INFLUENCE OF FRT ON RETAIL INVESTOR’S DECISION MAKING: A BEHAVIOURAL FINANCE PERSPECTIVE

Abstract

In recent years, Indian investors have put up with a slow economy, abrupt market declines brought on by diminishing revenues, and changes in the global economy. The outcomes of the stock market are not only influenced by obvious features; they are also affected by psychological and personality traits, the effects of which continue to baffle analysts. But, the reality, however, is quite different; every investor is not sufficiently intelligent, and there are a variety of factors that may influence their choice of investment instruments. One of them is financial risk tolerance (FRT). FRT stands for people who are prepared to tolerate the greatest amount of uncertainty while choosing an investment.

Purpose: The purpose of this paper is to investigate the relationship between factors and demographic factors with investment variables and to investigate how investors' risk tolerance influence investor’s risk investing choices.

Methodology: In carrying out this research study a descriptive design is used. A sample of 487 respondents (retail investors) were selected as part of a sample utilizing the snowball (chain referral) method of sampling. The instrument used for collecting primary data is a well-structured questionnaire and it consists of demographic profiles of respondents.

Findings: The findings indicated a substantial link between every dimension. The study's findings showed a significant correlation between gender and annual income, with male investors making larger investments than female peers. It was also discovered that men take greater risks than women, with women taking moderate risks. Investors in the middle age group were moderate risk takers and invested more than younger investors. The findings also indicated that a person's ability to take risks declines with age.

Implications: These results emphasize the significance of individual propensities in determining a person's level of financial risk tolerance. This study will help financial advisors to better understand the attitudes and behaviours of their clients and also be significant for financial institutions, given to positive economic effects of development of financial sector.

Keywords: Retail Investors, Financial Risk Tolerance, demographic Characteristics, Socio-economic Factors, Risk aversion