How information overload and heuristics shape digital investment decisions

Abstract

The study examines how information overload and heuristic judgment mediate between how locus of control and risk perception affect retail investors' digital investment activities. Digital platforms increased financial market access. However, frequent information streams and attention-seeking stimuli for speedy decision-making cause cognitive overload and judgment errors. The paper merges trait-level (locus of control), state-level (risk perception), and cognitive theories (information overload and heuristics) into a single explanatory framework using psychology and behavioral finance fundamentals. The study used structural equation modeling to evaluate direct and mediating correlations from structured surveys of 400 knowledgeable Indian digital investment platform users. Positive investments are associated with an internal control locus, while risk perception decreases involvement. Complex or fuzzy information cognitive prejudices, especially availability and representativeness heuristic biases, aggravate psychological dispositions and lead to extreme behaviors like greater trading, risk-taking, and digital complexity. The paper discusses paradoxical overload and heuristic biases. The former causes decision-making paralysis in some, whereas the latter aids processed decision-making. The research helps digital platform developers and decision aid policymakers customize information to prevent cognitive errors. This highlights the need to simplify information to support confidence and beneficial digital investments.