Few Canadian investors fully understand investment terms and concepts, according to the recently released Bridgehouse Investor Knowledge Index.
On average, survey respondents scored 39% on their investment knowledge. More specifically, while most Canadians understand the definition of bonds (70%) and equities (71%), few know that there are differences in how investment income is taxed. For example, only 43% of respondents were aware that interest income has the highest tax rate and only 24% understood that capital gains receive the most favourable tax treatment.
The survey released by Toronto-based Bridgehouse Asset Managers on Wednesday measured respondents’ understanding of investment terms and concepts, including the definitions of bonds, equities and active and passive management.
Study results also show that more than 62% of Canadians do not understand the difference between active and passive investing. Furthermore, the vast majority of investors (82%) believe there are still foreign content restrictions on their portfolios despite the federal government having lifted those limitations eight years ago.
While scores were low, most participants recognize the value of financial literacy with 72% saying they would like to learn more about investing and 93% of respondents stating they’d like the education system to cover basic investing and financial principles.
The survey is compiled of 1,004 online surveys of Canadians with investible assets of $25,000 or more. Toronto-based Environics Research Group conducted the research on behalf of Bridgehouse between October 23 and October 30, 2013.