A new study by the Canadian Securities Administrators finds that investors understand the importance of being informed, but they often fail to practice what they preach, leaving them more vulnerable to unsuitable or illegitimate investment opportunities.

According to the study, Canadians also seem to understand the importance of investing and the value of investor education. The majority of the respondents (72%) are saving or investing for their future, mostly in RRSP or pension plans. More than half of the respondents understood the importance of key concepts like diversification (64%) when making financial decisions.

However, other results show that knowledge is not being put into practice: most (88%) believe a financial plan is important, but over half (58%) don’t have one; 92% agreed on the importance of conducting independent research before investing, but 49% did not personally research their most recent investment, and of those 72% bought the investment solely on the advice of their financial adviser; 51% feel confident in their financial investing decisions, and 64% report they are confident about where to go when checking out investment opportunities, yet they have mixed performance when it comes to understanding fundamental concepts (such as risk tolerance).

Also, one-in-three respondents report having been approached with a fraudulent investment opportunity. While 86% understand that suspicious investment opportunities should be reported, only 14% actually do so. Despite this experience with fraud, just over half (51%) of the respondents believe they are just as likely to be a victim of investment fraud as anyone else, while 47% believe fraud is a common occurrence. Canadians feel that investor education and banning rule-breakers should be high priorities for regulators.

These are just some of the findings of the CSA Investor Index, which is being released to mark the launch of Investor Education Month. “For the first time, we have a tool that sets out how to effectively measure the overall attitudes and behaviours of investors across Canada on a regular basis,” says Jean St-Gelais, chair of the CSA. “Our plan is to use this information to identify the critical knowledge gaps and address them in a way that helps Canadians become more engaged, informed and educated investors.”

In addition, the study highlights differences in some of the regional data across Canada.

The CSA Investor Index is a mixed methodology study combining a random digit dialing telephone study with an in-depth online study. A 2,000 person telephone study was used to provide an incident rate for weighting purposes of Canadians’ investing profile. The online study was used to develop a profile of Canadian investor segments, as well as to provide a large sample of Canadians who have actually experienced fraud.

The online survey was conducted by Innovative Research Group Inc. between August 10 and August 31. Results from the survey are based on 5,568 completed online interviews of Canadians, 18 years of age or older. The results are considered accurate to within ±1.79 percentage points, 19 times out of 20.