their own theories, market movements, trends, and psychological
assessments. Major social or commercial events have an impact on investors'
judgments in addition to their ideological disposition or educational background.

However, heuristic biases, cognitive biases, and emotional variables in behavioural

finance are some of the psychological biases that people have while making investing
decisions (Tversky and Kahneman, 1974). Investors can better understand that
everyone is subject to bias and inaccuracy thanks to behavioral finance. They also do
better while making investment selections because to it.

According to studies, Malaysians' involvement in investment activities is favorable, and

more people would eventually enter the market. The implementation of government-
and regulatory-authority-developed investment incentives, such as investment tax
subsidies, education or training incentives, the advancement of information and
communication technologies, and improved laws to encourage investment growth, will
also benefit from this. In a similar vein, there will be novice and seasoned investors in
the market. External factors have an impact on these investors. Taking politics, law, and
economics as examples. Making wise investing judgments is quite difficult for investors
to do.

Individuals' investment decisions are influenced by a number of variables, including their

risk preferences, the state of the financial markets, the availability of various products,
and their own financial situation. Price swings, political and market uncertainty, as well
as internal organizational issues, all have an impact on investors' stock market
decisions (Waweru, Munyoki, and Uliana, 2008). According to research (Barber and
Odean, 2000), investor psychology has a long-lasting effect on trading and risk-taking
behaviors. However, due to their significance, events like the financial crisis of 2008–
2009 may have a significant effect on individual investors (Kahneman and Tversky,
1972). Investors in conventional finance are expected to be logical. According to
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Statman (2011), behavioral finance holds that the demands of investors ultimately
decide their investment choices. As a result, investors' rationality is limited, and they
make mistakes occasionally.

2.0 Data Collection Method

The gathering of data is a crucial step in doing research or an evaluation. The

researcher should have access to the data that must be gathered for the study in order
to collect data. The technique to be used in collecting this data is determined by the
type of data that needs to be collected. To this goal, different qualitative and quantitative
approaches, of which interviewing is a subset, are available for data collecting. The
goal of this essay is to talk about interviewing as a data collection technique,
emphasizing its benefits, advantages, and disadvantages. For the sake of this
discussion, interviews are to be understood as controlled dialogues in which the
interviewer employs serious verbal inquiries to ask the respondent for the data that is
needed (Akbayrak: 2000).

For social research, interviews are a crucial qualitative data collection technique. There
are several reasons to employ interviews as a data collection method and research tool.
They are most helpful when highly tailored data is required, as well as when there are
options for probing to obtain underlying elements. They also become a viable choice
when the number of respondents is low and a high return rate is crucial, as well as
when respondents lack native-language proficiency or struggle with written language
(Gray: 2004).

The primary benefit of interviews is that they can provide a comprehensive description
and analysis of a research topic without restricting the scope of the study or the type of
participant responses (Collis & Hussey, 2003). Thus, interviews are helpful for
understanding a topic's background and context. Unlike other data collection tools like
questionnaires that may operate as blinkers to the required responses, they can reveal

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information that the interviewee was already aware of. They consequently become
essential for research that is discovery-oriented and in which the researcher has just a
general idea of what they are looking for at the outset. A respondent has the freedom to
express what is significant to them during an interview, and it is possible to gather
insightful quotes and anecdotes from their comments.

Interviews from the start make it easier to accurately screen for the correct interviewee
because of the necessity to seek a thorough description and analysis of the subject
matter. The interviewer must locate the appropriate person who is in possession of the
required information due to the nature of the information being sought, which must be
comprehensive, accurate, and trustworthy. People who are directly involved in the work
or those who are directly impacted by the job are purposely sampled if the assessment
revolves around specific work processes. In keeping with the foregoing, face-to-face
interviews will help screening become more accurate because a person being
interviewed cannot give incorrect information in response to screening questions about
gender, age, or race (Akbayrak: 2000).

Another significant benefit of employing interviews as a form of data collecting is that

they may be conducted face-to-face. This is because they can record both vocal and
nonverbal questions during the data collection process. It is possible to read someone's
body language and facial emotions to determine how excited or uncomfortable they are
in response to a certain question. A inquiry like this might point out areas where
information may be unreliable, where there is a disconnect between what is being said
and how strongly one feels about a subject, or it can even verify a point that is being
made. A indicator that someone is in discomfort can be someone who claims to enjoy
their employment while displaying distressing behaviors.

Thus, in this assignment, interview will be conducted to 5 respondents which are

investors in Malaysia.

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3.0 Investment Involvement and Investment Choices amongst Malaysians

Age, gender, race, income, wealth (net worth), education level, years of share
investment experience, state or region of residence, and level of financial knowledge
are among the personal characteristics that are typically of interest when reviewing the
literature on individual investors (see, for instance, Dorn and Huberman, 2005). These
are referred to as the background characteristics of investors by Clark-Murphy and
Soutar (2004).

The basic goals of the study are achieved with the help of the demographic data
collected on individual investors. For instance, it is only possible to investigate the claim
that ethnic-Chinese investors have a higher propensity for governance when it comes to
seeking redress after exploitation if respondents can be segmented along the ethnic
dimension.

The idea that "risk is at the center of all investment decisions" is one that the finance
industry embraces (Bernstein, 2007: ix). The preference for a trade-off between risk and
return is another essential concept in traditional finance (Baker et al., 1977). As a result,
the potential return increases with the level of risk that investor is willing to accept.
Investors see this as payment for assuming more risk.

The current study only investigates the risk-averse/seeking inclinations of individual

investors in Malaysia in a generalized manner, in contrast to earlier empirical studies
that examined investors' risk-taking propensities (ex post risk-return connections) in
highly deep and specific detail. The variable of interest is investors' pre-investment (ex
ante) risk preferences through their self-reported general investment risk attitude
(roughly along the lines of Baker et al., 1977 and Cohn et al., 1975), as the emphasis is
on investment behaviors coming out of individual preferences.

As an alternative, certain risk-taking investors might be more prone to buy speculative

shares and/or are only interested in price changes for shares, regardless of what occurs

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in the businesses that shares are supposed to reflect. It's also feasible that some
investors may overlook governance-related factors even when they do take certain
fundamental company characteristics into account.

Actual share portfolios of individual investors are probably divided up into several
sections (Nofsinger, 2008; Kahneman and Tversky, 1982). It makes sense to assume
that different shares will be purchased in different tranches with various goals in mind.
For instance, some investments may be made for the purpose of generating steady
dividend streams to accumulate money for retirement, while others may be made for
gambling or speculation.

Undoubtedly, investors would likely treat certain tranches of shares within their portfolio
intended for short-term speculation in a markedly different manner than those that
he/she intends to keep for the long-term. This practice is termed by proponents of
behavioural finance as ―Mental Accounting‖. This concept is explained by Nofsinger
(2008: 50) in that “…mental accounting leads to building of portfolios layer by layer.
Each layer represents the investment choices that satisfy various mental accounts. This
process allows investors to meet the goals of each mental account separately...”

Shefrin and Statman (1985) claim that decision-makers typically separate and apply
decision rules to each investment they make independently when using mental
accounting. Each investment choice is essentially unrelated to the characteristics,
objectives, and performance of other shares in the investor's entire portfolio.

Overconfidence is among the most well-documented phenomena in investor

psychology. It highlights the propensity of an investor to overestimate his or her capacity
to carry out particular actions or tasks. Share selection can be a challenging process,
and Odean (1999) claims that people typically exhibit the most overconfidence in
challenging undertakings. Overconfidence typically develops after investors have had
some degree of investment success (Nofsinger, 2008). According to research showing

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that people reared in Asian cultures exhibit higher overconfidence than people from the
US, it is also discovered that culture can breed overconfidence (Yates et al., 1997).
Investigating such a trend among Malaysian investors would be fascinating.

As overconfidence can be the result of a number of psychological biases, the study will
try to capture this phenomenon by jointly investigating three of the main sources of
overconfidence attributable to investors who actively make their own share investment
decisions.

Both Jackson (2003) and Lease et al. (1974) found that respondents in their respective
samples of individual investors were more interested in long-term share price rises than
they were in short-term ones. The two studies have respective bases in the US and
Australia. Given the widely held belief that such developing capital markets are mostly
driven by speculative and rumor-based trading, the current study anticipates finding that
the relative weight attributed to each of the key investing objectives will differ in the case
of Malaysian investors.

Additionally, some of these individual investors are depicted as only being interested in
short-term changes in share price and paying little attention to the underlying
businesses whose values these shares are supposed to reflect (Shleifer and Vishny,
1997). This indicates that investor apathy towards governance is probably going to be a
big trend.

Therefore, exercising self-control not only applies to daily decisions but also to handling
personal finances. Willpower can be used to demonstrate self-control. When someone
has strong self-control, they also have strong willpower. Pompian (2007) contends that
people are influenced to consume today rather than save for tomorrow because of the
frailty of individual willpower. People with poor self-control are less likely to save enough
money for retirement before retiring, according to research by Choi, Laibson, and
Madrian (2011). Individual willpower issues will have an impact on self-control, which

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could result in bias while making financial decisions. Lack of self-control, on the other
hand, can result in actions that are detrimental to a person's long-term performance,
such as compulsive behavior, insufficient savings, and procrastination (Bucciol, Houser,
& Piovesan, 2010).

Additionally, according to Ang, Kong, Ong, Poo, and Tan (2019), investors are more
likely to be unaware of their investment decisions when they buy or sell stocks, bonds,
futures contracts, foreign exchange trading, or other financial products that may
increase personal wealth or improve the quality of a future retirement. Lack of self-
control prevents someone from building wealth and reaching their financial objectives.
According to this study's findings (Ameriks, Caplin, Leahy, & Tyler, 2007), wealth
accumulation and self-control are related.

4.0 Advantage of Investment

Financial investments are undertaken with the intention of receiving only financial
returns in the form of revenue for the company making the investment. The idea behind
buying a stake in a portable assembly company by a private value speculator is to earn
financially from the profit distributed by the investee company. Compared to a financial
investment, a speculator expects significantly more from a crucial investment.

An investment is anything you put money into with the hope that it will grow or turn into
a larger sum of money. The idea is to sell it later for more money or to sell it for cash
while you still own it. You might be planning to grow something over the length of the
upcoming year, such as saving money for a car, or over the course of the upcoming 30
years, such as saving money for retirement. Financial investments are right now the
most mainstream investment vehicle and give a few favorable circumstances to

speculators, including the accompanying:

1. Advanced Portfolio Management

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A significant percentage of the spending allocation must go into an administrative cost,
which pays for the services of a professional portfolio manager who assists you in
buying and selling stocks, bonds, and other financial instruments. Generally speaking,
this is a little price to pay for assistance in managing an investment portfolio.

2. Dividend Reinvestment

As profits and other premium wages are declared for the reserve, they can be used to
buy additional items from the common shop, so advancing your investment.

3. Risk Reduction (Safety)

The use of diversity results in a decreased portfolio risk because most pooled assets
will invest in between 50 and 200 different securities, depending on their primary focus.
At least 1,000 different stock positions are claimed by a few record stock common
finances.

4. Convenience and Fair Pricing

Shared assets are common and easy to acquire. They are typically exchanged merely
once daily at the closing net resource value (NAV), and typically have lower or lower
minimum deposits (some around $2,500). This eliminates daily value fluctuations and
the various arbitrage opportunities developed by informal investors.

5. Minority Ownership

All things considered, it appears to be a deception, yet when one invests money in a
supposed company's stocks, regardless of how small of a stake they may have, they
advance toward becoming part owners of the company. By investing money in multiple
groups, one might improve their chances of remaining competitive. You can also leave
at any time if you need to.

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5.0 Disadvantages of Financial Investment

However, there are also disadvantages of financial investment, such as the following:

1. High Expense Ratios and Sales Charges

Mutual fund expense ratios and sales charges might spiral out of control if you're not
paying attention. When investing in funds with expense ratios over 1.20%, exercise
extreme caution because these products will be viewed as having greater costs. Be
cautious while paying 12b-1 advertising fees and other sales costs. There are several
reliable fund businesses that don't charge sales commissions. Overall investment
returns are lowered by fees.

2. Management Abuses

When your management abuses their power, there may be turnover, churning, and
window dressing. This involves making irrational trades, replacing inventory too
frequently, and selling losers before the quarter's end to balance the books.

3. Tax Inefficiency

Whether they like it or not, investors are forced to accept capital gain distributions from
mutual funds. Investors often get distributions from the fund that are an unavoidable tax
event because of turnover, redemptions, gains, and losses in security holdings during
the year.

4. Poor Trade Execution

You will receive the same closing price NAV for purchase or sell on the mutual fund if
you execute your move before the deadline for same-day NAV. Mutual funds offer a
poor execution method for investors looking for quicker execution timeframes, whether
due to short investment horizons, day trading, or market timing.

5. Brokerage Commissions Kill Profit Margin

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The brokerage commission that must be paid to the broker each time an investor buys
or sells shares eats away at the profit margin.

As a result, financial investments are made with the expectation that they will only
generate financial returns in the form of cash flow from the entity making the
investment. In contrast to strategic investors, the investor depends more on the current
management. Any process employed to produce future income might be referred to as
a "investment" in this context. This includes the acquisition of bonds, equities, or real
estate in the financial sense. Additionally, the newly built structure or other
manufacturing facility can be viewed as an investment. It is possible to consider
investing to include the creation of items needed to manufacture other goods. While
investing in the financial market has both benefits and drawbacks, one must face the
risk of investing money in a variety of ways to protect their future.

References

Kumar, V. & Abdulla, P. (2020). Impact of Analysis of Locality on Investor's Awareness

and Sources of Information Used for Mutual Fund Investment. UGC Care Journal,
40(56), 980-989.

Jamaludin, N., Smith, M., & Gerrans, P. (2013). Mutual Fund Investment Choice
Criteria: A Study in Malaysia. International Journal of Education and Research, 1(4), 1–
10.

Sadiq, M. N., & Ishaq, H. M. (2014). The Effect of Demographic Factors on the Behavior
of Investors during the Choice of Investment: Evidence from Twin Cities of Pakistan.
Global Journal of Management and Business Research, 14(3), 46–56

Abdul Jamal, A. A., Ramlan, W. K., Pazim, K. H., & Budin, D. S. A. (2014). Decision-
Making Style and Investment Success of Retail Investors in Malaysia. International
Journal of Business and Social Science, 5(9(1)), 311–322

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Begum, N. N., & Rahman, S. (2016). An Analytical Study on Investors’ Preference
towards Mutual Fund Investment: A Study in Dhaka City, Bangladesh. International
Journal of Economics and Finance, 8(10), 184–191.

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