| Abstract: |
Financial literacy has become increasingly important with the rapid expansion of financial products, digital investment platforms and individual participation in securities markets. Although awareness of investment products is increasing in India, actual participation in market-linked instruments remains comparatively low. The present paper examines the relationship between financial literacy, investment awareness, risk perception and investment behaviour, with particular emphasis on the gap between actual and preferred investment choices. The study adopts a review and secondary-data-based analytical approach using recent findings from the SEBI Investor Survey 2025 and contemporary empirical literature. The evidence reveals a substantial awareness–participation gap: approximately 63% of Indian households are aware of securities-market products, whereas only about 9.5% participate in them. Mutual fund/ETF ownership is approximately 6.7%, while direct equity ownership is around 5.3%. Participation is substantially higher in major metropolitan areas than in rural India. At the same time, capital preservation remains a dominant consideration for approximately 80% of households. Recent studies further demonstrate that financial literacy, digital financial literacy, financial behaviour, risk tolerance and behavioural biases influence investment decisions. The paper conceptualizes an “Awareness–Investment Conversion Gap” and argues that financial knowledge alone does not necessarily translate into investment participation. Financial confidence, risk tolerance, income, investment experience, digital capability and behavioural factors determine whether awareness is converted into actual investment. The findings have implications for financial education, investment advisory services and policies aimed at improving household participation in formal financial markets. |
