Impact of Investor Trust and Risk Perception on Mutual Fund Investment Intentions: The Mediating Role of Financial Literacy

F. Josephine Lenta; J. Kumar

doi:10.32479/irmm.23221

Authors

F. Josephine Lenta Department of Commerce, Faculty of Science and Humanities, SRM Institute of Science and Technology, Ramapuram Campus, Chennai, Tamil Nadu, India.
J. Kumar Department of Commerce, Faculty of Science and Humanities, SRM Institute of Science and Technology, Ramapuram Campus, Chennai, Tamil Nadu, India.

DOI:

https://doi.org/10.32479/irmm.23221

Keywords:

Mutual Fund Investment Intention, Financial Literacy, Risk Perception, Investor Trust, Behavioral Finance

Abstract

This study aims to analyze the role of investor trust (IT) and risk perception (RP) in their mutual fund investment intentions (MFI), with a particular focus on the mediating effect of financial literacy (FL). Time-lagged data was collected from 389 individual investors actively investing in mutual funds from major urban metropolises in India. Structural equation modeling (SEM) using SmartPLS was used to measure and evaluate the structural model. The results show that IT and RP have an important influence on MFI. In addition, FL mediates to some extent the relationship between IT and MFIs as well as between RP and MFI. The current study extends existing research by identifying the critical function of FL in bridging the nexus between psychological factors (IT and RP) and MFIs. It has policy and practical implications for financial planners and policymakers to augment mutual fund investment through literacy programs.