Americans are pretty much illiterate when it comes to finance. They don’t know how to read a stock trade confirmation and have problems figuring out how much commission they’re paying their brokers on a mutual fund sale.
For years, professionals on Wall Street have sneered at the public as “the dumb money.” Well, they may not be geniuses on Wall Street, either. But they’re right that retail investors could use some serious coaching.
A recent report by the Securities and Exchange Commission mapped out in 182 painful pages how little the public understands about finance (which suits some people on Wall Street just fine, by the way). I talk about the grim details in my latest Bloomberg View column:
”Consider the profile of the 4,800 investors surveyed for the report, which concluded that they “lack basic financial literacy.” More than half had full-time jobs, 11 percent had part-time jobs, 70 percent had at least a two-year college degree and 63 percent had annual income of more than $50,000. We’re not talking about Mitt Romney’s indolent moochers here. The dumb money could be your neighbor. Or you.”
The results have inspired calls for financial literacy programs starting even in elementary school, but let’s get real. From the looks of things, school administrators don’t even have the resources for plain-vanilla literacy programs, let alone special classes in personal investing.
An alternative to new programs: At least get the public smarter about avoiding fraud. I have some ideas about that that you can read here.