Impact of Financial Literacy on Investment Decisions Making: The Mediating Effect of Risk Tolerance

Abstract

This study examines how financial literacy affects investment decision-making, with an emphasis on how risk tolerance functions as a mediating factor among those who work in Gwadar, Pakistan's private sector. Data were gathered from respondents, aged 24 to 44, with a minimum educational background of the 12th standard, using a cross-sectional survey approach. The analysis shows that risk tolerance acts as a mediator in the association between financial literacy and investment decisions, which is strongly influenced by financial literacy. But there was little evidence to support the idea that risk tolerance directly influences investment choices. The results emphasize how important financial literacy is in enabling people to make well-informed investing decisions while also taking their tolerance for risk levels into account. This study adds to our knowledge of how people behave financially in developing economies and offers insights that financial educators and policymakers may use to improve financial literacy initiatives.