They need a school...
Most Investors Flunk St. Knowledge Survey
WASHINGTON (Reuters) - Nearly 85 percent of U.S. investors surveyed failed to correctly answer five basic questions designed to measure awareness of what to do in turbulent stock markets or when confronted with other financial problems, a study released on Wednesday said.
Only 1 percent got four of the five questions right, and just 15 percent got three or more right, according to the survey conducted on behalf of the non-profit groups Securities Investor Protection Corp. (SIPC) and National Association of Investors Corp. (NAIC).
The findings suggested that, despite the large number of households owning stock, much more investor education is needed.
For example, more than four in five do not understand how margin calls work. In volatile markets, investors who put up an initial margin payment may be required to provide more money if the stock price falls, known as a margin call.
Only 14 percent of the 933 adult investors questioned knew that, under Federal Reserve rules, 25 percent is the level in a margin account below which a brokerage may issue a margin call.
And nearly two in five, or 39 percent, could not even offer a guess as to what the margin trigger level was, the study said.
``It has become increasingly evident to us over the last few years that many investors either have no knowledge or, even worse, the wrong information about a number of key issues that can haunt them during tough financial times,'' said SIPC President Michael Don.
Robert O'Hara of the NAIC added: ``New investors come in during bull markets and then don't know what to do when things go sour later. People need to take the time to learn the basics about investing and then put them into practice.''
Among the other key findings: Fewer than one in five people knew there is no insurance for stock market losses, and almost two out of three investors do not know what to do first when they have problems with a broker.
The study urged investors to put complaints against brokerages in writing as documentation is crucial to recovering money from firms that collapse due to fraud or other factors.
The survey was conducted by Caravan Opinion Research Corporation International from May 31 to June 4 and has a margin of error of plus or minus 3 percent. |
