The National Association of Securities Dealers announced the establishment of the NASD Investor Education Foundation, whose mission will be to provide investors with high-quality, easily accessible information and tools to better understand investing and the markets.

The foundation was established in the wake of a survey which showed how poorly educated many investors are around basic investment matters. The survey, conducted on NASD’s behalf by Applied Research & Consulting LLC, asked 1,086 investors more than 50 basic and intermediate questions about investing in stocks, bonds and mutual funds.

Among the key findings of the survey: 97% of investors realize they need to be better informed about investing, and nearly half of the participants said they could have avoided a negative experience had they known more about investing; nearly 50% thought stock market losses were insured; 70% of investors failed to understand that when you buy on margin, you can lose all of your investment even if the value of your shares does not go to zero; and, nearly 80% did not understand fully the meaning of “no load” mutual funds.

The findings of the survey can be viewed at www.nasdr.com/pdf-text/surveyexecsum.pdf.

“Our 2003 Investor Survey shows that investors realize they need to be better educated about both basic investing and the different investing products available to them,” said NASD chairman and CEO Robert Glauber. “Investors want and need this information and, at NASD, we recognize a responsibility to help meet that need as part of our mission.”

The Foundation, which will have an initial endowment of US$10 million, is a response to both the current environment in the markets and the survey. Grants from the Foundation will be used solely to fund educational programs, materials and research aimed at segments of the investing public who could benefit from additional resources.

“NASD has long been committed to investor education. Our investment in the Foundation makes that commitment clear and responds to a desire by investors for information that can help them create a more secure future for themselves and their families,” Glauber said.

“The market bubble and the aftermath, including some of the current misdeeds in the sale of mutual funds, have clearly shown that the more objective information investors have about investing, the better.

The investor survey was conducted in the spring of 2003. Of the 55 questions posed, 10 were basic financial literacy questions. Only 35% of investors scored a passing grade on this survey, which required correct answers to at least 7 of the 10 financial literacy questions.

The survey showed better investor education is especially important for lower-income investors, younger people, and women. Only 24% of investors between the ages of 21 and 29 scored a passing grade, as opposed to 45% of investors age 50 and over; only 23% of investors with household incomes of $50,000 or less scored a passing grade, as opposed to 51% of investors with income of $100,000 or more; and, only 25% of women scored a passing grade, as opposed to 46% of men.