Investment Decision Making of Individual Investors in India: An Integrative Review of Financial, Behavioural and Psychological Determinants

Abstract: Investment decision making is an important aspect of personal financial planning, but individual decisions cannot be explained solely by financial return and risk. Behavioural finance demonstrates that financial knowledge, personality, behavioural tendencies, risk perception, risk tolerance and previous investment experience influence how individuals evaluate and choose investment alternatives. This article presents an integrated review of these determinants in the Indian context by synthesising relevant theoretical frameworks and empirical themes from the literature on Indian retail investors. It proposes an integrated paradigm in which financial literacy, personality, behavioural tendencies, risk perception, risk tolerance and investment experience collectively influence investment decision making, rather than treating them as isolated determinants. The review highlights the fragmented nature of existing literature, particularly the limited concurrent consideration of financial, psychological, behavioural, risk-related and experiential factors, and presents a research paradigm that may subsequently be tested using Structural Equation Modelling on primary data. The integrated approach may offer useful insights for individual investors, financial advisers, educators, financial institutions and policy makers seeking to improve personal investment decisions in India.

Keywords: Behavioural finance, investment decision making, financial literacy, personality, behavioural inclinations, risk perception, risk tolerance, investing experience, Indian investors, integrative review.