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Gauging Investors’ Stock Market Knowledge [Survey]
GamblersPick posted a post in BlogKey Takeaways Women scored higher than men when quizzed on stock market basics. 83% of respondents incorrectly defined short selling. The average respondent score on our stock market quiz was 49%, a failing grade. Swathes of new investors have entered the stock market since the pandemic, with first-timers now making up 15% of all retail investors. This is due in part to new apps like Robinhood and Acorn enabling investors to begin with as little as one dollar, while the GameStop phenomenon inspired a frenzy of people to join the investing game. But how much do these newbies know? How much do all investors really know? We spoke to more than 1,000 people who have invested at least once to find out. Investors were asked to rate their own knowledge, which was then put to the test. After asking people basic questions related to the stock market, we were able to see how all types of investors performed. Average scores were broken down by everything from gender and generation to whether participants invested in crypto. We also found out the answers that investors most frequently got wrong. Keep reading to discover our results. Top Portfolio Choices Our study first asked respondents to share what they've invested in. We looked at the top stocks and digital currencies and compared answers by generation. We also asked them to rate their own stock market knowledge before taking the quiz. GameStop was the most popular stock for our respondents in the last six months. A third of investors had put their money on this company, which is actually seeing another financial rally at the time of writing. The second most popular choice was another "meme stock," BlackBerry, which is also up this past month. Even generationally, GameStop and BlackBerry were among the three most popular investments for baby boomers, Gen Xers, and millennials alike. Where cryptocurrencies were concerned, Bitcoin was the most popular by far. Seventy percent of digital investors had invested in Bitcoin, compared to only 39% who invested in Litecoin, the next most popular coin. Only a small 3% invested in coins other than the top 11 options listed. Before taking the exam, most respondents rated their stock market knowledge as average (38.9%) or even above average (31.5%). Only 8.3% were able to admit that their knowledge was below average. As we'll see in the coming research, these responses were falsely optimistic. Investment Knowledge Scores Moving onto the quiz, the next section of our study looks at average scores across all respondents, then breaks those scores down by gender, generation, and crypto ownership. We even compared scores with how each person assessed their knowledge beforehand. Men and women were pretty much neck and neck, although women won the day with an average score of 51.4% in comparison to an average of 50.4% for men. Scores were also not so different among people who said they took the stock market very seriously versus those who were not at all serious about it. In fact, those who took it very seriously actually fared slightly worse than other respondents. What made the real difference was whether or not a person owned cryptocurrencies. Those who did not performed much better with a score of 63.5% than those who did (44.8%). This could be because cryptocurrencies tend to appeal to younger, and therefore less experienced, investors or because crypto investors are opting out of the traditional stock market altogether and have no interest in gaining stock market knowledge. A person's opinion on whether or not the stock market was akin to gambling also seemed to affect how well they performed. Those who saw the process as gambling got only 44% of questions right, compared to 73% for those who saw the stock market as true investing –the highest score of any demographic breakdown. Perhaps it's a healthy love and respect for the stock market that improves knowledge most of all. Common Investment Knowledge Gaps Our study concludes with a look at the specific questions from the investment quiz that most people got wrong. The most common incorrect answers were also analyzed in terms of how much respondents had claimed to know about the stock market prior to taking the quiz. In spite of the short sell behind the GameStop frenzy, 83% of people could not properly identify the definition in a multiple choice question. Short selling refers to borrowing a share of a stock and then selling it. If the price does as anticipated, traders can rebuy the stock at a lower price and hold onto the difference. GameStop was one of the most heavily shorted stocks on Wall Street. And speaking of GameStop, most people couldn't identify the correct term for the abbreviation GME. GME is an example of a "ticker symbol," something that 73% of respondents did not know. More than half of investors couldn't properly explain what the "ask" and the "bid" were, either. For clarification, the "bid" price is the maximum amount that a buyer is willing to pay for a stock. The "ask," on the other hand, is the minimum price that a seller would take for that same stock. Another common knowledge gap was how to correctly define hedge funds, mutual funds, and exchange funds. Investing in Knowledge Ultimately, investment knowledge wasn't reserved for the elites or enthusiasts. Even those who claimed excellent understanding missed basic questions, while the vast majority of all investors failed to pass the test at all. That said, not everybody claimed to take the process seriously and may very well still be enjoying the fruits of their investment decisions. If you are looking to experience the fun of investing (or gambling, as many think of it), try using GamblersPick. Gamblerspick.com has all of the latest information on things like cryptocurrencies and recent jackpots. To get in on the action and expand your knowledge, head to Gamblerspick.com today. Methodology and Limitations This study uses survey data from 1,006 people who have some amount of money in the stock market. Responses were gathered using Amazon Mechanical Turk, where users were presented with a quiz-style survey followed by a variety of other survey questions, including an attention-check question. Of the respondents, 371 identified as women, 634 identified as men, and one individual identified as nonbinary. The survey included 99 baby boomers, 256 Gen Xers, 595 millennials, 34 Gen Zers, and 22 respondents from other generations. All data reported in the above survey rely on self-report, which can be subject to issues such as exaggeration, telescoping, and recency bias. Fair Use Statement If you feel like teaching the world a little something about investing, you're welcome to share the data in this article. Just be sure your purposes are noncommercial and that you link back to this page.
Cryptocurrencies 2021 Survey: Save or Spend?
GamblersPick posted a post in BlogExploring How Investors Are Managing Cryptocurrencies in Today's World [Survey] To save or to spend crypto? That is very much the question for many investors today. As they invest more, they are often forgoing other purchases – some of them essential. Many have even started to accumulate debt in order to buy more crypto or avoid selling it. In order to get to the bottom of what the cryptocurrency craze is really costing Americans, we spoke to 1,000 people on the topic. Crypto investors shared the amount they had, how they were financing the holding, and what they had given up in order to maintain the investment. Responses showed interesting differences across genders and generations. To see how different demographics and Americans as a whole are maintaining their crypto portfolios, keep reading. Trade-Offs for Holding On to Cryptocurrency The total cost of cryptocurrency is more than just a dollar amount. It also includes the cost of the things you can't afford to buy if you choose to keep your money invested. The first part of this study looks at how much cryptocurrency respondents are holding, on average, as well as the top things they're choosing to forgo paying for in order to hold on to that investment. Diamond hands are as expensive as they sound. On average, Americans reported currently holding $1,707 of cryptocurrency each but often admitted that they wouldn't touch that money even if a necessary bill or critical payment came up. More than 1 in 10 stopped saving for an emergency to buy crypto, while the same amount said they had skipped out on a purchase that would have genuinely improved their life. Millennials were the most likely to skip saving for their retirement or miss credit card payments to hold onto their existing crypto stashes. That said, the majority of credit card debt is currently held by Generation X, so perhaps millennials have slightly more wiggle room here. Baby boomers, though unlikely to take on debt for cryptocurrency, also had the highest average value already saved up. Affording More Cryptocurrency So how exactly did Americans come to own their roughly $1,700 worth of cryptocurrency? The next part of our study asked respondents how they purchased their crypto, how much they had to borrow, and what they plan on doing in the future to perhaps buy more. Cryptocurrency may well be one of the reasons that many Americans have credit card debt in the first place: 1 in 4 respondents said they purchased cryptocurrency with credit instead of cash. And, in spite of holding only $1,707 worth of crypto, respondents had borrowed nearly $500 more than that to afford it, whether from the bank or from friends and family. Twenty-one percent of respondents planned on accumulating consumer debt in the future to afford more cryptocurrency. The investment gender gap also appears to continue over from traditional investments into cryptocurrency. Men were planning to invest an average of $1,988 into cryptocurrency this upcoming year – $878 more than women. Men were also more likely to borrow in order to add more crypto to their personal rosters. However, while men were more likely to borrow in general, generational breakdowns show that Gen Xer and Baby boomer women had borrowed more on average than men of the same age. Reasons for Holding Respondents had clearly made some drastic financial decisions in order to stay involved with digital currencies. This part of our study asks about their reasons for doing so and the sources they were most commonly influenced by. People taking on debt or avoiding critical purchases may ultimately have the last laugh: Three-quarters of people holding on to cryptocurrency said they believed it has much more value to gain. About a third of respondents said they held on to their cryptocurrency simply to maintain a diverse portfolio. Decisions on how and when to invest were made mostly after consulting Reddit, with over a third of crypto holders getting their information there. While not all information on the site is verified, the world has recently seen the power that Reddit can have over the financial industry. The only source more influential was a single individual – Elon Musk –whose tweets have been known to impact Bitcoin greatly. In one instance, a tweet from Musk plummeted the price of Bitcoin to below $30,000 – a low for this fluctuating currency. Planning Ahead Looking forward, respondents had already laid out some cryptocurrency-related plans. Our study concludes with a look at their anticipated future actions and what they feel willing to sell in order to buy even more digital currency. On average, respondents planned on maintaining their crypto balances for another five years. That said, enormous increases in price would certainly sway a few to start selling. Overall, respondents agreed that a 61% price increase in bitcoin could cause them to sell. Baby boomers, however, had the highest threshold for selling: This generation wanted a 65% increase before they sold. Respondents were highly unwilling to sell all of their crypto, even in exchange for some pretty valuable things. Only a third said they would sell all of their crypto in exchange for a new home. Considering that the average house price in the U.S. is roughly $287,000, and the respondents we spoke to had fewer than $2,000 worth of crypto, this speaks to an incredibly high anticipated rate of return. Gen Z, however, had many respondents agreeing that they would get rid of all of their cryptocurrency if it would cover their student loan debt. Cryptocurrency Costs Respondents proved that there are more costs involved in investing in cryptocurrency than just the dollar amount. They were often investing in lieu of life-improving purchases, paying down credit card bills, or even covering medical expenses. Men and baby boomers were the most likely to borrow in order to continue financing crypto. In the future, most anticipated doubling down on aggressive decisions like these. Few would sell everything even for a new home or being able to quit their jobs. Of course, they felt their decisions were the right ones, as three-fourths said their primary motivation was an anticipation of a solid return on investment. For most, a 61% price increase would cause them to sell what they had. For others, diamond hands were the most valuable asset of all. Methodology and Limitations We surveyed 1,000 crypto investors on their behavior while investing. Among them, 60% were men, 39% were women, and 1% identified as nonbinary. For generational breakdowns, the sample sizes were: Baby boomers: 135 Generation X: 212 Millennials: 442 Generation Z: 206 Other: 5 For short, open-ended questions, outliers were removed. To help ensure that all respondents took our survey seriously, they were required to identify and correctly answer an attention-check question. These data rely on self-reporting by the respondents and are only exploratory. Issues with self-reported responses include, but aren't limited to, the following: exaggeration, selective memory, telescoping, attribution, and bias. All values are based on estimation. Fair Use Statement As the cryptocurrency conversation grows in pace and fervor, data-based information becomes more important than ever. If you or your followers would be interested in this type of information, you are welcome to share it. Just be sure your purposes are noncommercial and that you link back to this page.