Investigating the Factors Influencing Investor Decision-Making in Mutual Fund Investments: A PLS-SEM Approach

Abstract

Background:

Objective: The main aim of this study is to utilize the Partial Least Squares Structural Equation Modelling (PLS-SEM) approach to explore the impact of financial literacy, risk tolerance, market trend, economic stability perception, financial goals on investor decision-making.

Methods: A cross-sectional survey was conducted, collecting data from 407 respondents in Delhi between January and July 2024. A structured questionnaire was used, consisting of items measured on a 5-point Likert scale. PLS-SEM is employed to investigate the relationship between the independent and dependent variables of the study.

Results: The results of the study direct significant relationships between all studied factors and investor decision-making. Financial literacy had a path coefficient (β) of 0.568, risk tolerance0.809, market trend0.639, economic stability perception0.692, and financial goals0.763, all with p-values less than 0.001. These findings underscore the complex influence of studied factors on investor decision-making.

Conclusion: This study authorizes that financial literacy, risk tolerance, market trend, economic stability perception; financial goals significantly influence investor decision-making. These considerations can help mutual fund companies in developing more effective policies to fulfil the needs of different investors in Delhi.