Sep 18

WSJ: Do Americans Understand the Basics of Investing?

True or false: Buying a single company’s stock usually provides a safer return than a stock mutual fund.

Approximately 47% of those 28,000 surveyed by the Investor Education foundation of the Financial Industry Regulatory Authority did not know the correct answer of false. Did you?

What about: If interest rates rise, what will typically happen to bond prices? The possible answers were: rise, fall, stay the same, or there is no relationship. Only 28% answered the questions correctly: the prices will fall.

The Securities and Exchange Commission recently published a review of the numerous surveys on the topic and believes that, “U.S. retail investors lack basic financial literacy” and “have a weak grasp of elementary financial concepts.”

What does this mean? The average investor is not well versed in financial literacy, which could and is affecting many Americans planning for retirement.

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