While the results of the recent FINRA Foundation study Investors in the United States 2016 are interesting, “what’s really valuable is to ask some blunt questions about your own investment knowledge and behavior.” Read five key findings, and some questions you should ask yourself.
1. Ask Yourself: Do you know what you own? You can learn a lot by reading your account statements each month and taking time to learn how you can make and lose money with each investment.
2. Investors use financial professionals—but most don’t check them out.
Ask yourself: “Have you looked up the background of your financial professional? It’s free and takes just a few minutes to do so using FINRA BrokerCheck. Over half (58 percent) of those who use an advisor say that professional designations or certifications are very important. If you count yourself among that group, learn more about the any designations your advisor holds using FINRA’s professional designations tool.”
3. Knowledge of investment concepts is low. “Only 10 percent of the respondents who took a 10-question investor literacy quiz could answer eight or more questions correctly.”
“Ask yourself: How well do I know the basics of investing? You can start by reviewing the questions and correct answers to the quiz in the Investor Literacy section of the study.”
4. “Investors own individual stocks and mutual funds. Ask yourself: Do I understand the concept of diversification? Particularly, if you own only individual stocks, consider having a conversation with your financial professional about diversification. Prepare by reading FINRA’s Diversifying Your Portfolio.”
5. “Some investors understand advisor compensation—and some don’t. Ask yourself: Do I know how my financial professional is compensated? If you are not sure, then ask.
The investor survey is a component of the FINRA Investor Education Foundation’s National Financial Capability Study, one of the largest and most comprehensive financial capability studies in the country. Data for the survey were collected in July 2015.”
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