Understanding the criteria used by investors to evaluate any investment instrument is important for the marketers of any investment product. It is also important for them to segment the investors based on their choice and know the characteristics of each segment of investors. The present study has identified four commonly used criteria namely convenience, risk protection, return and liquidity. By using these criteria, investors are segmented into three categories namely, rational, normal and irrational based on the extent to which they consider each criterion. Rational people analyze any investment instrument by using all the criteria, whereas irrational people take investment decisions without considering any. The discriminant analysis is used to test the suitability segmentation.

There are many inherent puzzles in the savings behavior of Indian households. In a developing economy, majority of household savings are parked in financial rather than physical assets. On the contrary, in India, household savings are almost equally distributed between physical and financial assets. The most common form of investment avenue to the Indian investor is bank deposit, and the flow of household savings to the capital market is low. Though Indians are habituated with a high degree of thrift, they are not ready to invest in financial assets, particularly in capital market securities. The question is why? The collections on small savings schemes are also comparatively less than bank deposits with similar term and features. Is it due to the very nature and characteristics of the Indian investors or is it due to some criteria preferred by them while making an investment? This study has tried to find out answers to the above questions by conducting surveys among investors in Tamil Nadu. It also tries to segment the investors based on the criteria they consider while choosing any investment avenue.

A survey conducted by Srinivasan (1997), elicited opinion on investors' choices over the investment avenues and found that the majority of investors favored fixed deposits in banks, followed by post office saving schemes, insurance schemes, bonds issued by government organizations and equity shares. Mutual fund schemes, mainly meant for small investors were the least preferred. The survey was conducted to know the important factors that influence an investor to prefer one investment to another. Guaranteed return coupled with capital appreciation was the main expectation of most investors.

Radha (1995) found that investors have certain primary objectives and gave importance to them while making investment plans. Capital appreciation was considered as the most important objective. It was also seen that the investor's pre-investment objectives differed depending on their occupation and income.

SEBI-NCAER Survey of Indian Investors (2000) observed that investor households diversify their investment portfolio to balance risks. For households, safety and liquidity were the primary considerations which determined the choice of an asset. Ranked in an ascending order of risk perception, bank fixed deposit were considered safe, followed by gold, units of UTI-US64, fixed deposits of non-government companies, mutual funds, equity shares and debentures.

Behavioral Finance Journal, Investment Instruments, Financial Assets, Capital Markets, Mutual Fund Schemes, Government Organizations, Non-Government Companies, Equity Shares, Principal Component Analysis Method, Risk Protection, Investment Programs, Economic Indicators, Financial Investments.