What is the average person knows about the investment?
According to "The Plan of IQ Test, a test of 10 questions taken by more than 800 investors, the knowledge of some of the most basic concepts of American Century Investments investment is poor. On average, participants selected about half of the correct answers on multiple-choice test, which was given to individuals who have investments outside a retirement plan of the company.
"Although the trend in recent decades has been for Americans to assume more control of their financial futures, many still do not understand some of the most essential investment concepts, leaving them ill-equipped to achieve their financial goals", said Doug Lockwood, Vice President of the orientation of investors in American Century Investments.
According to the survey, portfolio rebalancing is the concept that confuses investors most. When presented with three statements about rebalancing, only 13 percent chose the correct answer.
Although the largest proportion of respondents agreed to return the portfolio rebalancing back "to the perfect mix of asset allocation," not participants to understand other aspects. test takers seemed more confused by the idea that rebalancing often involves the sale of some investments that have performed the best and buying more of those who have fallen behind.
Although the test participants also struggled with definitions of other terms and common concepts of investment, investors fared better in questions related to basic investment practices. For example, 71 percent understood that a "well-diversified portfolio will experience less volatility."
Regardless of their knowledge of investment, investors are about evenly split between those who trust in his plan to reach long-term savings and which are not.
"Financial Empowerment begins with quality financial education and guidance," said Lockwood.
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