How to invest? Americans don't know some basics.(Read article summary)
Americans lack the knowledge and confidence to invest, a new survey finds. Here are some resources to get you started in investing.
Melanie Stetson Freeman/The Christian Science Monitor
Are you a knowledgeable investor? Try this quiz:
- What kind of account must be opened in order to trade stocks online?Â
- What will the average household in pay total 401(k) fees over a lifetime? a) $10,000; b) $50,000; c) more than $150,000?Â
- What's the most important factor for most Americans picking an online broker?
If you said: brokerage account, more than $150,000, and low prices, then congratulations. You're far ahead of most Americans, whose grasp of investing is rudimentary.
The three questions above caused the most problems for the 869 adults in a new investment literacy survey conducted by InvestingNerd. For example: 4 in 5 couldnâ€™t identify a brokerage account; 9 in 10 severely underestimated how much a 401(k) would cost them (because beyond the stated fees are the trading costs, which also sap returns); and while over half of the current investors in the survey said low prices were most important to them in picking an online broker, only 1 in 10 actually took the time to compare costs across accounts when making their choice.
No wonder so many Americans donâ€™t invest! They lack the knowledge and confidence to feel they are doing a good job at it.
Over a quarter of non-investing respondents said they avoided investing altogether because of either uncertainty on how to get started (13.6 percent) or not wanting to risk losing money (12.8 percent). A full 39.3 percent said they did not invest because they do not have enough money to do so.
Investing is a key pillar of a strong personal finance foundation. These results all point to one thing â€“ knowing how to get started, and what to look for once you are ready to invest â€“ is half the battle.
So where should you look for help?Â Here are three places where people can get started learning about basic investing concepts:
- NerdWalletâ€™s free best brokerage accounts comparison tool
- The SECâ€™s Beginner Guide to Investing
- FINRAâ€™s Guidelines for Protecting the Investing Public
â€“ Susan Lyon is a financial analyst with InvestingNerd (a division of NerdWallet), which seeks to empower investors by providing unbiased and transparent access to investing and financial markets information.