Invesco perpetual is calling on the financial services industry to do more to educate consumers abou...
Invesco perpetual is calling on the financial services industry to do more to educate consumers about the definition of bonds, equities and asset allocation as a survey suggests more than 50% of people do not know the differences.
Research conducted by NOP Research Group for Invesco perpetual suggests 50% of investors do not know the difference between bonds and equities, even though bond funds have been the most popular investment selection in the last year, so more needs to be done to ensure people know what their savings are invested in.
Furthermore, evidence discovered three quarters (75%) of all investors do not know what asset allocation means.
Knowledge of what constitutes a bond or equity seems to be lower again when assessing the individuals surveyed, says the survey.
But there is a positive indication that education may be working because 42% of 55-64 year olds know which is a bond and which is an equity, compared with just 16% of 18-24n year olds.
Mike Webb, chief executive of Invesco Perpetual, argues while new schemes to educate schoolchildren, such as that financed by PFEG, will help in the long-run, the greater emphasis needs to be placed on adults who are more likely to invest in the short-term.
"It is extremely worrying to think that one in two investors do not know the difference between bonds and equities. Given that there are 7.8 million ISA accounts currently held in the UK, that means a lot of people are investing without really understanding what they're investing in," says Webb.
"Corporate bond [funds] are some of the most popular selling funds this Isa season, but our research does beg the question: do people really know what they are buying? We could very well see many people investing in bonds funds when an equity fund may be most suited to their individual needs, and visa versa," he continues.
"While some organisations go a long way in helping to promote and facilitate the education of school pupils about financial matters, it is clear that more help needs to go into helping today's investors understand what they're investing in. There is a clear role for advice as well as clear information provision in the future. If these findings mean anything, it is that financial advice is a crucial element in improving understanding and buying/selling decisions for the majority of investors," adds Webb.
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