Financial literacy and investment decisions: A micro-level evidence-based study
Keywords:
Financial Literacy, Investment Decisions, Behavioral Finance, Micro-Level Study, Financial Inclusion, Risk Tolerance, Portfolio DiversificationAbstract
Financial literacy plays a pivotal role in shaping individual investment decisions, particularly in emerging economies where financial inclusion is rapidly evolving. This study investigates the micro-level relationship between financial literacy and investment behavior among individual investors, with evidence derived from survey-based data collected across selected urban and semi-urban districts. The research employs a mixed-method design integrating descriptive statistics, correlation analysis, and multiple regression models to examine how knowledge, attitude, and financial planning competence influence portfolio diversification and risk-taking behavior. Results indicate that higher financial literacy significantly enhances investment decision quality, leading to more diversified portfolios and long-term asset allocation. However, the study also uncovers disparities in literacy levels across age, gender, and income groups, emphasizing that socio-demographic factors critically mediate financial choices. The evidence highlights the urgent need for structured financial education programs and regulatory frameworks promoting investor awareness and financial capability. The findings contribute to policy discourse by providing empirical insights into the behavioral mechanisms underlying financial decision-making and underscore the role of micro-level financial literacy as a cornerstone for sustainable economic participation and inclusive financial growth.
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