The British Columbia Securities (BCSC) has launched two new calculators on its investor education website, InvestRight.org, as part of its Investor Education Month activities, the BCSC announced Monday.
The BCSC developed a return on investment calculator after conducting survey research that demonstrated that the return on investment (ROI) calculation can be difficult for people to understand.
The commission conducted an online study of 300 B.C. residents’ understanding of ROI, asking survey respondents to make calculations based on two questions – a relatively straightforward question and a slightly more complicated one. The survey identified that an “overconfidence gap” significantly widened when respondents answered the more complicated question.
At the outset, the survey asked respondents about their comprehension of ROI, and 86% of respondents indicated a degree of comfort with the concept.
When asked to calculate the first question, 79% of respondents answered correctly — an overconfidence gap of 7%. Only 23% of respondents answered the second question correctly, increasing the overconfidence gap significantly to 63%.
“We are seeing from this data and our overall experience that investors need tools to help them understand important investing concepts,” says Pamela McDonald, BCSC director of communications and education, in a statement.
The commission’s investment growth calculator shows investors how investment contributions can grow over 20 years. Visitors can choose a portfolio size and see how two different amounts grow. The calculator uses a conservative rate of return to demonstrate that investing on regular basis can increase savings over time through compounding returns.
“The launch of these two calculators and other improvements to InvestRight.org are part of our ongoing efforts to improve investing literacy in British Columbia so that investors can have the best investment outcomes,” McDonald adds.