It’s time for better investor education

I got my first taste of investing right after graduating from college, and boy, did I dislike it.

From barely knowing the difference between a stock and a bond, I moved straight to Ginnie Mae futures contracts for my Individual Retirement Account. Why? Well, I don’t know, other than a stockbroker friend convinced me it was a smart move.

One year later, I finally pulled the plug, but only after my retirement account was showing a loss. Yes, a rookie mistake, but one that shook my confidence in investing.

I waited two years before diving in again, this time through an employee stock purchase plan. To this day, I’m still chagrined that I lost two year’s worth of time to invest for the future.

Back in my college days, my parents never talked to me about investing. They didn’t invest, and I didn’t ask questions, leaving me behind the educational curve by the time I graduated from college.

Judging by what has happened this year, when many novice investors using online accounts and mobile apps jumped on stocks like GameStop and AMC and rode the ups and downs to spectacular heights and depths, investor education remains a big issue.

That’s why I’m encouraged by the recent announcement from the Financial Industry Regulatory Authority to explore new ways to reach and educate investors ages 18 and up.

The brokerage industry self-regulatory group said it plans to spend about $30 million to study and launch a program “aimed at educating this rapidly growing segment of novice retail investors who are leveraging advancements in technology” to play the stock market.

I don’t think it was any coincidence that FINRA’s announcement came on the heels of handing out a $70 million fine — its biggest ever — to Robinhood, the stock market trading platform, in part for allegedly letting too many inexperienced traders make high-risk trades without properly educating them. Robinhood claimed at the time that it was out to “democratize finance.”

Earlier this year, FINRA released a survey that found that investor knowledge in the United States is low among all investors globally, and that new investors had “lower levels of financial knowledge” than more experienced investors.

FINRA said it is asking for input from all comers by Aug. 30 on effective ways to reach new investors. Go to www.finra.org.

To prime the pump, here are few suggestions:

Any program must familiarize young investors with cryptocurrency, trading platforms such as Robinhood, peer-to-peer payment platforms and other ways technology is altering the investment landscape.

Since many young investors are tuned into social media, it’s important to identify reliable websites, as well as podcast “influencers” who are trustworthy financial experts, said Barbara McMahon, a financial planner with Innovest Financial Partners Inc. in Kansas City.

If stock market games are going to be played by high school and even college students, the emphasis needs to be on learning the basic fundamentals of investing. Too often, the games emphasize shortterm gains and big bets on stocks to win the competition because of the short amount of time devoted to teaching and playing.

Colleges should require incoming freshmen to take a finance 101 class during orientation or, better yet, for the entire first semester. The class themes should include the power of compounding, risk and reward, smart budgeting and how to identify scams.

Finally, some old-school advice from Jamie Bosse, a financial planner with Aspyre Wealth Partners in Overland Park, Kansas. Young investors need to be taught that investing “should be boring, not trading every day and making a quick buck. They need to be taught to think of investing as a long-term approach.”

Long-term thinking, patience and delayed gratification. Those are not traits that teens — or most people — are wired for. But they are great traits for successful investing.