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SEC Says Retail Investors Are Clueless About Stocks


In 182 short pages, this SEC study shows retail investors lack basic financial literacy.

The verbatim comments showed how confused many investors are about fees. One focus group member said, "[A]nd then I found out there are management fees, which are deducted from the actual growth of the portfolio." Finding a balance between too little information and too much information is a challenge. As one focus group participant stated, "there's a bit of a diminishing value because the more that is disclosed to us, we may be less likely to pay attention to it."

Bullet points, tables, and visuals seemed to be the preferred methods of imparting information in digestible bites. Online survey participants overwhelmingly, if perversely, preferred hard copies of investment materials.

To be fair, the study intends to highlight problems in order to provide solutions. Most solutions the study came up with centered around sending investors to websites. was one mentioned, others included the Investment Adviser Public Disclosure database, IAPD, and FINRA's BrokerCheck. They can use these sites to research and verify the professional background of a financial intermediary.

Investors, however, were looking for something more one-stop. One said he'd like some kind of "SEC-sponsored website" where investors could look up brokers "like a doctor" and find answers to questions.

As to where they're currently getting their information, on a multiple choice question, 51.4% cited a financial advisor or broker as the primary source of information, 48.7% identified the Internet, 35.7% indicated friends and family, 26.6% relied on magazines and newspapers, and 24.6% said they got their information from a prospectus -- which seemed odd since over 50% of the respondents in one test said they found prospectuses difficult to read.
No positions in stocks mentioned.
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