How strong is your investment product knowledge?

By Vanguard

Investing strategy

Most Australians are not confident in making financial decisions

With high home ownership levels, and the trillions of dollars being held in superannuation accounts and other assets, Australia could be regarded as a nation of investors.

Yet, when it comes to investment knowledge, numbers can be deceiving.

Despite rising levels of income and wealth in Australia, it’s evident that many Australians remain unfamiliar with financial products and services and lack confidence in making financial decisions.

Many Australians still appear to be lacking in knowledge around financial securities.

That’s one of the key findings from Vanguard’s recently released How Australia Retires 2025 report, which delves into financial literacy levels and the persistent gaps in knowledge that are impacting the confidence of Australians both before and during retirement.

To put this to the test, we asked a nationally representative sample of over 1,800 Australians aged 18 years and over how confident they felt in their understanding of a range of readily available financial products and services.

The results are shown in the chart below:

Australians’ confidence managing financial products and services

Key findings

When it comes to managing finances in general, only 37% of Australians are very confident or extremely confident in making financial decisions.

Australians were most confident in understanding savings and deposit accounts (57% very or extremely confident). That accords with Vanguard’s Core Components of a Successful Retail Investment System report released in July, which identified that Australia is one of only a handful of leading OECD countries where there is more money being held in savings accounts than in capital market investments. The research found that $185 billion in excess cash savings could potentially be unlocked in Australia and invested into capital markets based on further improvements to the investment landscape outside of superannuation.
However, many Australians still appear to be lacking in knowledge around financial securities. The latest retirement research found those surveyed were less confident in their understanding of investment products such as shares (only 21% are very or extremely confident), managed funds (18%), exchange traded funds (15%) and bonds (11%).
Only 35% of those surveyed were very or extremely confident in their understanding of superannuation products. Given the central role of superannuation in retirement planning, this is a concern.
In addition, only about 35% of those surveyed were very or extremely confident in their understanding of mortgages and personal loans. This is surprising given the high proportion of Australian household wealth held in property.

To learn more about the How Australia Retires research, click here. The latest edition includes our SmartRetire quiz, designed to provide clear, practical steps to increase your retirement confidence.

Vanguard’s Core Components of a Successful Retail Investment System report recommended that policymakers develop targeted, research-based national financial literacy plans to build consumer confidence in investing.

Regular national research is essential to understand issues, track progress, and identify effective interventions.

^{Important Information}

^{Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) (VIA) is the product issuer and operator of Vanguard Personal Investor and Vanguard ETFs and managed funds. Vanguard Super Pty Ltd (ABN 73 643 614 386 / AFS Licence 526270) (the Trustee) is the trustee and product issuer of Vanguard Super (ABN 27 923 449 966).}

^{The Trustee has contracted with VIA to provide some services for Vanguard Super. Any general advice is provided by VIA. The Trustee and VIA are both wholly owned subsidiaries of The Vanguard Group, Inc (collectively, “Vanguard”).}

^{We have not taken your objectives, financial situation or needs into account when preparing this article so it may not be applicable to the particular situation you are considering. You should consider your objectives, financial situation or needs, and the disclosure documents for the product before making any investment decision. Before you make any financial decision regarding the product, you should seek professional advice from a suitably qualified adviser. A copy of the Target Market Determinations (TMD) for Vanguard’s financial products can be obtained on our website free of charge, which includes a description of who the financial product is appropriate for. You should refer to the TMD of the product before making any investment decisions. You can access our Investor Directed Portfolio Service (IDPS) Guide, Product Disclosure Statements (PDS), Prospectus and TMD at vanguard.com.au and Vanguard Super SaveSmart and TMD at vanguard.com.au/super or by calling 1300 655 101. Past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance.}

^{This article was prepared in good faith and we accept no liability for any errors or omissions.}