FINRA Foundation Study Analyzes Behavior of US Investors

FINRA Foundation Study Analyzes Behavior of US Investors

A recent study by the FINRA Investor Foundation found that people generally seek professional help when investing. This is despite the myriad of investing websites, “do it yourself” financial literature and newsletters giving people the tools they need to invest successfully on their own. The survey found that basic knowledge of investment concepts is stubbornly low. As a matter of fact, only 10-percent who indicated they could take an investment literacy quiz actually scored eight or more questions correct. The majority or respondents could only answer a handful of questions.

The FINRA Foundation’s National Financial Capability Study (NFCS), one of the most comprehensive financial capability studies in the country, found that upon interviewing subjects who own retirement accounts as well as have other investments, more than half of respondents (56%) use a financial advisor. FINRA wrote that most use professional help when investing to avoid losing money and making costly investing mistakes. In addition, FINRA reported that many feel a professional can help them learn more about their investment options.

Part of the interview process of the FINRA study was a 10-question literacy quiz. “…men answered 4.9 questions correctly compared to 3.8 for women. Interestingly, both genders got the same number of questions wrong: 3.4,” said FINRA Foundation President Gerri Walsh. “But women were significantly more likely to say they did not know the answer to a question compared to men, perhaps pointing to differences in investor confidence by gender.”

While the FINRA study found gender differences in terms of investment knowledge, the survey also found generational differences in various concepts and attitudes toward investing. A big topic of late – so-called “crowdfunding” — still tends to be an investment option for younger investors. According to FINRA, crowdfunding “…remains a mystery to those ages 55 and up, as only 22 percent had heard of the concept.” However, most respondents between ages 18-34 were aware of crowdfunding.

The subject of investment fraud also tended to show large generational attitudes. The study found that 61-percent of young investors (18-34) are worried about being victimized by investment fraud compared to those ages 55 and older.

The FINRA findings also include the following interesting statistics:

* More than 70-percent of households surveyed own individual stocks and 64-percent own mutual funds.

* Most of those surveyed are “okay” with the fees they pay for the management of their investment accounts.

* FINRA found that those interviewed, 35-percent of the population own bonds and 33-percent own annuities.

* Fewer than half (43 percent) of investors who use a financial professional are worried that sales incentives present a conflict of interest.

As investment products continue to grow in complexity, gold and silver may seem like a retro investment – it is pure and simple.  And in some ways it is true, for three thousand years Gold and Silver have been a symbol and store of wealth preservation and accumulation – long before stock markets, mutual funds, annuities or crowdsourcing dominated the discourse about personal finance.  However, because of this history and symbolism, during times of economic crisis, inflation and economic uncertainty, gold and silver deliver powerful investment returns, which is why so many investors are looking to buy gold online or include gold and silver into their investment or retirement portfolio right now.

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