International Journal For Multidisciplinary Research

E-ISSN: 2582-2160   •   Impact Factor: 9.24

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Volume 8 Issue 2
March-April 2026

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Understanding Retail Investor Behaviour: Financial Literacy, Risk Tolerance, and Investment Decisions - A Systematic Literature Review

Author(s) Mr. Arun Kumar M, Dr. Well Haorei
Country India
Abstract Financial literacy has been identified as one of the most crucial factors influencing financial situations, especially in recent years, as the number of retail investors in financial markets has increased. However, the wrong relationship between financial literacy and investment decision-making points to behavioural factors. This paper aims to conduct a systematic literature review to examine the impact of financial knowledge on financial investment decisions, particularly examining the impact of risk tolerance as a mediator among retail investors. This paper uses a systematic literature review (SLR) methodology in accordance with PRISMA guidelines. Relevant literature from 2010 to 2025 is obtained from various sources such as Scopus, Web of Science, Google Scholar, ScienceDirect, Emerald Insight, etc. A list of peer-reviewed literature is selected based on certain criteria. The results show that financial literacy plays a significant role in improving the ability of investors to make informed decisions. However, this is often influenced by risk tolerance, as financially literate investors show greater risk tolerance, thereby investing in more profitable but riskier investments.
Keywords Financial Literacy, Financial Investment Decisions, Behavioral Finance, Risk Tolerance, Retail Investors.
Field Sociology > Banking / Finance
Published In Volume 8, Issue 2, March-April 2026
Published On 2026-03-25
DOI https://doi.org/10.36948/ijfmr.2026.v08i02.72401
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E-ISSN 2582-2160
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