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31 Aug 2012

The basic story is that after the financial crisis, lawmakers decided that one of the reasons the economy collapsed is that average investors didn't understand the various stocks and bonds and mutual fund shares they had bought. So they decided to require the SEC to find out how much average (also known as "retail") investors knew about the stuff in their portfolios, by asking them questions like, and I'm paraphrasing: "This stock you own — what does it do?"

The resulting study, released today, is amazing and depressing. Not only does it contain the world's longest section titles ("The Most Useful and Understandable Relevant Information that Retail Investors Need to Make Informed Financial Decisions before Engaging a Financial Intermediary or Purchasing an Investment Product or Service") but it sheds light on how little people know about the financial products they own.

The SEC's conclusion is fairly straightforward: "U.S. retail investors lack basic financial literacy ... have a weak grasp of elementary financial concepts and lack critical knowledge of ways to avoid investment fraud."

read more: http://nymag.com/daily/intel/2012/08/sec-study-nobody-knows-anything.html



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