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| 2003
News and Press Releases |
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HEADLINE:
Survey Reveals Misinformed Investors
By: Staff Writer - Associated Press
NYTimes.com. December 2, 2003
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EXCERPT: Nearly half the investors polled in a survey erroneously believed that stock market losses were insured and 70 percent were unaware of the risks of buying stocks on margin, according to the National Association of Securities Dealers. The brokerage industry's self-regulatory organization released the survey results as it announced the creation of an investor education foundation with initial funding of $10 million. Additional money will come from fines levied by the NASD on brokerage firms and individuals for disciplinary breaches. In the April survey of 1,086 adults around the country who had recently made at least one investment, 97 percent of respondents said they needed to be better informed about investing, while nearly half said they could have avoided a negative investment experience if they had known more. Only 35 percent of the respondents scored a passing grade on the 55-question, multiple-choice survey, which required correct answers to at least seven of 10 basic financial literacy questions. Only 24 percent of respondents aged 21 to 29, 23 percent of those with annual household incomes of $50,000 or less and one-quarter of women received a passing grade. By contrast, 45 percent of respondents aged 50 and over, 51 percent of those with incomes of $100,000 or more and 46 percent of men passed. Federal Reserve Chairman Alan Greenspan said in a speech this fall that improved financial education is critical in the fight against fraud. Policymakers and experts have complained for years about the poor quality of Americans' financial literacy. Legislation to give consumers new protections against identity theft, which Congress recently enacted and sent to President Bush, includes provisions establishing a federal Financial Literacy and Education Commission, a toll-free telephone number and Web site for financial education information, and a $3 million media campaign. The NASD survey was conducted before revelations surfaced in early September of widespread trading abuses and marketing violations in mutual funds. As the scandal has spread, the Securities and Exchange Commission, the NASD and state regulators have brought a spate of civil enforcement actions against big mutual fund companies and investment firms and their executives in recent weeks. The stock market bubble of the late 1990s and its aftermath, ``including some of the current misdeeds in the sale of mutual funds, have clearly shown that the more objective information investors have about investing, the better,'' said Robert Glauber, NASD's chairman and chief executive officer. ``Investors realize they need to be better educated both about basic investing and the different investing products available to them,'' Glauber said in a statement.
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