Impact of Financial Literacy on Investment Decision-Making among Young Investors

Abstract

Start with the current state of the financial environment there exist an array of options for investments; these range from traditional types of saving to more advanced and sophisticated forms of investing. Examples include mutual fund investment vehicles, Exchange Traded Funds (ETFs) and other forms of investing in stocks, bonds or commodities. In addition, the emergence of cryptocurrency and other forms of digital currency have created new and innovative investment avenues. With the advent of technology, it is now possible for younger generations to invest in a variety of ways through various online investment platforms. Financial literacy can be defined as having the knowledge required to effectively apply financial concepts, products and services to inform financially related decisions. Individuals who possess high levels of financial literacy will typically assess risk associated with their investments better than those who lack such knowledge. They are also able to compare alternative investment options and develop long term wealth creating strategies. Although today's investor has greater access to financial data than ever before, many still engage in irrational investment behaviors due to their lack of financial knowledge. As a result, financial literacy has become a critical variable that affects the way young investors act when engaging in a wide variety of complex financial activities. The purpose of this research is to investigate the relationship between financial literacy and investment decision-making by young investors. A survey questionnaire-based quantitative methodology was utilized to collect data from 277 participants aged between 18-35 years old. Descriptive statistics, reliability analysis, exploratory factor analysis (EFA), correlation analysis, and multiple regression analysis were performed using SPSS software. The results indicate that financial literacy impacts investment decision-making. Four main aspects of financial literacy were found: Financial Knowledge, Financial Planning, Risk Assessment Ability, and Investment Awareness. The study provides insight into how financial education improves investment confidence and decision quality for young investors.