Investor optimism about the stock market remained high despite the dramatic market volatility triggered by the COVID-19 pandemic during early 2020, with 20% of Americans indicating an increased interest in investing, according to research by the Finra Investor Education Foundation and NORC (formerly the National Opinion Research Center) at the University of Chicago.
Another research study by the two groups found low levels of investment knowledge, especially among African Americans and Hispanics.
In the first study, researchers found widespread awareness of the stock market volatility among investors and non-investors, but the survey respondents reported making few transactions as the market disruption unfolded.
Further, while four in 10 respondents reported a decrease in their willingness to take financial risk as a result of the market volatility, a comparison of their risk tolerance before and after the pandemic started showed very little change.
On a five-question section of the survey used to assess investing knowledge, African American and Hispanic/Latino investors scored significantly lower than white investors.
“A lack of investment knowledge may result in suboptimal investment decisions, especially during times of market disruptions,” said Gerri Walsh, president of the Finra Investor Education Foundation. “As new investors enter the stock market, it will be critical that they take advantage of unbiased educational resources to help them understand risks and manage market volatility.”
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