From New York Magazine: Just in time for your Labor Day
vacation, the Securities and Exchange Commission has produced a spellbinding
story of what happens when normal people try to invest like Wall Street big
shots.
The masterpiece in question is "Study Regarding
Financial Literacy Among Investors", which was commissioned by the watchdog
agency in response to a Dodd-Frank mandate. And while a 182-page treatise on
financial literacy may not seem like beach-read material, it's very likely the
most darkly funny thing you'll read all year.
The basic story is that after the financial crisis,
lawmakers decided that one of the reasons the economy collapsed is that average
investors didn't understand the various stocks and bonds and mutual fund shares
they had bought. The resulting study,
released today, is amazing and depressing. Not only does it contain the world's
longest section titles ("The Most Useful and Understandable Relevant
Information that Retail Investors Need to Make Informed Financial Decisions
before Engaging a Financial Intermediary or Purchasing an Investment Product or
Service") but it sheds light on how little people know about the financial
products they own.
The SEC's conclusion is fairly straightforward: "U.S.
retail investors lack basic financial literacy ... have a weak grasp of
elementary financial concepts and lack critical knowledge of ways to avoid
investment fraud."
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