Recently released Financial Industry Regulatory Authority (FINRA) study findings determined investors with low levels of financial knowledge lack confidence in their ability to meet their financial goals.
The analysis, New Evidence on the Financial Knowledge and Characteristics of Investors, was conducted by the FINRA Investor Education Foundation (FINRA Foundation) and the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University School of Business.
The scope of work examined nearly 15,000 Americans, aged 25 to 65, who were not retired or in school. Investors were categorized into two segments, workplace-only investors and active investors. It also included non-investors for comparison purposes.
“Investors are seeing a rapid evolution of the financial landscape, from the introduction of more complex financial products and instruments to a fundamental shift in the retirement system that places responsibility for saving and investing squarely on the shoulders of individual Americans,” Gerri Walsh, president of the FINRA Foundation, said. “Fewer workers today have defined benefit pension plans and the rise of defined contribution plans, like 401Ks, require an understanding of financial markets and basic personal finance that many investors lack.”
The results showed, among other determinations, that workplace-only investors were more likely to include individuals who were divorced or separated, had lower incomes and less education and were less likely to be self-employed. When presented with financial literacy questions measuring understanding of interest rates, inflation, and risk diversification, only 32 percent of workplace-only investors could answer the questions correctly, compared to 44 percent of active investors. Higher levels of financial knowledge were associated with participation in private retirement savings accounts and financial markets, even when controlled for risk preferences or confidence in one’s ability to reach financial goals.
Read more / Original news source: https://financialregnews.com/study-probes-investor-literacy-education-needs/