FINANCIAL LITERACY AND ITS EFFECT ON INVESTMENT BEHAVIOR AMONG INDIAN CITIZENS

This study investigates how financial literacy influences investment decisions among 100 young Indian professionals, primarily aged 18–25 from urban areas, especially Bengaluru. Using a 24-item structured Likert-scale questionnaire, the research measures financial knowledge (compound interest, SIP calculations, diversification, expense ratios), subjective confidence, risk tolerance, and actual investment practices.

 

Findings reveal moderate financial literacy levels (mean = 3.27, SD = 0.33) alongside conservative investment patterns: 45% prefer fixed deposits, 25% gold, and only 15% equity or mutual funds. A statistically significant positive relationship between financial literacy and investment behavior was found (r = 0.201, p = 0.007; β = 0.125, F = 7.571). High-literacy respondents were three times more likely to use SIPs (62% vs. 15%) and allocated 35% to equities compared to 8% by low-literacy peers. Social media significantly influences 51% of investment decisions, though its behavioral effect remains weak (r = 0.075, p = 0.315), indicating a "pseudo-literacy" phenomenon. Demographic moderators including income, urban location, and gender further shaped the literacy–behavior relationship.

 

Keywords: Financial literacy, Investment behavior, SIP adoption, Behavioral finance, Urban youth, India, Markowitz, Prospect Theory

Financial literacy Investment behavior SIP adoption Behavioral finance Urban youth India Markowitz Prospect Theory