The Effect of Financial Literacy on Investment Decisions in the Stock Market: A Study of the United Kingdom

Purpose: The purpose of this article was to analyze the effect of financial literacy on investment decisions in the stock market: a study of the United Kingdom. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: The study found that higher financial literacy positively influences investment decisions in the UK stock market. Investors with better financial knowledge were more likely to invest, manage risks, and diversify their portfolios. Those with lower financial literacy tended to make poor investment choices. The study highlighted that financial education programs could improve decision-making and investment outcomes, emphasizing the importance of financial literacy for informed stock market participation. Contribution to Theory, Practice and Policy: Theory of planned behavior, behavioral finance theory & human capital theory may be used to anchor future studies on the effect of financial literacy on investment decisions in the stock market: a study of the United Kingdom. Financial advisors should integrate financial literacy training into their services, focusing not only on product recommendations but also on educating clients about the risks and strategies associated with investing in the stock market. Policy initiatives should focus on embedding financial literacy into primary, secondary, and higher education curricula.