









































Pa
ge

 
1



Pa
ge

 
59

American Journal of  Financial 
Technology and Innovation (AJFTI)

A Study on Impact of  Risk Tolerance on Mutual Fund Investors
Shubham Sharma1*, Vinod Negi1

ISSN: 2837-4738 (Online)
Volume 3 Issue 1, Year 2025

DOI: https://doi.org/10.54536/ajfti.v3i1.4531
https://journals.e-palli.com/home/index.php/ajfti

Article Information ABSTRACT

Received: February 05, 2025

Accepted: March 10, 2025

Published: April 24, 2025

This study investigates the impact of  risk tolerance on mutual fund investment behavior 
in Himachal Pradesh, India using information gathered from 450 respondents in the 
districts of  Kangra, Una, and Hamirpur, the study uses regression analysis to look into 
the connection between mutual fund investments and risk tolerance. The results indicate 
that risk tolerance and mutual fund investing have a statistically significant and substantially 
favourable connection. With standard deviations indicating some variation in respondents’ 
risk preferences, descriptive statistics show a higher-than-average risk tolerance and 
investment activity. The results of  the regression analysis indicate that variations in risk 
tolerance account for 70% of  the variance in mutual fund investment behavior. The findings 
show that respondents who have higher risk tolerance are more inclined to invest in mutual 
funds, underscoring the importance of  risk tolerance in financial decision-making. In order to 
promote wise mutual fund investing practices, financial advisors and policymaker can benefit 
greatly from the study’s observations, which emphasize the significance of  comprehending 
behavioral trends in investing.

Keywords
Investor Decision Making, Mutual 
Fund Investment, Risk Tolerance

INTRODUCTION
The market offers a wide variety of  financial assets, from 
traditional real estate and bank deposits to the newest and 
most trendy capital market offerings like shares and mutual 
funds. According to various studies among the many 
investing options available, mutual funds have grown in 
popularity over the past several years (Meyer & Uhr, 2024). 
An individual investor is a person who buys stocks not 
for an organization but for their own account. Compared 
to large investors like insurance firms, pension funds etc., 
individual investors usually trade in considerably smaller 
numbers. Individual investors’ investment activity occurs 
in the background of  institutional investors’ activities 
(Karthikeyan et al., 2012). Given the lesser magnitude 
of  their ownership and the resulting voting power, there 
is every chance that their interest could be impacted.  
A crucial part is played by individual investors in 
maintaining the financial market’s smooth operation and 
making sure money is placed in the most capable hands. 
A growing field of  finance called “behavioral finance” 
is very interested in individual investors’ ability to take 
risks. From this angle, behavioral finance emphasizes the 
personal traits, psychological traits or other, that influence 
standard financial and investing behaviors of  investors 
(Bikas et al., 2012). A mutual fund is created when several 
people pool their extra money and give it to a reputable 
organization to administer, according to the Association 
of  Mutual Funds in India. A mutual fund is essentially a 
tool for risk diversification, and each fund has a different 
risk profile. This study aims to determine investors’ risk 
tolerance when making mutual fund investments. Mutual 
funds invest in companies that are growth-oriented and 
capable of  generating long-term financial gains. These 

funds pay out a lower yearly dividend to unit investors. 
Income funds offer high returns on investment (Chawla, 
2014). According to the Association of  Mutual Funds in 
India, there are numerous funds available for investors 
to invest in, including funds specifically focused on real 
estate investing with an emphasis on returns. Investments 
in which the entire corpus is devoted to a particular 
sector are referred to as sector-based funds. Likewise, 
funds referred to as index funds may focus on companies 
that are part of  an index. Investment funds that focus 
on debt securities are known as debt funds. Balanced 
funds are also established to satisfy the combined benefit 
of  capital appreciation and yearly growth since growth 
and income are the two components of  any investment’s 
return. Mutual funds that only invest in units of  other 
mutual funds are referred to as funds of  funds, which 
is another kind of  mutual fund. The purpose of  mutual 
funds is to provide investors with tax exemptions. 
Traditional financial models have predominantly upheld 
the conceptual connection between risk tolerance 
and investment decisions, frequently presuming that 
investors act rationally. Expected Utility Theory (EUT) 
is a prominent framework for elucidating the connection 
between risk tolerance and risk-taking behaviour. 
Experts advise that individuals should concentrate their 
evaluations on outcomes that yield the highest profits. 
The anticipated utility theory posits that individuals, 
irrespective of  the circumstances, act rationally and 
consistently choose certain risks over others. (Hemrajani 
et al., 2021).
Research indicates a high correlation between financial 
behaviour and financial risk tolerance. Possessing a 
greater number of  equities correlates with enhanced 

1 Himachal Pradesh University Business School, Shimla, India
* Corresponding author’s e-mail: shubhamsharma061997@gmail.com



Pa
ge

 
60

https://journals.e-palli.com/home/index.php/ajfti

Am. J. Financ. Technol. Innov. 3(1) 59-66, 2025

financial risk tolerance, according to Halissos and Bertaut 
(1995). Finke and Huston (2003) assert that individuals 
more inclined to embrace financial risks possess a greater 
proportion of  equities compared to those who are risk-
averse. This aligns with the findings of  Hariharan et 
al. (2000), which indicated that those with greater risk 
tolerance prefer investing in stocks rather than risk-free 
assets. This study aims to examine the risk tolerance levels 
of  mutual fund investors. The purpose of  the present 
study is to know about risk tolerance level of  mutual fund 
investors while investing in mutual funds. 

LITERATURE REVIEW
The study by Jain et al. (2023) investigates the mediating 
effect of  risk perception on the link between heuristic 
biases and decision-making among individual stock 
investors in India’s National Stock Exchange. The 
study employs Partial Least Square Structural Equation 
Modelling (PLS–SEM) on survey data from 432 
investors, revealing that risk perception partially mediates 
the relationship between overconfidence, availability bias, 
gamblers’ fallacy, anchoring bias, and investment decision-
making. The study offers insightful information about 
behavioral biases among capital market participants, with 
the acknowledged limitation of  concentrating only on 
heuristic biases and failing to acknowledge the possible 
influence of  other factors on individual equity investors. 
With implications for equity investing decisions, the 
study by Deka et al. (2023) investigates the calibration and 
assessment of  the link between behavioral biases and risk 
perceptions among Indian retail investors. The study uses 
EFA, CFA, and AMOS-based SEM for factor extraction, 
validity evaluation, and path analysis using a structured 
questionnaire with 438 samples. The study demonstrates 
a noteworthy correlation between investor risk perception 
and ESG consciousness, validates the substantial influence 
of  risk perception on equity investing decisions, and 
connects certain biases to perceived risk. Interestingly, 
biases and risk perception have a positive association that 
is moderated by higher ESG consciousness.
Behera et al. (2022) The study highlights how crucial it 
is to assist investors who are experiencing emotional 
distress in order to keep money in the stock market. It 
suggests developing a process for producing knowledge 
in order to improve investors’ cognitive abilities and 
create the best possible risk-bearing capacity. Mahdzan 
(2021) This study examines how 260 working adults in 
Kuala Lumpur, Malaysia-mostly MBA students-make 
judgments about investing in mutual funds based on 
their financial literacy. An increasing degree of  investing 
literacy is correlated with higher income and occupational 
levels. Nonetheless, the likelihood of  investing in mutual 
funds is not greatly impacted by risk tolerance. Hemrajani 
et al. (2021) investigated the influence of  psychological 
factors on individual investors’ financial risk tolerance 
and risk-taking behaviour. The researcher investigated the 
influence of  psychological factors on individual investors’ 
financial risk tolerance and risk-taking behaviour. The 

study demonstrated a substantial correlation between 
emotional intelligence and impulsiveness with financial 
risk tolerance and financial risk-taking behaviour. 
The findings emphasized the importance of  psychological 
factors in determining an individual’s financial risk 
tolerance and financial risk-taking behaviour. Financial 
risk tolerance is a complex mechanism that entails more 
than just psychological consideration.
Upadhayay (2020) did a study on the influence of  
behavioural finance on individual investing decisions in 
Ahmedabad. The study was descriptive and conducted 
in Ahmedabad city, which consists of  six zones: north, 
south, west, east, central, and new west. Primary data was 
gathered from 1,233 respondents. The results indicated 
that investors aged 18-28 constitute 45.1% of  the 
overall sample, with post-graduates providing the most 
responses. 
Ogunlusi and Obademi (2019) examined the influence 
of  behavioural finance on investment decision-making 
through a specific investment in Nigeria. The researcher 
distributed 200 questionnaires to respondents from four 
surveyed investment banks, of  which 180 were returned. 
The enquiries focused on the demographic characteristics 
of  respondents, heuristics, and prospect theory, utilising 
a descriptive research design for the study. The findings 
indicated a substantial influence of  behavioural finance 
on investing decisions. Raut et al. (2018) assessed the 
conduct of  individual investors in stock market trading. 
The research utilised structural equation modelling 
(SEM) to analyse data gathered from a nationwide survey 
involving 396 individual investors. This study examined 
the elements influencing individual investors’ investment 
decision-making behaviour to determine the efficiency 
of  the Indian financial market and the rationality of  
investor decisions. The results indicated that investors 
were markedly affected by herding, information cascades, 
anchoring, representativeness, and overconfidence, 
although contagion exhibited little effects. Chaudhary 
(2025) studies how overconfidence, loss aversion and 
perception of  risk affect investment decisions. The 
findings of  the research reveal that risk perception 
significantly impacts investment decision with individual 
perceiving higher risk displaying a greater propensity to 
invest in high-risk assets.  
Deepa (2018) studied the investors’ behavioural approach 
toward mutual fund investment in the Tirupur district 
of  Tamil Nadu. The researcher used an explorative 
research design. The researcher took a sample size of  
400 and applied different types of  sampling techniques 
like simple random, cluster and convenience sampling 
to source required information from the defined 
geographical regions of  the study. The researcher found 
that 74.30 per cent of  the mutual fund investors were 
men, 34.50 per cent of  investors were graduates, and 
the study results indicated that 61 per cent of  investors 
have expressed a very high degree of  awareness of  the 
performance of  mutual funds. The factors which affect 
the investors for investing in mutual funds were features 



Pa
ge

 
61

https://journals.e-palli.com/home/index.php/ajfti

Am. J. Financ. Technol. Innov. 3(1) 59-66, 2025

like minimum initial investment (68%), ownership pattern 
of  the scheme (66.80%) and availability of  professional 
financial advisor (64.8%). The relationship between 
logical decision-making and behavioral biases among 
Indian individual investors is investigated by (Kumar & 
Goyal ,2018). Applying statistical procedures like t-test, 
ANOVA, and Fisher’s LSD test, 386 valid responses to 
a structured questionnaire that was collected between 
May and October 2015 are used. According to the study, 
although most investors make logical decisions, behavioral 
biases might appear at different phases of  the process. 
Moreover, disparities in income and gender influence the 
ability to make logical decisions; in India, men investors 
are more prone to herding prejudice and overconfidence. 
The results imply that people can make better investing 
decisions if  they are conscious of  their biases.
Nithya (2017) investigated how individual investors 
in the Coimbatore district of  Tamil Nadu perceive the 
behaviour surrounding mutual fund investment decisions. 
The primary conclusion of  the study indicated that most 
investors exhibit a reduced risk appetite when engaging in 
the mutual fund market. The investment in mutual funds 
is primarily shaped by the active involvement of  factors 
specific to the fund, as well as broader economic and 
various other investment considerations. Pinjisakikool 
(2017) investigated the influence of  personality factors on 
households’ financial risk tolerance and financial conduct. 
The analysis included psychological and economic data, 
encompassing the Big Five personality factors that may 
affect financial conduct. The research included data 
from 4,026 individuals in the DNB (De Nederlandsche 
Bank) household survey and demonstrated that all five 
major personality factors were positively correlated with 
financial risk tolerance and affect risk tolerance. Mark 
(2017) performed an exploratory investigation of  the 
investment behaviour of  investors in Hong Kong and 
Mainland China. Key features such as demographic, 
psychological, and societal factors were examined. 
Customer data from 2012 to 2014 was collected. The 
researcher employed regression analysis as a statistical 
instrument. This research collected 142,496 samples 
from financial service providers registered on the Hong 
Kong Stock Exchange, comprising 87,057 samples from 
Mainland Chinese investors and 55,439 from Hong 
Kong investors. The researcher determined that the three 
most critical factors—age, income level, and investing 
experience—affect investment behaviour; income level 
exerts a positive influence, whereas investment experience 
negatively impacts the quantity of  fund shares held by 
investors. Deb  and Singh (2016) investigate the impact 
of  risk perception on the investment behaviour of  bank 
workers in Tripura regarding mutual funds. The general 
risk perception among bank personnel has been classified 
as moderate. The research demonstrated an inverse 
correlation between risk perception and the amount 
invested in mutual funds.
Rahmawati et al. (2015) examined the factors influencing 
the risk tolerance of  individual investors. The author 

reached the conclusion that men exhibit lower levels of  
risk aversion compared to women. Investors with a solid 
education tend to embrace risk more readily, while those 
with fewer financial resources often exhibit lower risk 
tolerance. Finding important determinants of  investor 
preferences for financial goods is the goal of  the research 
by Kalra et al. (2012) The classification and regression 
tree (CART) methodology was utilized by them with a 
sample of  377 individual investors. It was discovered 
that psychographic factors were important indicators for 
high-risk investment goods, although socioeconomic and 
demographic factors were important indicators for low-
risk investments. The report recommends that financial 
service companies take these factors into account in order 
to customize their marketing tactics and build customer 
confidence. The comprehension of  Indian investor 
behavior is improved by this empirical contribution. Walia 
and Kiran (2009) conducted an analysis of  investors’ risk 
perception regarding mutual fund services. The study 
revealed that investors’ understanding and their positive 
outlook on market volatility affect their choice to pursue 
risky investments. 

Objective
To study the impact of  risk tolerance on mutual fund 
investors while investing in mutual funds.

MATERIALS AND METHODS
This study used descriptive research design. The target 
population for this study are those people who invest in 
mutual funds. This study is based in Himachal Pradesh, 
a hilly state in India. For the purpose of  this study top 
three district of  Himachal Pradesh according to their 
literacy level have been taken. These top 3 districts are 
Hamirpur, Una and Kangra (Indian Census, 2011). In 
the present study non probability sampling (Purposive 
and Convenience sampling) is used. The sample size for 
the study is 450 which further divided into the 3 district 
according to their population proportion. So lastly 273 
responses are from Kangra district, 94 from Una and 
83 respondents are from Hamirpur district. Regression 
analysis used in this study to analyze the data related to 
risk tolerance level of  mutual fund investors.
There are number of  reasons for choosing Himachal 
Pradesh as research area The first reason for taking 
Himachal Pradesh for study is that Himachal Pradesh 
stood first among all the states in SDG 8 i.e., Decent 
Work and Economic Growth. SDG 8 promotes sustained 
economic growth. But despite being in first position 
in SDG 8, Himachal Pradesh has to work more in the 
sector of  social security. The percentage of  regular wage/
salaried employees in the non-agriculture sector without 
any social security benefit is 39.1 per cent (NITI Aayog 
Reports SDG India Index 2020-2021) and the target for 
2030 is to bring it down to 0 per cent, so mutual fund 
investment can help to provide social security to employees 
because mutual contains various retirement funds with 
minimum risk as compare to other market instruments.  



Pa
ge

 
62

https://journals.e-palli.com/home/index.php/ajfti

Am. J. Financ. Technol. Innov. 3(1) 59-66, 2025

Progression rate of  investors in Himachal Pradesh is 
good as there was 7,48,583 investors in Himachal Pradesh 
in 2023 which is increased to 10,93,311(As per BSE data) 
till August 2024 which is 46.05% increase in the rare of  
investors and Himachal Pradesh has 16,300 crore Asset 
Under Management (AUM) in Mutual Fund till August 
2024 (As per data of  Association of  Mutual Funds in 
India). For this research Individuals are selected from 
the chosen districts belonging to the age group of  18-
49 (as per RBI National Strategy for Financial Education 
2020-2025 there is 57% of  the population who cross the 
minimum threshold score which includes components 
like Financial Knowledge, Financial Behaviour and 
Financial attitude of  financial literacy), who are investors 
of  mutual fund schemes will be selected as sampling unit 
for the study.

Research Instruments
5 items are used to measure risk tolerance which were 
adapted from Goyal et al., (2023). The reliability of  these 
items came 0.791. Whereas for mutual fund investment 4 
items were used which were adapted from Ogunlusi and 
Obademi (2019) and the reliability for these items were 
0.833.

For Risk Tolerance Following Items are Used on 7 
Points Likert Scale 

1. Investing is too difficult to understand for me 
2. I am more comfortable putting my money in a bank 

A/c than in the mutual fund
3. When, I think of  the Word “risk” the term loss 

comes to mind immediately 

4. Making money in stock and mutual fund based on luck
5. In term of  Investing, safety is more important than 

return.

And for Mutual Fund Investment Following Items 
were Used on 7 Points Likert Scale

1. My investment in mutual funds has demonstrated 
better results than expected.

2. My investment in mutual funds has shown consistent 
cash flow growth.

3. My investment in mutual funds carries lower risk 
compared to the overall market.

4. My investment in mutual funds offers a high degree 
of  safety

Hypothesis
H0 There is no impact of  Risk tolerance of  investor on 
Mutual Fund Investment.
Ha There is an impact of  Risk tolerance of  investor on 
Mutual Fund Investment

Data Analysis and Results
For this study the data is collected from three district of  
Himachal Pradesh i.e. Kangra, Una and Hamirpur and 
data 450 sample were gathered from these districts to 
know the risk tolerance level of  mutual fund investors 
in Himachal Pradesh, a hilly state in India. For analysing 
the impact of  risk tolerance on mutual fund investor, 
regression analysis is conducted and the result of  the 
same are given below: 

Regression Analysis

Table 1: R Square Analysis
Model Summaryb  

M
od

el

R R
 S

qu
ar

e

A
dj

us
te

d 
R

 S
qu

ar
e

St
d.

 E
rr

or
 

of
 th

e 
E

st
im

at
e

R
 S

qu
ar

e 
C

ha
ng

e

F 
C

ha
ng

e

D
f1

D
f2

Si
g.

 F
 

C
ha

ng
e

D
ur

bi
n 

W
at

so
n

1. 0.838a .702 .701 .2178 .702 1053.862 1 448 <.001 1.937
a. Predictors: (Constant), Risk Tolerance
b. Dependent Variable: Mutual Fund Investment

Source: Primary data prepared by author

The research reveals a fairly favourable, statistically 
significant connection (r = 0.838, p < 0.001) between 
investing in mutual funds and risk tolerance. According 
to descriptive statistics, respondents’ levels of  both 
variables are marginally higher than average. These 
findings highlight how risk tolerance affects investing 
behavior, which makes it a crucial component of  research 
on financial decision-making.
According to the data, 70.2% of  the diversity in investment 
patterns may be explained by risk tolerance, which has a 
considerable impact on mutual fund investing behavior 
(R2 = 0.702). This suggests that variations in respondents’ 
risk tolerance account for around 70% of  the variation in 
mutual fund investment behavior.   

Adjusted R2 is 0.701, This value modifies the R2 statistic 
to account for the number of  predictors and the sample 
size, so offering a more precise assessment of  model fit 
in the context of  multiple predictors. The little disparity 
between R2 and Adjusted R2 indicates that the model 
possesses robust and steady explanatory power.
Standard Error of  the Estimate: Standard Error is 0.2178, 
This is the mean deviation of  the observed data from the 
regression line. A reduced standard error signifies that the 
model’s predictions closely align with the actual data points.
Change in R² is 0.702, Signifies that the total variance 
elucidated by the model is attributable only to the 
independent variable (Risk Tolerance), given that there is 
a singular predictor in this model.



Pa
ge

 
63

https://journals.e-palli.com/home/index.php/ajfti

Am. J. Financ. Technol. Innov. 3(1) 59-66, 2025

F Change and Significance (F-test)
F = 1053.862, p < 0.001: The F-test evaluates the overall 
statistical significance of  the regression model. The 
elevated 𝐹-value and its significant p-value demonstrate 
that the model is well-suited and that Risk Tolerance is a 
major predictor of  Mutual Fund Investment.

Durbin-Watson Statistic
Durbin-Watson is 1.937 This evaluates autocorrelation in 
the residuals. A number around 2 signifies the absence 
of  substantial autocorrelation, implying that the residuals 
are independent, a fundamental assumption of  regression 
analysis.

Table 2: Correlation
Model Summaryb  

Mutual Fund Investment Risk Tolerance
Pearson Correlation Mutual Fund Investment 1.000 0.838

Risk tolerance 0.838 1.000
Sig. (1-tailed) Mutual Fund Investment - <.001

Risk tolerance .000 -
N Mutual fund Investment 450 450

Risk Tolerance 450 450
Source: Primary data prepared by author

According to the analysis, there is a 0.838 Pearson 
association between risk tolerance and mutual fund 
investment. This shows a somewhat positive connection, 
indicating that respondents’ investment behavior in 
mutual funds tends to rise proportionately to their 
increased risk tolerance.
At a 99% confidence level, the correlation’s p-value of  less 
than 0.001 indicates that it is statistically significant (p < 
0.01). The observed association is unlikely to have happened 

by accident, as confirmed by this high level of  significance.
The statistically substantial and positive association 
indicates that respondents’ risk tolerance has a 
considerable impact on their mutual fund investing 
behavior. An important behavioral tendency among 
mutual fund investors is the apparent correlation between 
increased investment activity and higher risk tolerance. 
These results highlight how the sample population’s risk 
appetite influences their investment choices.

Table 3: ANOVAa

Model Sum of  Squares df Mean Square F Sig.
1. Regression 50.035 1 50.035 1053.862 <.001b

Residual 21.270 448 .047
Total 71.304 449
a. Dependent Variable: Mutual Fund Investment
b. Predictors: (Constant), Risk Tolerance

Source: Primary data prepared by author

Sum of  Squares (SS)
Regression SS (50.035)
This shows how much of  the change in the dependent 
variable (Mutual Fund Investment) can be explained by 
the change in the independent variable (Risk Tolerance). 
When the number is high, it means that the model 
explains a lot of  the variation.

Residual SS (21.270)
This is the change in the dependent variable that the 
model can’t explain. A better fit of  the model is shown by 
a lower residual SS.

Total SS (71.304)
This shows how much the dependent variable has 
changed. The Regression SS and the Residual SS are 
added together to get this number.

What It Means
About 50.035 of  the total variations (71.304), or 70.2%, 
can be explained by the model. The other 21.270, or 
29.8%, cannot be explained.

Types of  Freedom (df)
This number, df  (1), shows how many variables are in the 
model (Risk Tolerance), residual df  (448), which is the number 
of  observations minus the number of  variables and the 
constant, is equal to 448. This is the number of  observations 
minus one, which is 450 - 1 = 449 (450 - 1 = 449).

Mean Square (MS)
Regression MS (50.035)
This is found by dividing Regression SS by Regression 
df. It shows how much of  the difference the model can 
explain for each predictor.



Pa
ge

 
64

https://journals.e-palli.com/home/index.php/ajfti

Am. J. Financ. Technol. Innov. 3(1) 59-66, 2025

Residual MS (0.047)
This is found by dividing Residual SS by Residual df. It 
shows the average difference that can’t be explained.

What It Means
The big difference between the Regression MS (50.035) 
and the Residual MS (0.047) shows that the model 
explains a lot more variation than it leaves out.

F Statistic
That number, 1053.862, is the ratio of  the Regression MS 

to the Residual MS. The other number, 50.035/0.047, is 
the same thing. If  the F-value is high, it means that the 
model is a lot better at predicting the dependent variable 
than using the mean as a forecast.

How Important (p-value)
p<0.001
This means that the regression model is statistically 
significant as a whole. The independent variable (Risk 
Tolerance) helps to predict the dependent variable 
(Mutual Fund Investment) by a large amount.

Table 4: Coefficientsa

Model Unstandardized B Coefficients 
Std. Error

Standardized 
Coefficient Beta

t Sig. Collinearity 
Statistic

1. (Constant) 0.860 .091 9.435 <.001 Tolerance VIF
Risk tolerance 0.767 .024 .838 32.463 <.001 1.00 1.00
a. Dependent Variable: Mutual Fund Investment

Source: Primary data prepared by author

It is projected that the dependent variable (Mutual Fund 
Investment) will have a value of  0.860 when the independent 
variable (Risk Tolerance) is 0. The starting point for investing 
in mutual funds is 0.860 units (on the scale used in the 
model), even if  the person has no risk tolerance.
t = 9.435, Sig. < 0.001: The constant is statistically 
significant, which means it makes the model more useful.

Risk Tolerance (independent variable)
Unstandardised B = 0.767: This means that Mutual 
Fund Investment goes up by 0.767 units for every unit 
increase in Risk Tolerance, which is the same scale as the 
dependent variable.

In Other Words, Risk Tolerance Has a Big and 
Positive Effect on Mutual Fund Investments
Beta = 0.838: This is the standardised coefficient, which 
lets you compare variables that are recorded on different 
scales. A lot of  the model’s variation can be explained by 
the fact that Risk Tolerance has a big positive effect on 
Mutual Fund Investment.
t = 32.463, Sig. < 0.001: Risk Tolerance is a very good 
indicator of  Mutual Fund Investment, as shown by the 
very high t-value and significant p-value.

Tolerance and VIF Statistics for Collinearity
Tolerance = 1.00 and VIF = 1.00 are statistics that show 
multicollinearity, or how much two different factors 
are linked to each other. There are no problems with 
multicollinearity if  both the Tolerance value and the VIF 
(Variance Inflation Factor) value are close to 1. There is 
no need to worry about multicollinearity in this model 
because there is only one independent variable.
Overall Meaning and Risk There is a strong and statistically 
significant link between tolerance and investing in mutual 
funds. In raw units, the unstandardised coefficient 
(B=0.767) shows how the link works, and the standardised 
coefficient (β=0.838) shows how strong the effect is.

Since There are no Problems with Multicollinearity, 
the Model is Strong
Since the difference between R2 and Adjusted R2 is 
minimal, the model’s explanatory power is strong 
and stable. The analysis confirms that Risk Tolerance 
significantly influence Mutual Fund Investment.
So, we reject the null hypothesis i.e. There is no 
impact of  Risk tolerance of  investor on Mutual Fund 
Investment and Accept Alternative Hypothesis There is 
an impact of  Risk tolerance of  investor on Mutual Fund 
Investment.

Findings
The regression analysis indicates a robust and statistically 
significant positive association between risk tolerance and 
mutual fund investment behaviour (r = 0.838, p < 0.001). 
This indicates that when an individual’s risk tolerance 
escalates, their propensity to invest in mutual funds 
correspondingly increases, demonstrating a direct impact 
of  risk tolerance on investing choices.
The R² score of  0.702 signifies that roughly 70.2% of  
the variance in mutual fund investment behaviour is 
attributable to risk tolerance. This underscores that risk 
tolerance significantly influences mutual fund investment 
behaviour among the study group from Himachal 
Pradesh.
The Adjusted R² value of  0.701 validates the model’s 
robustness, considering sample size and predictors, 
indicating a steady and dependable model fit.
The F-statistic of  1053.862 (p < 0.001) indicates that the 
total regression model is statistically significant, affirming 
that risk tolerance is a primary predictor of  mutual fund 
investment behaviour.
The t-value for Risk Tolerance (32.463, p < 0.001) 
underscores that risk tolerance is a highly significant 
determinant affecting mutual fund investments, exerting 
a substantial positive influence.



Pa
ge

 
65

https://journals.e-palli.com/home/index.php/ajfti

Am. J. Financ. Technol. Innov. 3(1) 59-66, 2025

investors in investment decision-making. International 
Journal of  Financial Studies, 10(1), 21. https://doi.
org/10.3390/ijfs10010021

Chawla, D. (2014). An empirical analysis of  factors 
influencing investment in mutual funds in India. 
Global Business Review, 15(3), 493–503. https://doi.
org/10.1177/0972150914535136

Chaudhary, M. K. (2025). Impact of  Risk Perception, 
Overconfidence Bias and Loss Aversion on 
Investment Decision-Making. American Journal of  
Financial Technology and Innovation, 3(1), 14–22. 
https://doi.org/10.54536/ajfti.v3i1.4061

Finke, M. S., & Huston, S. J. (2003). Undefined. Journal of  
Family and Economic Issues, 24(3), 291–303. https://doi.
org/10.1023/a:1025499322428

Goyal, K., Purohit, S., & Shukla, S. (2023). The direct 
and indirect effects of  financial socialization and 
psychological characteristics on young professionals’ 
personal financial management behavior. International 
Journal of  Bank Marketing, 41(7), 1550–1584. https://
doi.org/10.1108/ijbm-09-2022-0419

Haliassos, M., & Bertaut, C. C. (1995). Why do so few 
hold stocks? The Economic Journal, 105(432), 1110. 
https://doi.org/10.2307/2235407

Hemrajani, A., Kumar, R., & Sharma, P. (2021). Retail 
investors’ financial risk tolerance and risk-taking 
behavior: The role of  psychological factors. FIIB 
Business Review, 231971452110582. https://doi.
org/10.1177/23197145211058274

Reserve Bank of  India. (2020). National Strategy for 
Financial Education 2020-2025 [PDF file]. https://
shorturl.at/aZDzr

Reserve Bank of  India. (2020). Annual Report 2019-2020 
[PDF file]. https://shorturl.at/sEC2A

Moscati, I. (2018). The expected utility theory and 
measurement theory of  von Neumann and Morgenstern, 
1944–1947. In Measuring utility (pp. 147–162). https://
doi.org/10.1093/oso/9780199372768.003.0010

Nithya, D. (2017). Mutual fund investment decision by individual 
investors: Behavioural perspectives [Doctoral dissertation]. 
Sodhganga.

Shahnaz, N., Jamil, S., & Abdul Rahman, R. (2021). 
Investment literacy, risk tolerance, and mutual fund 
investments: An exploratory study of  working adults 
in Kuala Lumpur. International Journal of  Business and 
Society, 21(1), 111–133. https://doi.org/10.33736/
ijbs.3230.2020

Ogunlusi, O. E., & Obademi, O. (2019). The impact of  
behavioural finance on investment decision-making: 
A study of  selected investment banks in Nigeria. 
Global Business Review, 22(6), 1345–1361. https://doi.
org/10.1177/0972150919851388

Pinjisakikool, T. (2017). The influence of  personality traits 
on households’ financial risk tolerance and financial 
behaviour. Journal of  Interdisciplinary Economics, 30(1), 
32-54. https://doi.org/10.1177/0260107917731034 

Rahmawati, R., Sari, N. L., & Hartono, D. (2015). 
Determinants of  the risk tolerance of  individual 

The Standard Error of  the Estimate (0.2178) indicates 
that the predicted mutual fund investment values closely 
correspond with the observed data, signifying a strong fit 
of  the regression model to the actual data.
The Tolerance (1.00) and VIF (1.00) values signify the 
absence of  multicollinearity concerns in the model. The 
presence of  a single independent variable indicates that 
the model is devoid of  potential collinearity issues.
The ANOVA table indicates that the regression model 
significantly accounts for the variance in mutual fund 
investing behaviour (p < 0.001), hence affirming the 
critical influence of  risk tolerance on investment decisions.

Consequences for Financial Decision-Making
The study underscores the significance of  risk tolerance 
in shaping investing decisions, rendering it an essential 
consideration for financial advisors and mutual 
fund managers in formulating investment strategies. 
Comprehending the correlation between risk tolerance and 
investment behaviour might facilitate the customisation 
of  financial products and advisory services to more 
effectively correspond with investor preferences. The 
study demonstrates that risk tolerance substantially affects 
mutual fund investment behaviour. This understanding is 
significant for legislators, financial planners, and mutual 
fund providers seeking to stimulate investment activity by 
addressing investor risk preferences.

CONCLUSION
This study’s analysis definitively shows that risk tolerance 
substantially influences mutual fund investment behaviour 
among the people of  Himachal Pradesh. The regression 
model indicates that risk tolerance explains a substantial 
proportion of  the variance in investment patterns (70.2%), 
with a positive and statistically significant connection 
between the two variables. The results indicate that 
investors with more risk tolerance are more inclined to 
invest in mutual funds, whilst those with diminished risk 
tolerance generally refrain from such investments. This 
highlights the significance of  evaluating an individual’s 
risk profile when examining investment behaviour in 
financial decision-making. The substantial statistical 
significance (p < 0.001) of  the association indicates that 
risk tolerance must be regarded as an essential element for 
comprehending and forecasting mutual fund investments. 
The study refutes the null hypothesis asserting no effect 
of  risk tolerance on mutual fund investment behaviour 
and endorses the alternative hypothesis that risk tolerance 
substantially affects mutual fund investment decisions. 
These findings can assist financial advisors, policymakers, 
and fund managers in customising investment strategies 
and products according to investors’ risk preferences, hence 
improving investment participation and financial planning.

REFERENCES
Behera, S., Yadav, M., & Kumar, A. (2022). Examining 

risk absorption capacity as a mediating factor in the 
relationship between cognition and neuroplasticity in 



Pa
ge

 
66

https://journals.e-palli.com/home/index.php/ajfti

Am. J. Financ. Technol. Innov. 3(1) 59-66, 2025

investors. International Journal of  Economics and Financial 
Issues, 5, 373–378.

NITI Aayog. (2020). SDG India Index & Dashboard 2020-
21. https://sdgindiaindex.niti.gov.in/#/ranking

SE Ltd-registered investors. (n.d.). BSE (formerly 
Bombay Stock Exchange) | Live stock market updates 
for S&P BSE SENSEX, stock price, company news 
& results. BSE. https://www.bseindia.com/markets/
keystatics/KeyStat_ClientStat.aspx?expandable%20

=4
Walia, N., & Kiran, R. (2012). Understanding the risk 

anatomy of  experienced mutual fund investors. 
Journal of  Behavioral Finance, 13(2), 119–125. https://
doi.org/10.1080/15427560.2012.673517

World Investor Week. (2021, November 22–28). Mutual 
Funds India | Investment Plans | Tax Saving | 
Mutual Funds NAV. AMFI. https://www.amfiindia.
com/geographical-spreads


