A Study of Determinants Influencing Financial Literacy of Individual Investor in India

International Journal of Research and Innovation in Social Science (IJRISS) | Volume I, Issue III, March 2017 | ISSN 2454-6186

A Study of Determinants Influencing Financial Literacy of Individual Investor in India

Neha Ramnani Bhargava

  Assistant Professor, Institute of Business Management & Research, IPS ACADEMY, DAVV Indore, India

Abstract: Investment scenario is changing very fast and financial literacy impacts financial decisions of individual investors. The present study is exploratory in nature and determines the factor that affects financial literacy and how they affect decision making. The sample consist of 649 individual investors to obtain information through structured questionnaire from various parts of India The result indicated that there are seven most influencing factors of financial literacy that affects investor decision making are: Attitude, Knowledge, Budgeting Habits, liquidity, self analytical skills, Emotional Inclination and Goal Planning. This study will help to determine strategies which will help to improve financial literacy of an individual investors.

I. INTRODUCTION

Financial Literacy is a buzz word today and it plays a vital role in the economies of the world. With the advent of globalization and liberalization, there are variety of complex modern products available in the market. Very few fractions of people in our population have access to them. (Lusardi and Mitchell, 2007). Financial literacy is the education and understanding of various financial products (Source: Investopedia), it lays main focus on personal financial management which is the ability, skill and attitude of a person to manage personal finances on the basis of knowledge about various investment options available in the market. Financial illiteracy is not an issue unique to any one person but it is the reality of masses. It affects everyone: men and women, young and old, across all the racial and socioeconomic lines. It has become imminent to raise the financial literacy level as we cannot ignore this problem anymore. The economic future of India depends on it. We need to impart capacity building to the masses in such a a way that an individual becomes capable of making informed financial choices in personal life. Personal financial management connotes to sound analysis on the basis of risks and returns of various investment options before doing any investment. Financial literacy involves broader comprehension of ethical, social, political and environmental dimensions of finance. ( Noctor et al, 1992 apud Kempson et al, 2005).

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