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Younger investors are flocking to the stock market, but are they truly prepared? Regulators have… [+] resources that can assist them in learning to invest and avoiding frauds.
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One of the trends that arose during the COVID-19 pandemic is the rise in the number of new, young investors, fueled by easy-to-use investment applications and innovations like stock slices, which allow you to buy a portion of a high-priced stock rather than the entire share.
They’ve entered the stock market, but are they truly prepared?
While applications can entice young people to invest, it is not a game. But it’s a competition in a sense, in which you utilize your expertise and intelligence to expand your money. To have the best chance of succeeding, you must have a thorough understanding of financial markets and investment.
Unpreparedness or a lack of crucial abilities can lead to financial disaster, which is a difficult way to learn important lessons, particularly at a young age. Consider where a young investor could learn not only how to invest, but also how to avoid being duped.
What better way to learn than through fun games and quizzes created by regulators like FINRA (Financial Industry Regulatory Authority)? The brokerage industry is regulated by FINRA.
Every resource I’ll explore with you today has the potential to pique the curiosity of young people. There is no need to read a textbook. There are no homework assignments in this course. There are no grades. Instead, there are simple, interactive materials that entertain rather than boring… just some good old-fashioned investment knowledge.
I recommend beginning with an interactive program that allows the young investor to quickly check his or her understanding. You can find out what you know about investing – and, more crucially, what you don’t know – by taking the Investor Knowledge Quiz. “All investors should have access to basic instructional material about investing,” according to FINRA. The right answers are explained in detail throughout the quiz.
ADDITIONAL INFORMATION FOR YOU
Here’s an example of a question:
You put down $500 and borrow $1,000 to buy stock on margin. The stock’s value plummets by 50 percent. You are the one who sells it. After all is said and done, how much of your original $500 investment do you have left?
1. A $500 investment
2. $1000
3. 0 $
4. I’m not sure/I’m not sure
Answer: Buying stock on margin exposes you to the danger of losing your entire investment, or much more. In this case, an investor used $500 to acquire $1,000 worth of shares, with the remaining $500 borrowed from a brokerage business. When the stock was sold after losing 50% of its value, it only had a value of $500, which was the same amount the investor owed the brokerage business for the margin loan. Read our Investor Alert Investing with Borrowed Funds: The Hazards of Margin Trading to learn more about the risks of margin trading. Error has no “Margin.”
Please do me a favor after you’ve completed the quiz: Take a moment to visit Finra.org’s Learn to Invest section, which contains a Young Adults and Investing part. Take a look around. A variety of very short, focused, and interactive courses are among the resources, and you may test them out in no time by clicking on the quick courses link. Even those with limited attention spans will reap significant benefits. “Worth Holding On To?” for example, helps you rapidly comprehend and evaluate an investment’s rate of return by walking you through how it is calculated, allowing you to compare one investment’s performance to another.
Risk Calculator
Then go to the FINRA Risk Meter. You’ll find out if you “share qualities and behavior features that have been demonstrated to make some investors prone to investment fraud” by answering 12 questions. Everyone should test oneself for three to five minutes. After you’ve completed the fast questionnaire, you’ll receive a report that grades you on whether your personality and habits make you vulnerable to fraud. The Risk Meter’s report will provide you with information about yourself that is both informative and useful.
Scam Detector
Take FINRA’s Scam Meter, a four-question (yes, only four) quiz if you’re thinking about investing. You must have a specific investment in mind to use the scam meter. Make this a challenge for the young people in your household, and put yourself to the test. You can print the findings, which include an explanation for each of your responses.
If You Can, Con ‘Em
The FINRA Investor Education Foundation and Commonwealth, a national nonprofit that strives to promote opportunities and security for financially disadvantaged people, collaborated on a fun strategy game called “Con ‘Em If You Can.” The game’s goal is to teach players how to recognize and avoid investment fraud. It can be found here.
Young investors with little expertise have a knowledge gap when it comes to investing. There’s a reason for this. Years of experience are required to learn how to invest and even to know what you don’t know.
A recent FINRA Education Foundation study looked into the world of investors to assess their knowledge and discovered there is much for those new to the field to learn — enough to fuel a new effort by the FINRA Foundation to address the apparent knowledge gap and help up-and-coming investors avoid egregious mistakes.
The FINRA Foundation and the University of Chicago’s NORC performed a study titled “Investing 2020: New Accounts and the People Who Opened Them” earlier this year. New investors were defined as individuals who “established one or more non-retirement investment account(s) during 2020 and did not own a taxable investment account at any point prior to 2020,” according to the report.
Among the findings were that more than 60% of new investors were under the age of 45, with 22% of new investors being between the ages of 18 and 29.
When asked to rate their own financial knowledge, 50% of new investors stated they were average, while 38% indicated their knowledge was poor or nonexistent.
Only 1.4 out of 5 questions measuring investor knowledge were answered correctly on average by new investors.

These findings, together with those from a 2019 FINRA Foundation poll, which found that investor knowledge in the United States is poor among all investors, provide statistical support for FINRA’s new multiyear, multidimensional $30 million strategy. “It is vital that newer investors understand both the rewards and hazards of participation in the financial markets,” stated Robert Cook, president and CEO of FINRA and chair of the FINRA Foundation.
The public is involved in the first phase of the project, which runs from now until August 30, 2021. FINRA is looking for feedback on ten questions related to educational activities. If you want to leave a remark, take a look at the questions here, where you’ll also find instructions on how to do so. You can also view the comments that have already been left.
A complete program “aimed at teaching this rapidly-growing population of inexperienced retail investors who are utilizing developments in technology to enter U.S. securities markets” will be offered in the second phase.
FINRA should be commended for taking on this vital endeavor. Everyone who invests will profit.
If you have any investment-related inquiries, please contact me at forbes@juliejason.com. Mention that you are a Forbes.com reader and include your city and state. While it is impossible to respond to all questions, each email is read and reviewed. Follow me on the Forbes.com site to stay up to date on the issues I cover./nRead More

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