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Investing your hard-earned money in the stock market can be a nerve-racking decision. This is especially true considering the market fluctuations investors have absorbed in the past few decades like The Great Recession and the economic uncertainty in the past year.
It doesn’t help that investing advice seems to be everywhere, but it’s hard to decipher which advice to take. It’s no wonder that 91% of investors tell us that when researching a new investment, they can’t find the information they need to get started.
To better understand investors’ knowledge, habits, and what they’re most concerned with right now, we asked a group of 800 individuals familiar with investing to tell us:
- What their motivations are for investing
- How much they plan to invest
- How confident they feel about investing
- How knowledgeable they feel about investing
The results help paint a portrait of investing in 2021, which we detail below.
Does your investment perspective match up to this group? Keep reading to find out.
Key Findings from Our Investor Knowledge and Habits Survey
- Investors want to grow their net worth. While investors reported many reasons for investing in 2021, the most popular reason was to grow their net worth.
- Younger respondents want to invest. Respondents in the youngest age group we surveyed are willing to invest the highest percentage of their money compared to other age groups.
- More schooling equals more investing. Respondents with more education were more likely to invest a higher percentage of their income.
- Investors trust their financial advisors. When we asked respondents where they found investing advice, a majority said their financial advisor.
- Most investors regard investing as “somewhat risky”. Regardless of age, education, or income, investors reported a healthy appreciation for the risks of investing.
- Investors are embracing mutual funds. Our survey finds that investors are most likely to invest in mutual funds over the next five years.
- Over half of our respondents don’t feel fully prepared for retirement. More than 50% of respondents noted that they are only “somewhat prepared” or “not prepared at all” for retirement.
Keep reading to learn more about all 12 of our big survey takeaways.
Our Survey Methodology
We surveyed 800 anonymous individuals who self-identified as having knowledge and/or experience with investing. Our survey was conducted online and limited to the United States and participants were not affiliated with Money Morning.
Survey participants were separated into the following categories and results were rounded to the nearest percent:
- Female: 54%
- Male: 46%
- Age 18 - 24: 10%
- Age 25 - 34: 29%
- Age 35 - 44: 31%
- Age 45 - 54: 14%
- Age 54+: 16%
1. Growing Net Worth Is the Most Popular Reason to Invest
Why do investors decide to invest in the first place? Out of the eight options provided, the most popular response was “to grow my net worth.” In fact, 28% of respondents chose this reason.
Another significant driver behind investing is to save for retirement, with 26% of respondents choosing this option. The final major reason respondents gave was to establish additional sources of income.
Based on these results, it’s clear that investors are willing to accept the risks of the stock market in exchange for the opportunity to grow their savings and meet their retirement goals. Other investors appreciate investments that may expand their income streams.
2. Investors Aren’t Motivated by Being Part of a New Venture
Motivations for investing changed depending on age. For instance, respondents age 45 or older are more focused on saving for retirement, while younger investors are excited to grow their money. In fact, the younger the respondents, the more focused on growing their net worth.
But there was one thing all age groups seemed to agree on: two of the lowest ranking reasons to invest were “to be part of a new venture” and “to support others.”
It seems like these investors prefer to invest with a more established strategy and prefer to support businesses in other ways than direct investments.
3. Gen Z Is More Likely to Invest a Larger Portion of Their Income Than Other Age Groups
Generation Z, or those born after 1996 according to the Pew Research Center, seem to have the biggest appetite for investing—at least when it comes to the proportion of their income they invest.
Gen Z is a vibrant and diverse cohort that came of age after the Great Recession when the economy grew considerably. Could this be the reason for their rosy economic outlook? Or is it simply the fact that as Gen Z begins entering the workforce, even small investments tend to represent a larger share of their starting salaries and incomes?
Either way, 10% of the Gen Z respondents are investing 21% or more of their income. This compares with just an average of 6% for their Millennial counterparts who graduated right into the Great Recession, and between 4% and 5% for the rest of the age groups we surveyed.
4. People with Higher Education Levels Are More Likely to Invest Larger Portions of Their Income
According to our survey, the higher your education, the greater percentage of your income you are likely to invest.
Investors with post-graduate degrees invest 6% to 10% of their income on average, while those with a high school education or less only invest 1% to 5% of their income.
This discrepancy may be related to the fact that greater levels of education correlate with higher income and more wealth. According to the Federal Reserve Bank of St. Louis, families without a high school diploma earned a median income of $22,230 in 2013. Compare that to families with an advanced degree, which enjoyed a median income of $116,265 in the same year. Individuals with greater wealth can usually afford to invest more.
With this in mind, we know education level does not determine one's success in the market. Anyone can make money and grow their wealth to meet their goals.
5. Income Doesn’t Necessarily Correlate with How Much Investors Are Willing to Invest
It may seem like common sense that investors with the highest income would be willing to invest the highest percentage of their money. After all, they likely have the most money after expenses to put into the stock market, mutual funds, and other investments.
However, our survey data found that the highest earners—those making $150,000 or more per year—reported investing 6% to 10% of their income. That’s the same percentage as respondents earning $50,000 to $74,999 per year.
So while it's not surprising that higher earners tend to put more money into investing, it may be news that the percentage of their salary they're investing is the same as lower earners.
6. 27% of Investors Turn to Their Financial Advisor for Investment Advice
How are most investors receiving financial advice? Our survey tells us that 27% of investors report seeking the wisdom of a financial advisor. A large proportion of respondents, 26%, also turn to their family and friends. Financial publications and internet searches also featured in the decision process of over 35% of respondents.
Our survey suggests that investors use multiple sources before making their investment decisions but that they trust those in their circle as well as financial professionals. It’s notable to see which sources didn’t rank high. Aside from the “other” category, the least chosen option was “brokers.”
It’s not too surprising that the youngest investors we surveyed, those ages 18 to 34, relied more heavily on their friends and family for investment advice than a financial advisor. They were also more likely to perform internet searches to hunt for good investing information.
7. Age and Education Don’t Affect Risk Perception
It’s common knowledge that investments aren’t risk-free, but how do investors perceive the risk of putting their money in investment vehicles, like mutual funds or bonds? Does age or education level affect risk?
Our data doesn’t show a correlation between the perceived risk of investing with age or education. Over half of our respondents considered investing “somewhat risky” while 15% of respondents pegged investing at “extremely risky.” Just under 10% of respondents believed that investing was “not risky” at all.
Men and women do seem to perceive investment risk a little differently, with women being slightly more risk-averse. For example, 16% of female respondents described investing as “extremely risky” compared to 14% of men. Nine percent of male respondents considered investments not risky, compared to just 5% of women.
8. People Earning $125,000 or More per Year Feel the Most Knowledgeable About Investing
Which survey respondents feel like they are investing masterminds? Is it the investors who earn the most income? Perhaps it isn’t too surprising that the answer is “yes.”
Among investors earning $125,000 or more per year, over 40% of respondents considered themselves “extremely knowledgeable” when it comes to investing. For those earning less than $125,000 per year, they were most likely to describe themselves as “somewhat knowledgeable” about investing.
Men were over twice as likely to consider themselves “extremely knowledgeable” about investing compared to women (24% compared to 11%), while younger investors had more confidence in their investment prowess than their older counterparts.
Nearly 20% of respondents ages 18 to 44 considered themselves extremely knowledgeable about investing, while only a little over 10% of investors age 45 and older shared their confidence.
9. Mutual Funds Are Predicted to Be the Most Popular Investment Over the Next Five Years
Investors have a lot of choices when it comes time to decide where to put their money. As they look into the future and try to predict the best investment bets for the next five years, where did our respondents decide to invest?
The strong winner was mutual funds.
Over 27% of respondents plan to or are already investing in mutual funds. The closest runner-up was bonds, with smaller percentages of investors choosing dividends and real estate investment trusts (REITs) as their preferred investments. Interestingly, nearly 10% of our respondents weren’t sure where they planned to put their investments over the next few years.
Mutual funds are a perennial favorite investment option. They can invest across different industries and sectors, allowing investors to better balance their portfolios or to focus on specific types of investments. Bonds are a great option to balance out risk, especially for older investors who need to keep retirement funds safe.
10. 74% of Respondents Wish They Were More Engaged in Their Finances
Do you wish you had more time to spend analyzing, choosing, and monitoring your investments? You’re not alone.
Nearly three-quarters of our 800 respondents told us that they wished they could be more engaged in their finances.
Interestingly, investors age 54 and older had the least worries about engaging in their investments. Over 30% of older investors didn’t have any wish to spend more time with their investments.
11. “Smart,” “Responsible,” and “Valuable” Are the Words Most Associated with Investing
When you think of investing, what words come to mind? According to our survey respondents, the top three words were:
- Smart (22%)
- Responsible (18%)
- Valuable (17%)
It’s probably not surprising that those already active in investing equate the activity with strongly positive adjectives. Everyone wants to think of themselves as smart and responsible, especially where their money is concerned.
The words least associated with investing, according to our survey respondents, were:
- Overwhelming (5%)
- Confusing (5%)
- Hard (6%)
These results are good news. It means the majority of investors, or at least those who answered our survey, feel confident and positive about investing. To them, investing is an empowering action that can help them achieve their financial goals.
Of course, it’s important not to overlook the fact that 15% of respondents described investing as “risky” while 12% considered it “necessary.” That implies that while not everyone enjoys investing or feels comfortable with it, they still feel pressure to invest to improve their financial situation.
12. Almost 20% of Respondents Don’t Feel Prepared for Retirement
The first question we asked in our survey was what motivated our respondents to invest. One of the most popular answers was to save for retirement (25% of respondents). So, how prepared did our survey respondents feel for retirement?
Shockingly, nearly 20% of our survey respondents admitted that they’re “not prepared at all” for retirement. Another 35% told us that they feel only somewhat prepared. Only 37% of our respondents considered themselves “on track” or “very prepared” for retirement.
These results match up with similar surveys. For example, Yahoo Finance reported in 2019 that 64% of Americans aren’t prepared for retirement.
It’s discouraging to consider that over 50% of our respondents who describe themselves as being knowledgeable and/or experienced in investing are still not on track with their retirement savings. It shows that many of us need to work harder and smarter to save and invest for the future.
Follow the Investing Experts at Money Morning
One of the biggest takeaways from our survey was that so few investors feel they are on track with their retirement savings.
We were also surprised to discover that nearly 35% of our respondents described themselves as only "moderately knowledgeable" or "not very knowledgeable" about investing.
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