Impact of Financial Literacy on Investment Decision Making Among GENZ’s In Ahmedabad

Abstract

Investment decisions are influenced by financial literacy, risk perception, investment preferences, information-seeking behaviour, and individual financial circumstances. The present study examines investment awareness, attitudes towards investment risk, and investment preferences among respondents, with particular emphasis on their understanding of fundamental financial concepts and their approach to investment decision-making. Primary data were analysed using a structured questionnaire to examine respondents’ demographic profiles, financial knowledge, risk attitudes, investment planning practices, and preferred investment instruments. The findings indicate that respondents demonstrate a relatively positive level of self-reported investment awareness, particularly regarding the relationship between risk and return, diversification, comparison of investment alternatives, and the evaluation of financial information. Approximately 78% of respondents reported an understanding of the risk–return relationship, while 79% recognised the importance of diversification. Furthermore, 85% reported comparing investment alternatives, and 81% indicated that they consult relevant financial information before making investment decisions. Equity shares emerged as the most preferred investment option, selected by 50.4% of respondents, followed by mutual funds at 24.4%. However, awareness of inflation’s impact on investment returns and the consistent consideration of financial goals and investment horizons were comparatively weaker. The findings also highlight the importance of considering personal income and financial capacity when evaluating investment preferences. The study draws on Financial Literacy Theory, Modern Portfolio Theory, Prospect Theory, Rational Choice Theory, and Goal-Based Investment Planning to interpret the findings. It recommends strengthening practical financial education, promoting goal-oriented investment planning, improving the evaluation of financial information, and encouraging investment decisions aligned with individual risk capacity and financial circumstances.