Social Indicators Research

, Volume 132, Issue 2, pp 799–820 | Cite as

Financial Literacy, Portfolio Choice and Financial Well-Being

  • Zhong ChuEmail author
  • Zhengwei Wang
  • Jing Jian Xiao
  • Weiqiang Zhang


This study examined potential effects of financial literacy on household portfolio choice and investment return, an indicator of financial wellbeing. Using data from the 2014 Chinese Survey of Consumer Finance, financial literacy was measured and further categorized into basic financial literacy and advanced financial literacy. This study tested the hypothesis that financial literacy affects household choice between stock and mutual fund. The results indicated that households with higher financial literacy, especially those with higher level of advanced financial literacy tended to delegate at least part of their portfolio to experts and invest in mutual fund. However, households who were overconfident about their financial literacy tended to invest by themselves and were more likely to hold only stocks in their portfolios. The findings also indicated that households with higher financial literacy had a better chance of receiving a positive investment return, suggesting that higher financial literacy may result in a better financial outcome.


Household finance Financial literacy Overconfidence Financial well-being 



The authors acknowledge funding support from the National Natural Science Foundation of China (71232003 and 71573147), Specialized Research Fund for the Doctoral Program of Higher Education (20120002110085) and China Postdoctoral Science Foundation (2015M570066). The authors would also like to thank Hong Zhang and Bibo Liu for their comments and suggestions.


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Copyright information

© Springer Science+Business Media Dordrecht 2016

Authors and Affiliations

  1. 1.PBC School of FinanceTsinghua UniversityBeijingPeople’s Republic of China
  2. 2.Department of Human Development and Family StudiesUniversity of Rhode IslandKingstonUSA

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