The Impact of Financial Literacy and Behavioral Biases on Investors’ Decision-Making

Financial literacy refers to a set of knowledge, skills, and abilities that enable individuals to manage money, understand financial concepts, and make sound economic decisions. Behavioral biases are cognitive deviations that lead investors to make irrational investment decisions. The purpose of this study is to simultaneously examine the role of financial literacy and various behavioral biases on the quality of investors’ decision-making. The importance of this topic lies in the direct impact of investment decisions on financial well-being, household economic stability, and the reduction of behavioral risks. This research adopts a descriptive–analytical approach, and data were collected through library research and note-taking methods. The findings indicate that financial literacy has a positive and significant effect on investors’ decision-making, while behavioral biases such as overconfidence, representativeness, anchoring, mental accounting, and herding behavior negatively affect decision-making. Enhancing financial literacy, educating financial concepts, and controlling cognitive biases can improve the quality of investors’ decisions. The main question addressed in this research is why, despite the availability of financial information, many investors’ decisions are still influenced by insufficient financial literacy and behavioral errors.

کلیدواژه ها:

Financial Literacy ، Behavioral Biases ، Investors’ Decision-Making