TThe people have spoken, loud if not entirely clear, and they say they want to be educated about investments. My question is, what’s stopping them?
The amount and quality of investment education materials available today surpass anything I ever imagined. Among the best are those from the financial services industry.
“This amorphous thing, education, whatever it is, the public wants more of it,” said Hal Quinley, a partner with Yankelovich Partners in Claremont, Calif. His firm has been surveying investors for three years on their attitudes toward the securities industry. He has found their opinion has improved– 64 percent thought favorably of the industry this year, compared with 55 percent in 1996 and 1995.
But 81 percent of investors, up from 76 percent a year ago, said the industry needs to do more “to educate the public about how to make good investments.” Except the survey doesn’t make it clear what it is investors want.
“We don’t really know what it is,” said Quinley. “We need to do more research on this.”
I would tell Quinley the industry is doing quite a bit already, and determined to do a lot more. Arthur Levitt Jr., the chairman of the U.S. Securities and Exchange Commission, said as much in his annual speech at the Securities Industry Association meeting in South Florida this month.
Levitt is the top federal regulator watching over the industry, an outspoken advocate of investors’ rights. But he devoted much of his speech to singling out “examples of excellence,” things the industry is doing right. In the area of investor education, he identified the Royce and Kemper Zurich family of mutual funds and the municipal bond firm Lebenthal & Co.
Just as Levitt said he was, I am reluctant to single out a particular fund company or brokerage firm for fear readers will interpret it as an endorsement. But what the heck, if the SEC chairman can do it, why can’t I?
So I will single out:
– The Vanguard family of funds for a candor that is disarming and refreshing. Vanguard’s reports to shareholders don’t make excuses when a fund does poorly. When a fund does well, they invariably caution investors not to become overly exuberant.
And you get facts, not sales pitches. When I asked for Vanguard’s literature on its variable annuity, they sent me a questionnaire to first determine whether an annuity made sense for me.
– The T. Rowe Price family of funds, for a clearly written and highly informative free quarterly newsletter that gives shareholders more useful and unbiased information than many articles in the financial press do.
– The Third Avenue funds for the depth and quality of fund manager Martin J. Whitman’s report to shareholders: learned but entertaining discourses on the art and science of investing by one of the top money managers of our time.
– The brokerage firms of Dean Witter, Gruntal & Co., Merrill Lynch, and Smith Barney for putting on free investment seminars open to the public. I am sure there are others; these happen to be the ones I have attended recently.
I must confess, as a journalist, I went to these seminars looking for trouble, wanting to find some “hard sell” to expose in this column.
Instead, I found clear and well-articulated explanations of basic investing principles, such as asset allocation and diversification. I got a refresher course on fundamental stock analysis and a perspective of how markets are affected by economic conditions.
But I wonder, is this what the public wants? I have been struck that most people who attend these seminars ask only about stock picks. Just tell me what to buy, and its ticker symbol.
I hope that’s not what people mean when they say they want more investment education. I hope they mean they want to know more about identifying and prioritizing their financial objectives, about building a portfolio that fits their goals and tolerance for risk.
Unfortunately, the scant evidence I find doesn’t encourage me.
For example, one of the greatest tools for investment education today is the Internet, with literally hundreds of sites on the World Wide Web offering excellent information and time-tested advice. But most investors use computers mostly to look up stock quotes and see how their portfolios are doing. And to trade frantically, getting in and out of stocks at the click of a mouse.
Rather than stock quotes, I suggest investors look up the Securities Industry Association site (http://www.sia.com). There they will find clear and useful information on the basics of investing, understanding market risk and the most recent tax law changes.
The SIA also offers a book Levitt has praised and I strongly endorse, the 190-page, color-illustrated “Your Guide to Understanding Investing.” It is a thorough, plain-English guide to the world of investments. An excellent value at $15, it can be ordered by calling 888-654-7238.
———-
Humberto Cruz welcomes questions and comments from readers. Although he cannot respond to each one individually, he will answer questions of general interest in his column. Write to Mr. Cruz c/o Tribune Media Services, 435 N. Michigan Ave., Suite 1400, Chicago, Ill. 60611. Send e-mail messages to: HCruz5040aol.com.
