Beginning March 29: To help insurance agents and financial advisors like you guide clients in making critical wealth, health and life decisions we will be moving our coverage from to

Our comprehensive coverage will help you expand your knowledge base and adapt a new client-centric approach that incorporates both insurance and investment solutions.

ThinkAdvisor’s new Life/Health channel is your roadmap to thriving in a disrupted environment.


Filed Under:Life Insurance, Life Planning Strategies

Few investors excel in financial literacy quiz

One in five investors scored high enough to earn a 'B,' in the investor literacy quiz, but nearly half earned a failing grade.
One in five investors scored high enough to earn a 'B,' in the investor literacy quiz, but nearly half earned a failing grade.

Just 11 percent of investors scored an 'A' on an eight-question investment literacy quiz, according to a new survey.

John Hancock discloses this finding in an Investor Sentiment Survey that polled 1,078 investors about their views of the current economic climate and what represents a good or bad investment given market conditions. Conducted by independent research firm Greenwald & Associates, the poll also asked consumers about their confidence in reaching key financial goals and likelihood of purchasing financial products and services. 

One in five of the investors surveyed (20 percent) scored high enough to earn a 'B' in the investor literacy quiz, but nearly half earned a failing grade, with 22 percent receiving a 'D' and 23 percent receiving an 'F,' John Hancock reports.

Investors were able to select correct answers to questions about financial concepts or product definitions, but most exhibited significant knowledge gaps. When it came to correctly answering a question about an optimal retirement savings strategy, knowledge declined further, with only 37 percent able to choose the correct answer.   

Almost all investors surveyed (94 percent) properly identified the definition of asset allocation as:  "A method of assigning your financial contributions to different risk classes of investments." Dollar cost-averaging was also widely understood (85 percent) as: "When you purchase the same dollar amount of investments each month so when share prices are low you get more shares, and when share prices are high you get fewer shares."

However, when asked about the objective of index funds, which "Seek to match the investment returns of a specified stock or bond benchmark," only about six in ten were able to answer correctly. And only 62 percent understand that the price of a bond or bond fund decreases as interest rates rise.

Investors are clear about the tax treatment of Roth IRAs, with three-fourths stating that a Roth IRA is purchased with after-tax dollars. Seventy-seven percent correctly stated that term life insurance is less likely to have cash value than permanent life insurance. Most investors (73 percent) believe, correctly, that stocks have generated the best average returns over the last 20 years.

However, investors struggled in determining the better retirement savings strategy when asked to choose between saving "$1,000 per year from age 35 to 65 in an account earning eight percent interest" and saving "$1,000 per year from age 25 to 35 in an account earning eight percent a year and then stopping saving."

Nearly four in ten were able to choose the second alternative as the better strategy. Almost half said the first choice was correct, and 16 percent said the two strategies were the same.

Featured Video

Most Recent Videos

Behind the scenes with Vicki Gunvalson [VIDEO]


In this exclusive interview, Vicki Gunvalson shares how she built a $15 million a year annuity business by planning for...

Regulator: Market may need to reinvent LTCI


Cioppa says Maine's governor wants to spur the creation of better products.

Dementia: It's more than Alzheimer's


An association calls for policymakers to remember lesser-known neurodegenerative conditions.

Protesters Disrupt WellPoint Annual Meeting


Hecklers call for more disclosures of information about political contributions.

Related resources

More Resources


Power your business with up-to-the-minute insurance news, analysis, and best practices from LifeHealthPro Daily eNewsletter – FREE.

Power your business with LifeHealthPro Daily eNewsletter – FREE.

Enter a valid email address.
Nichole Morford

Nichole Morford
Managing Editor

Thank you for subscribing to LifeHealthPro Daily!

Check Out More eNewsletters Now! Close

Advertisement. Closing in 15 seconds.