The study, conducted at Mercu Buana University, focused on financial literacy, herding behavior, risk aversion, and risk perception—four key factors that shape investment decisions. The results provide valuable insights for anyone looking to understand how young people handle their money.

1. Financial Literacy: The More You Know, The Better You Invest

One of the biggest takeaways from the study is that financial literacy has a direct and positive impact on investment decisions. In simple terms, the more you understand about money, the better your financial choices will be.

Key Number: People with higher financial literacy scores make significantly better investment decisions compared to those with little financial knowledge (p-value = 0.001, meaning a very strong correlation).

The lesson here? Financial education matters. If you want to make smart investment choices, take the time to learn about stocks, savings, and financial planning.

2. Herding Behavior: Are You Following the Crowd?

Another major factor influencing young investors is herding behavior—the tendency to follow what others are doing rather than making independent decisions.

Key Number: Investors who rely on herd behavior are more likely to make poor investment choices because they are influenced by trends rather than logic.

Why does this matter? Because following the crowd in investing—especially during market booms and crashes—can lead to big losses. Many young investors are investing simply because “everyone else is doing it,” which can be risky.

3. Risk Aversion: Playing It Safe

Not everyone is comfortable with high-risk investments, and this study found that risk-averse investors tend to make more cautious choices.

Key Number: Risk-averse investors will only invest if they believe the expected return is higher than the perceived risk (p-value = 0.007).

Contrary to the popular belief that Millennials and Gen Z are heavily invested in risky assets like cryptocurrency and speculative stocks, this study suggests that many young investors actually prefer safer investments. Risk-averse individuals from these generations tend to favor options like fixed deposits, mutual funds, and well-established stocks, carefully weighing potential risks before making financial decisions. While high-risk investments are often associated with younger investors, the data shows that risk perception plays a significant role in guiding their choices.

4. Risk Perception: Fear of Losing Money

Perhaps the most striking finding is that risk perception is the most influential factor in investment decisions.

Key Number: The fear of losing money plays the biggest role in whether young people invest or not (p-value = 0.000, meaning an extremely strong effect).

This tells us that Millennials and Gen Z carefully assess risks before investing, and many prefer safer, more predictable options. However, being too cautious can sometimes mean missing out on opportunities for higher returns.

What This Means for You

So, what can we learn from this study? Here are some key takeaways:
Education is everything – The more financial knowledge you have, the better your investment choices.
Don’t blindly follow trends – Just because your friends are investing in something doesn’t mean it’s a good idea.
Understand your risk tolerance – If you’re uncomfortable with risk, consider safer investment options.
Don’t let fear stop you – While caution is good, being too afraid to invest can mean missing out on financial growth.

For young people looking to build wealth, the best approach is to educate yourself, make informed decisions, and find a balance between risk and reward.

Want to improve your financial literacy? Start by reading books, taking online courses, and following expert advice—because knowledge is the most powerful investment you can make!

Scientific Publication Source: Rosdiana, R., 2020. Investment behavior in generation Z and millennial generation. Dinasti International Journal of Economics, Finance & Accounting, 1(5), pp.766-780.

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