The Impact of Personality Traits on Financial Decisions through Financial Knowledge and Investment Risk

The personality of the investor has a significant role in determining investment decisions. Investors' ' personality traits and financial literacy determine their ability to understand investment risks. This capability enables investors to make appropriate investment decisions and enhances the competitiveness of the investors and the organization for which they work. This study examines the impact of personality traits on financial decisions mediated by financial literacy and investment risk. Data was collected from stock investors (individuals or organizations) in Indonesia, with as many as 455 respondents. The proposed hypotheses were tested and verified using the partial least squares approach using SmartPLS software version 4.0. The results indicated that personality traits composed of openness, conscientiousness, extraversion, agreeableness, and neuroticism affect financial literacy, investment risk, and financial decisions. Financial literacy positively and significantly impacts investment risk and financial decisions. The ability of investors to pay attention to risks in investing can provide many alternatives to increase the influence on financial decisions. This research makes a theoretical contribution to enriching the theory of finance behavior in making investments that provide profits. The practical implication is to provide insights for financial consultants to improve competitiveness through financial understanding, especially adjusting to personality in determining appropriate investment decisions.