The 2012 Canadian Securities Administrators (CSA) Investor Index, released today, shows that the overall investment knowledge of Canadians is low and that investors are starting to turn to less conventional sources for investment information.
Gauging knowledge
Forty percent of those surveyed failed a general investment knowledge test. According to the findings, 57% of Canadians say they are confident when it comes to making investment decisions, yet most Canadians have unrealistic expectations of market returns. When asked what they think the annual rate of return on the average investment portfolio is today, only 12% of Canadians gave a realistic estimate. Thirty percent provided an unrealistic estimate, and 59% explicitly chose not to hazard a guess.
“Understanding key investment concepts, such as the relationship between risk and return, can help investors make suitable investment decisions,” says Bill Rice, chair of the CSA. “The CSA provides unbiased tools and resources to help investors learn more about investing and how to protect themselves from fraud.”
Reporting fraud
Almost 30% of Canadians surveyed believe they have been approached with an investment fraud at some point in their lives, but just 29% of that group said they reported the most recent occurrence to the authorities.
“Our research shows that Canadians continue to be approached with fraudulent investments and aren’t reporting it,” says Rice. “As securities regulators, enforcement is always a top priority for us, and to help us investigate investment fraud, we need to hear from those who have been affected. We encourage investors to report suspected fraudulent investments and to protect themselves by recognizing the warning signs of fraud.”
Social media as investment tool
New to the Investor Index this year was a series of questions to determine the use of blogs and other social media tools as a source of investment information. The findings confirm that social media is emerging as an investment tool, with more than one-third of Canadians saying they have used at least one social media platform as a source of information about investing.
However, traditional channels still dominate: the most common source of information about investing is finance professionals, and face-to-face meetings were deemed to be the most reliable source when making investment decisions.