Relationship Between Financial Literacy and Portfolio Performance of University of Nairobi Employees

Abstract

Financially literate investors allocate their investments across different assets and thereby minimize the risks. Financially literate investors understand the risk-return tradeoff and are thus confident to hold even the risky financial assets to increase their returns. Enhanced financial literacy is crucial for making rational verdicts and attaining positive investment returns. The University of Nairobi (UON) workers posted across the 10 faculties with varied specializations are expected to have differing financial literacy levels due to different exposure to financial education material. According to the Final Council Retreat University of Nairobi Strategic Plan 2023-2027, amongst the identified skills gap was financial management. The study thus sought to establish the association amid financial literacy and portfolio performance of University of Nairobi employees. The study was guided by the Prospect Theory and the Modern Portfolio Theory. A descriptive cross-sectional survey research design was used with the target population being the UON employees. Primary data was used and was collected using structured questionnaires. SPSS software was used in data analysis and the results were outlaid in the form of descriptive and inferential statistics. From the discoveries, study concluded that financial literacy has a positive and statistically significant relationship with portfolio performance. Financial expert advice has a positive and statistically significant relationship with portfolio performance. Hazard attitude has a positive and statistically significant connection with portfolio performance. Behavioural bias has a positive and statistically significant relationship with portfolio performance. Peer influence has a positive and statistically significant relationship with portfolio performance. Investment goals has a positive and statistically significant relationship with portfolio performance. The study recommended that University of Nairobi employees should attend programs including workshops to support its employees by offering financial education that cover key topics like budgeting, risk management, asset allocation, and retirement planning whenever they are in place. University of Nairobi employees should consider seeking financial expert advice as a valuable benefit. University of Nairobi employees should seek financial expert information from financial experts. Attending workshops and training sessions led by financial experts can help employees recognize these biases and develop strategies to avoid them, such as sticking to a disciplined investment plan and maintaining a long-term perspective. University of Nairobi employees should promote a culture of individualized financial planning, emphasizing that investment verdicts need to merge with personal fiscal goals and hazard tolerance rather than social trends. University of Nairobi employees ought to set clear, measurable investment goals that align with their personal financial objectives and time horizons.