Behavioral Bias and Investment Experience in Influencing Portfolio Diversification through Financial Risk Tolerance among  Capital Market Investors

Andreas Tigor Oktaga; Utami Puji Lestari; Endang Dwi Wahyuningsih

doi:10.61132/jukerdi.v3i2.1548

Authors

Andreas Tigor Oktaga Institut Teknologi dan Bisnis Semarang
Utami Puji Lestari Institut Teknologi dan Bisnis Semarang
Endang Dwi Wahyuningsih Institut Teknologi dan Bisnis Semarang

DOI:

https://doi.org/10.61132/jukerdi.v3i2.1548

Keywords:

Behavioral bias, Financial risk tolerance, Investment experience, Portfolio diversification, Retail investors

Abstract

The rapid expansion of digital investment platforms has increased retail investors’ access to capital market instruments while simultaneously exposing them to behavioral influences that may affect portfolio construction. This study examines the effects of behavioral bias and investment experience on portfolio diversification and investigates the mediating role of financial risk tolerance. A quantitative explanatory design was employed involving 286 active retail capital market investors selected through purposive sampling. Data were collected using an online five-point Likert-scale questionnaire and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings indicate that behavioral bias negatively affects financial risk tolerance and portfolio diversification, whereas investment experience positively affects both financial risk tolerance and portfolio diversification. Financial risk tolerance also positively influences portfolio diversification and partially mediates the effects of behavioral bias and investment experience on diversification. These findings demonstrate that portfolio construction is shaped not only by rational risk-return considerations but also by psychological tendencies, accumulated market experience, and investors’ capacity to tolerate financial uncertainty. The study implies that investor education and digital investment platforms should integrate financial literacy, behavioral-bias awareness, risk-profile assessment, and diversification guidance to support more disciplined investment decisions.

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