Financial Literacy, Risk Perception, and the Effectiveness of Digital Tools in Investment Decision-Making

Abstract

This study analyzed the impact of digital influence on financial decision-making, especially looking at how financial literacy and risk perception come into play. To figure out what investors know and how they feel about risk mixes with digital tools to affect their investment results. The team gathered data from 350 individual investors using structured questionnaires and ran the numbers with Structural Equation Modeling. Here’s what stood out: when investors used digital tools, their investment outcomes improved a lot, but only when they already had strong financial knowledge. So, digital works best for people who understand finance. On top of that, risk perception made a difference. Investors who worried more about risk didn’t get as much out of digital-driven advice, even if they were financially literate. Basically, digital tools can’t guarantee you’ll make smart investments unless you know what you’re doing and you’re not too risk averse. This research adds a new layer to behavioral finance and fintech by combining how people think and feel with the impact of digital. The study also offers something practical: if policymakers and financial institutions want people to thrive with these new tools, they need to build better financial literacy programs and encourage smart, responsible use of digital tools in finance.