What drives investment choices? A behavioral perspective from Gujarat state

Purpose This study aims to examine the investment preferences of individual investors in Gujarat across various asset classes and to analyze how demographic factors and behavioral biases influence their risk perception, return expectations, and investment decisions. Design/methodology/approach A mixed-method research approach was adopted, comprising a structured survey of 573 investors selected using stratified random sampling from different regions of Gujarat. Additionally, semi-structured interviews were conducted to gather qualitative insights. Data analysis employed path analysis through regression modeling to assess the relationships among demographic characteristics, investment preferences, risk perception, and expected returns. Findings The study found that demographic variables such as gender, age, education, income, and occupation significantly influence both investment preferences and perceptions of risk and return. Women generally preferred safer instruments like fixed deposits and post-office schemes, while men showed greater inclination toward equities and bonds. Younger investors favored real estate, whereas older investors leaned towards mutual funds. Higher educational attainment correlated with elevated return expectations, and higher income levels were linked to lower perceived risk in conservative investment avenues. A noticeable optimism bias was identified, as investors tended to expect higher returns from their preferred asset classes, while risk perception differed by asset type. Practical implications This study will help the financial corporation to design and develop the financial product as per the need. Social implications The study helps the corporation to come out with new products and services that give innovative and standardized services and products to society. Originality/value This study enriches behavioral finance literature by integrating demographic and behavioral factors to explain investor decision-making in Gujarat, offering practical implications for financial product design and investor education initiatives.