Investigating Influence of Financial Literacy on Investment Decision: Mediating Role of Risk Tolerance

Abstract

The Financial Risk Tolerance has a big impact on financial decision-making and is essential for understanding investment opportunities. One important characteristic that draws investors to take advantage of market opportunities is a higher risk tolerance. This study looks into how risk tolerance acts as a mediating factor in the relationship between financial literacy and investing performance. A structured questionnaire was used to gather information from 288 individual investors in India. The results show a strong positive association between investment decision and financial literacy, with risk tolerance acting as a partly mediating factor. This study is noteworthy for its innovative approach to investigating the mediating function of risk tolerance. It demonstrates how higher levels of financial literacy lead to a greater willingness to take risks, which in turn produces better and more satisfactory investment returns. This study has ramifications for investors, financial advisors, and legislators. It highlights the value of financial literacy in raising awareness and encouraging non-investors to make investments.