This study sought to establish the effect of financial literacy on portfolio diversification at the Nairobi Securities Exchange. The study adopted a cross sectional survey research design. The population of the study constituted all individual investors who traded in stocks at the Nairobi Securities Exchange between June and July 2017. Primary data was used and a sample of 200 investors was considered for the study. Data was analyzed using regression analysis. The findings depicted that there was a significant effect of financial literacy on portfolio diversification among investors at the Nairobi securities exchange. However, age, education and income level which were control variables had insignificant influence on portfolio diversification. The study further recommends the need for the relevant government agencies to facilitate formulation of policies and programs to educate and train people on financial literacy.
JEL classification numbers: G11
Keywords: Financial literacy, portfolio diversification, demographics
ISSN: 2241-0996 (Online)