Investment Decisions: Are Financial Knowledge, Risk Tolerance and Experience Important?

Abstract

Aims: This research aims to determine whether Financial Knowledge, Risk Tolerance and Experience significantly influence Investment Decisions, especially for heads of families in Purbalingga Regency. Study Design: Heads of families in Purbalingga District, Central Java, Indonesia. Place and Duration of Study: The research was conducted for three months in Purbalingga District with 20,552 Heads of Families. Methodology: This research method uses the SEM (Structural Equation Modeling) analysis method with the Partial Least Square (PLS) approach. Each hypothesis is tested to understand the relationship between variables. To test the validity and reliability of research using an outer model. Hypothesis testing uses inner models. Results: Financial knowledge influences investment decisions. Risk Tolerance does not affect Investment Decisions. And experience influences investment decisions. Conclusion: Financial Knowledge and Experience influence family investment decisions in Purbalingga Regency, Central Java, Indonesia. This happens because the higher the respondent's financial knowledge, the better their ability to predict investments and choose the right type of investment so that they can generate profits. Experience also provides valuable lessons for respondents, helping them determine the right time, investment amount and type of investment. However, Risk Tolerance does not have a significant influence because the culture of the people in Purbalingga Regency, Central Java, prefers to invest in real assets such as land, rice fields and the business world because they consider it a desirable form of wealth.