International Journal of Economics and Financial Issues ISSN: 2146-4138 available at http: www.econjournals.com International Journal of Economics and Financial Issues, 2021, 11(4), 53-65. International Journal of Economics and Financial Issues | Vol 11 • Issue 4 • 2021 53 Individual Investor Risk Tolerance from a Behavioural Finance Perspective in Gauteng, South Africa Anzel Van den Bergh-Lindeque, Sune Ferreira-Schenk, Zandri Dickason-Koekemoer* North West University, South Africa. *Email: 20800274@nwu.ac.za Received: 29 March 2021 Accepted: 28 June 2021 DOI: https://doi.org/10.32479/ijef.11451 ABSTRACT The investment behaviour of individuals is unconsciously infuenced by their thoughts, emotions, personal beliefs or past experiences to the degree that even individual investors with considerable knowledge may diverge from logic and reason. These infuences, which can be classifed as behavioural fnance biases, may afect the manner in which risk is perceived and understood. This study aims to establish the relationship between the behavioural fnance biases and the risk tolerance of individual investors within Gauteng, South Africa. This study also aims to identify the behavioural fnance biases that drive individual investment decisions. Positive, statistically signifcant relationships were established between the behavioural fnance biases and individual investor risk tolerance. Furthermore, the investment decisions of individual investors are driven to a rather great extent by the behavioural fnance biases. The signifcance of these fndings will contribute to facilitate the more practical and accurate profling of individual investors’ risk tolerance to ensure the successful implementation of investment strategies not only within South Africa, but also internationally. Keywords: Individual Investors, Risk Tolerance, Risk Profling, Behavioural Finance, Investment Decisions, Gauteng, South Africa JEL Classifcations: D81, G41 1. INTRODUCTION Behavioural fnance investigates how the unpredictable nature of human psychology has an efect on investment decision-making and occasionally brings about emotionally driven behaviours that result in market anomalies that as a whole may either be speculative bubbles or bad bear markets (Rossini and Maree, 2015). Behavioural fnance comprises three elements, which are knowledge of fnance, economics and cognitive psychology when investment decisions are made by individual investors (Lintner, 1988; Zindel et al., 2014). The fnancial decision-making environment is characterised by complexity and uncertainty as fnancial markets are neither strictly efcient nor strictly inefcient (Fakhry, 2016). According to traditional fnance theories, it is believed that individual investors behave rationally, take all available information into account and capitalise on available opportunities to maximise their wealth when making investment decisions. However, in reality, individual investors do not behave rationally and investment decisions are driven by emotions, such as greed and fear (Muhammad, 2009). Therefore, numerous systematic deviations in individual investment decision-making from the principle of rationality, based on traditional fnance theories, were revealed by behavioural fnance research (Klement, 2015). Traditional fnance theories are focused on recognising rational solutions for decision problems as a result of investors’ behaviour through the development of assumptions and tools (Baker and Nofsinger, 2002). On the other hand, behavioural fnance comprises finance concepts and cognitive psychology as to comprehend and forecast systematic fnancial market implications of the psychological process of decision-making (Olsen, 1998). Furthermore, while traditional fnance theories examine how individuals behave with regard to wealth maximisation, the behavioural finance theory examines how individuals truly behave in a fnancial environment (Kourtidis et al., 2011). De This Journal is licensed under a Creative Commons Attribution 4.0 International License