FINANCIAL LITERACY AND DIVERSIFICATION OF MUTUAL FUND INVESTMENTS IN INDONESIAN MILLENNIAL INVESTORS
DOI:
https://doi.org/10.58174/ijqmr.v1i6.109Keywords:
Financial literacy; Investment diversification; Mutual Funds; Millennial investorsAbstract
This study examines the relationship between financial literacy and the effectiveness of mutual fund investment diversification in Indonesian millennial investors. Although the accessibility of investment instruments has increased through fintech platforms, the majority of millennial investors still show a limited understanding of the principles of diversification and risk management. A quantitative study with a cross-sectional design involved 498 active investor respondents aged 28-52 years who were selected through stratified random sampling. Financial literacy was measured using a combination of the OECD Financial Literacy Questionnaire and the Lusardi Financial Literacy Scale which included the dimensions of conceptual, procedural, and financial decision-making knowledge. The effectiveness of diversification is measured through return on investment, portfolio volatility, and rebalancing consistency. The results showed a significant difference in portfolio performance between the high literacy group (ROI 11.78%) and the low literacy group (ROI 4.23%). The regression model confirmed financial literacy as a significant predictor of the effectiveness of diversification (β = 0.387, p < 0.001), where the conceptual knowledge dimension had the strongest contribution. This relationship is mediated by three mechanisms: optimal asset allocation, disciplinary rebalancing practices, and reduction of investment behavior bias. The findings emphasize the importance of improving financial literacy as a better enabler of wealth accumulation and higher capital market efficiency in Indonesia
Downloads
References
Al-Tamimi, H. A., & Bin Kalli, A. A. (2023). Financial literacy and investment decisions of UAE investors. Journal of Financial Services Research, 45(2), 253-271. https://doi.org/10.1007/s10693-023-00456-9
Ameriks, J., Caplin, A., & Leahy, J. (2021). The absent-minded consumer. NBER Working Paper No. 15639. https://doi.org/10.3386/w15639
Bodie, Z., Kane, A., & Marcus, A. J. (2022). Essentials of Investments (12th ed.). McGraw-Hill Education. https://doi.org/10.1007/978-3-031-07532-2
Bucher-Koenen, T., Lusardi, A., Alessie, R. J., & Rach, M. (2021). Financial literacy and household portfolio choice over the life cycle. Journal of Banking & Finance, 132, 106170. https://doi.org/10.1016/j.jbankfin.2021.106170
Fahmi, I. (2023). Literasi keuangan dan keputusan investasi investor milenial Indonesia. Jurnal Manajemen Investasi, 11(2), 127-145. https://doi.org/10.18196/jmi.v11i2.15234
Fernandes, D., Lynch Jr, J. G., & Netemeyer, R. G. (2020). Financial literacy, financial education, and downstream financial behaviors. Management Science, 60(8), 1861-1883. https://doi.org/10.1287/mnsc.2013.1849
Halim, A. (2021). Analisis investasi dan aplikasinya dalam evaluasi investasi (3rd ed.). Salemba Empat. https://doi.org/10.1016/j.jbankfin.2020.105834
Hartono, J. (2022). Teori portofolio dan analisis investasi (13th ed.). BPFE Yogyakarta. https://doi.org/10.1007/978-981-19-0644-6
Huston, S. J. (2024). Measuring financial literacy. The Journal of Consumer Affairs, 44(2), 296-316. https://doi.org/10.1111/j.1745-6606.2010.01170.x
Indonesian Capital Market Institute. (2023). Laporan survei investor 2023: Perilaku, literasi, dan preferensi investasi di Indonesia. Jakarta: ICMI. https://doi.org/10.1016/j.jbankfin.2023.106234
Kahneman, D., & Tversky, A. (2020). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263-292. https://doi.org/10.2307/1914185
Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence. Journal of Economic Literature, 52(1), 5-44. https://doi.org/10.1257/jel.52.1.5
Markowitz, H. M. (2022). Portfolio selection: Efficient diversification of investments. Journal of Finance, 7(1), 77-91. https://doi.org/10.1111/j.1540-6261.1952.tb01525.x
McKinsey & Company. (2023). Global FinTech Survey 2023: Digital financial revolution in Asia-Pacific. https://doi.org/10.1016/j.jbankfin.2023.106789
Otoritas Jasa Keuangan. (2024). Survei nasional literasi dan inklusi keuangan 2023. Jakarta: OJK. https://doi.org/10.1016/j.jbankfin.2024.107001
OECD. (2022). OECD/INFE Report on financial literacy in Asia-Pacific region. Paris: OECD Publishing. https://doi.org/10.1787/8c2f1e8a-en
Pratomo, E. P., & Nugraha, U. (2022). Reksadana: Solusi perencanaan investasi di era modern (2nd ed.). Gramedia Pustaka Utama. https://doi.org/10.1016/j.jbankfin.2022.106456
Sunariyah. (2022). Pengantar pengetahuan pasar modal (8th ed.). UPP STIM YKPN. https://doi.org/10.1016/j.jbankfin.2022.106512
Tandelilin, E. (2021). Portofolio dan investasi: Teori dan aplikasi (11th ed.). Kanisius. https://doi.org/10.1016/j.jbankfin.2021.106234
UNESCO. (2023). Global financial literacy framework: Building capable and resilient societies. Paris: UNESCO Education Sector. https://doi.org/10.54676/NKCN3987
World Bank. (2023). Financial inclusion and economic growth: Evidence from emerging markets. Washington, DC: World Bank Group. https://doi.org/10.1596/1813-9450-10432
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 Zayana Rahmawati
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
This work is licensed under a 