New Survey Shows Urgent Need for Investors to Learn Key Investor Knowledge, Behavior (Cont.)

However, just one in five investors (21 percent) said they practice all four of the desirable behavioral traits focused in the survey: reading prospectuses, regularly reviewing account statements, checking out the disciplinary backgrounds of brokers or financial planners and having a financial plan in place.

Other key findings of the SIPC/IPT survey included the following:

• A little more than a third of investors (36 percent) have checked out the disciplinary backgrounds of their stockbroker or financial planner. Perhaps even more disturbing is that seven out of 10 of those who did not check out their financial planner's background stated that they did so either because they trusted the individual in question (61 percent) or the individual had assured them that there was nothing to be concerned about (9 percent).
• Less than one in 10 investors (8 percent) understands that NO agency or organization "insures you against losing money as the result of fraud in your investment portfolio." A total of four out of five investors incorrectly identified one or more of the following entities as providing such insurance: Securities and Exchange Commission (42 percent); Federal Deposit Insurance Corporation (41 percent); and SIPC (23 percent). (These percentages add up to more than 80 percent, since more than one answer was permitted.)
• Only 41 percent understand the bond investing basic rule that as interest rates go up, bond prices tend to fall. More than a quarter of investors (28 percent) predicted bonds will move in the wrong direction, 16 percent said bond prices would remain the same, and 14 percent either did not know or refused to answer. Fewer than three in five investors (57 percent) can correctly define a prospectus. About three out of five investors (61 percent) understand that most brokers and financial planners are compensated through commissions on product sales. Two out of three investors understand that stocks have had the best long-term return for investors, compared to those who incorrectly identified CDs (14 percent), bonds (11 percent) and savings accounts (2 percent).

Full survey findings (including methodology) and a self-scoring version of the SIPC/IPT survey are available online.

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