A COMPREHENSIVE STUDY ON THE IMPACT OF FINANCIAL LITERACY ON INVESTMENT DECISION-MAKING OF INDIVIDUAL INVESTORS

The increasing complexity of financial markets, coupled with rapid technological advancements and financial innovation, has significantly transformed the investment landscape for individual investors. The availability of diverse financial instruments such as equities, mutual funds, derivatives, and digital assets has expanded investment opportunities while simultaneously increasing exposure to financial risk. In this context, financial literacy has emerged as a crucial determinant of effective investment decision-making. This research paper examines the role of financial literacy in influencing the investment behavior of individual investors. The study analyzes how knowledge of fundamental financial concepts—such as risk–return relationship, diversification, inflation, interest rates, and time value of money—affects investment choices, risk management practices, and long-term financial outcomes. The research is based on an extensive review of secondary data drawn from academic journals, financial reports, and prior empirical studies. The findings reveal that financially literate investors demonstrate superior portfolio diversification, enhanced risk assessment capabilities, and a greater inclination toward long-term investment strategies. The study concludes that financial literacy is essential not only for individual wealth creation but also for the stability and efficiency of financial markets.