Many investors have a limited understanding of basic investing principles, including the assessment of risk and importance of diversification, according to survey results from AMG Funds.
AMG Funds released new findings from its annual investor survey, which polled 1,000 individual investors with over $250,000 in household investable assets.
“Our study highlights the ongoing need for professional financial advice, even though investors may not fully recognize its worth,” Jeffrey T. Cerutti, CEO of AMG Funds, said in a statement. “Given the proliferation of investment options along with evolving technology, financial advisors must demonstrate the value to investors of working with a qualified professional. To that end, they should make a concerted effort to educate current and prospective clients on managing their portfolio toward financial goals, including how to best manage risk and utilize diversification, as well as optimal asset class allocations.”
Seventy-three percent of investors surveyed had a financial advisor. However, the survey also finds that there is “substantial room for improvement” in investors’ financial IQ.
While more than half of surveyed investors have primary investment goals that require diversification and risk management to succeed, the survey finds that only 9% of survey respondents could correctly identify market risk measures. In addition, fewer than 10% of investors surveyed identified beta and/or standard deviation as risk measurement tools.