Only 18% of US Investors Show Advanced Investment Literacy, Study Finds
By Tanya Chepkova
AI summary of the source article
A study based on the 2024 National Financial Capability Study Investor Survey revealed that only 18% of US investors with assets outside workplace retirement plans possess advanced investment literacy. Conducted by the FINRA Investor Education Foundation and the Stanford Initiative for Financial Decision-Making, the research found that 66% had basic-only literacy and 16% had low literacy. While basic concepts like stocks, bonds, and inflation were well understood, knowledge weakened regarding margin trading, options, and interest-rate risk. Furthermore, 54% of basic-literacy investors said they would invest in a hypothetical fraudulent scheme promising risk-free 25% annual returns, highlighting limitations in risk and fraud recognition.
Why it matters
The findings highlight that retail investors often lack understanding of key risks like leverage and volatility, which can lead to significant losses and vulnerability to fraudulent schemes.
Key facts
- Only 18% of surveyed US investors outside workplace retirement plans demonstrated advanced investment literacy.
- 66% of respondents showed basic-only investment literacy, while 16% had low literacy.
- When presented with a hypothetical risk-free investment offering 25% annual returns, 54% of basic-literacy investors and 35% of advanced investors said they would invest.