Financial Risk Tolerance Among Portfolio Investors: Evidence from Bengaluru, India

Abstract

This study investigates the determinants of financial risk tolerance among portfolio investors in Bengaluru City, focusing on the roles of demographic characteristics, financial literacy, and investment experience. Adopting a descriptive research design, data were collected through a structured questionnaire administered to purposively selected investors meeting a minimum investment threshold. The measurement model was validated through reliability testing, confirmatory factor analysis, and assessments of convergent and discriminant validity, confirming strong internal consistency and construct distinctiveness. Structural equation modelling was employed to test the proposed hypotheses, revealing significant positive relationships between financial literacy, investment experience, and financial risk tolerance, with investment experience demonstrating a slightly stronger effect. The model exhibited substantial explanatory and predictive power, underscoring its practical applicability for understanding investor behaviour. Findings indicate that enhancing both financial knowledge and experiential exposure can meaningfully increase willingness to take financial risks. The results offer valuable implications for financial advisors, policymakers, and fintech platforms seeking to design targeted interventions that strengthen investor confidence and informed decision-making in urban financial markets. The study also provides a foundation for further exploration of psychological and contextual influences on risk-taking behaviour in diverse investor populations.