Financial risk tolerance (FRT) and financial risk behaviour (FRB) play a crucial role in individual choices on wealth accumulation, retirement planning, portfolio allocation, insurance, and all other investment and finance related decisions that are dependent on this behaviour. Choosing a portfolio which is inconsistent with an individual’s financial risk tolerance may result in investor disappointment and may increase the financial stress of the individual, which in turn, may affect his/her overall behaviour. Previous studies have investigated a number of factors namely, demographic, social, environmental, and psychological factors across countries over a period of time. However, it is imperative to assess the impact of these factors periodically as FRT varies from one person to another, one time to another, and one country to another. Secondly, owing to the sub-prime mortgage crisis in 2008 and Greece crisis in 2010, the value of assets (such as equity) decreased and inflation increased, weakening the currency value (in India in particular) and increasing unemployment or salary cuts. This increased the financial vulnerability of investors ). Such a scenario changes the level of FRT and emphasises the importance of a periodical assessment of FRT . No study has been conducted so far to understand the role of demographic factors in differentiating the level of FRT among retail investors as well as classifying the retail investors into different FRT categories. Therefore, this study intends to examine the role of demographics as differentiating and classifying factors of retail investors. The study addresses this objective successfully. Four of the six demographic factors were found to be useful factors in differentiating among the level of FRT and FRB of retail investors as well as classifying them into different FRT and FRB categories. This result confirms that demographic factors do play a crucial role as differentiating and classifying factors and practitioners would do well to continue to use them in the future.
