While research shows that people who are more financially literate invest their money at higher rates, those who also have greater confidence are more willing to make riskier investments, according to a University of Michigan study.
October 20, 2022
While research shows that people who are more financially literate invest their money at higher rates, those who also have greater confidence are more willing to make riskier investments, according to a University of Michigan study.
Set for publication in the November issue of Economic Modelling, the paper used data from the 2019 Survey of Consumer Finances to explore the relationship between investor financial literacy and confidence to determine which had a bigger impact on investor behavior.
The study found that people with both high financial literacy and high confidence in themselves and the economy are more likely to invest in stocks rather than lower-risk investments like bonds—creating more diverse portfolios as a result.
