Traditional economics describes human beings as rational decision makers, but it has been observed that investors do not always act rationally. Behavioral finance is a new emerging science which focuses on understanding how psychology affects investment decision. The demographic variables, such as age, education, income, and marital status affect individual's investment decisions. This paper investigates how investment choice gets affected by the demographics of the investor. Such knowledge will be highly useful to the financial advisors as it will help them advise their clients regarding investments which are appropriate with respect to their demographic profile. The study provides evidence that the investment choice depends on and is affected by the demographic variables.

Traditional finance (and economic) theory stands squarely on the notion of "rational man". It assumes that individuals are "capable of understanding vastly complex puzzles and conduct endless instantaneous optimizations". The classical economic literature describes human beings as rational entities, making right decisions in the situation of complete transparency. This perfect human being - referred to as homo-oeconomicus - always succeeds in optimizing the intended benefit. Herbert Simon, on the other hand showed that human beings are not completely rational when it comes to decision making. They exhibit bounded rationality. It is often assumed that the investors take a careful account of all available information before taking the investment decision. But there are enough evidences that this is not always the case. They have behavioral biases in the way they process information for taking investment decision, which lead to systematic errors (Pavabutr, 2002). The role of investor psychology in asset price is everyday fact for the practitioner. However, proponents of the classical theory of investment decision making, find it difficult to blend psychology with asset price. It has taken some time for the academic community to accept the fact that investors are not completely rational, they exhibit risk-seeking behavior, they tend to segregate outcomes of different decisions, and their expectations are often biased in predictable direction (Shafir et al., 1993).