FINANCIAL LITERACY, RISK TOLERANCE, AND INVESTMENT DECISIONS: EVIDENCE FROM YOUNG UNIVERSITY INVESTORS IN INDONESIA

Abstract

This study examines the influence of financial literacy and risk tolerance on the investment decisions of Generation Z investors in Indonesia’s emerging capital market. Although young investors represent a promising segment for future market expansion, their participation remains constrained by limited financial knowledge and heightened sensitivity to perceived investment risk. Drawing on survey data collected from university students affiliated with investment galleries in Bandung, this study employs Partial Least Squares Structural Equation Modeling (PLS-SEM) to evaluate the relationships between financial literacy, risk tolerance, and investment decision-making behavior. The findings reveal that financial literacy significantly and positively affects investment decisions, while risk tolerance also exerts a meaningful positive influence. These results underscore the importance of financial knowledge and psychological readiness in shaping young investors’ engagement in capital markets. The study contributes to the growing literature on behavioral finance in emerging economies and offers practical implications for financial education programs and risk-awareness initiatives targeted at youth investors.