Abstract Financial literacy plays an important role in determining individual financial decision or portfolio diversification practices. In a complex financial environment it is essential of understanding about financial products, evaluate risk and return, and make informed decisions to achieve their financial goals. This conceptual study examine the influence of financial literacy on investment decision making and portfolio diversification among individual investors. It explores the major dimensions of financial literacy, including financial knowledge, financial awareness , financial skill and financial behaviour and their relationship with investment choice, risk perception, asset allocation and diversification. Increase in financial literacy helps the individual in productive allocation of savings. The study is developed through a conceptual review of relevant literature and established financial theory , particularly modern portfolio theory and the theory of planned behaviour. The paper highlight the importance of financial education in encouraging informed, discipline and balanced investment practices. It also identifies implication for financial institutions, policymakers and individual investors.

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