Investors across the globe are confident in their own knowledge of investments and are also keen to improve this knowledge, but majority of them are unable to identify correctly what an investment management company does, according to the Schroders Global Investor Study 2016.
Of the 20,000 investors surveyed in 28 countries, 87% felt that their knowledge of investments is average or above that of the average investor. Sixty one percent of investors in the millennial group held this view, compared to only 45% of older investors.
However, only 37% of investors worldwide correctly identified what an investment management company does. Only 32% in the millennial group could correctly identify the right definition, compared to 41% of older investors.
Financial advisors are still considered to play an integral role in the investment decision-making process for all investors, the study highlighted.
In this regard, 51% of millennials said they would consult a financial advisor the next time for making an investment decision, compared to 49% of older investors. For making investment decisions, millennials are also more likely to look to online sources such as independent websites, investment management websites, or investment provider websites.
The study further revealed investors' keenness to learn more, with 89% seeking more knowledge to enhance understanding of investment.
Also, women were found to be more likely to admit a less than average understanding of investments, with the view admitted by 18% of women compared with only 11% of men. Moreover, keenness to gain more knowledge about knowledge was evident in 91% of women compared to 88% of men.
Schroders head of public policy Sheila Nicoll said: “The study found that investors tend to be overconfident in their own understanding of investments. This combined with other findings, that investors are unrealistic about the income that they can expect from their investments, means they risk missing their future financial targets.
"The fact that consumers are increasingly being expected to take responsibility for their future financial wellbeing creates an ever more pressing need for them to be engaged and better informed.”