Exploring diverse drivers: investment literacy and investment motivations

Purpose Motivation enhances productivity and satisfaction in achieving investment goals because goal-directed behavior regulates processes, helping investors attain their desired outcomes. This research aims to examine the associations between investment literacy, risk tolerance and the diverse motivations that drive individuals to invest. Design/methodology/approach This study utilized the 2021 National Financial Capability Study (NFCS) and the 2021 Investor Survey datasets to investigate the relationship between investment literacy, risk tolerance and investment motivations. The study considers six motivational factors that encompass the spectrum of investor intent: short-term investment gain, long-term investment gain, entertainment and/or engagement, social interactions, social support, social responsibility, and the pursuit of investment. Findings The findings from the 2021 NFCS and Investor Survey indicate that objective investment literacy was negatively associated with all investment motivations except for “long-term horizon” and “learning investment.” In contrast, subjective investment literacy showed positive associations with all motivations except for “long-term horizon.” Risk tolerance exhibited positive associations with all motivations to invest. Originality/value This study is among the first to examine how both objective and subjective investment literacy, along with risk tolerance, relate to a broad range of investment motivations. Drawing on nationally representative data from American investors, it offers a novel perspective on the multifaceted reasons individuals choose to invest.