Financial Literacy and Investment Decision-Making: A Study of Equity Investment Behaviour Among Young Professionals

Abstract

Financial literacy is becoming more critical in an era where digital platforms have become more accessible and have introduced new products, biases and social media recommendations to the investor. This paper explores the issue of financial literacy and equity investment behavior of the young professionals in India using an integrative evidence-based design. It combines the theories from household finance, behavioural finance and financial literacy and gives a descriptive analysis of the published findings of the Securities and Exchange Board of India (SEBI) Investor Survey 2025. The evidence shows that there is a significant awareness-participation disconnect as 63% of Indian households are aware of at least one securities-market product while merely 9.5% invest in securities and 8.5% report having a demat account. Only about one-third of investors have high or moderate levels of securities-market knowledge. Increased engagement in markets is seen among more highly educated and salaried households, with Gen Z and Millennials outperforming older generations in current and future engagement in the market. Concurrently, peers, financial influencers and online community are key information sources. This paper proposes a conceptual framework that shows direct and indirect links between objective and subjective financial literacy and equity behaviour via risk tolerance, investment attitude, behavioural biases and information quality. It suggests specific education at the workplace and online on diversification, risk-return relationships, costs, leverage, verification and discipline in the long-term. The paper does not make any individual-level causal claims (as this cannot be done in published SEBI aggregates) and includes hypotheses for future primary-data testing.