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Britons 'ignorant' of bond and equities

22 February 2006
Most Britons are ignorant of the details of bonds and equities, according to new research.

Net retail sales of bonds and equities topped £4 billion at the end of October, however 77 per cent of investors are not able to tell the difference between the two, a survey undertaken by Gfk NOP on behalf of Invesco Perpetual found.

A further 68 per cent could not identify what a bond is – even when they were supplied with the correct definition.

The survey found that 19 per cent of investors thought that equities described the amount of cash held in a portfolio, while 13 per cent thought equities pay a fixed rate of interest.

There were a number of different misinterpretations of what bonds and equities were, but the most notable was that five per cent of people had the notion that bonds invested in James Bond memorabilia.

"Current retails sales figures show that there is a huge demand from consumers to invest in bonds and equities yet it appears that the majority of investors are unsure what these terms actually mean," said Rick White, marketing director at Invesco Perpetual.

He said that this demonstrates that there is a need for financial education and said it is important that people understand what they have invested in and why.

"There is room for both bonds and equities in a portfolio, but people must understand the principles behind them to decide what proportion they need of each asset class.

"If people do not even understand the basic terms then it is difficult for them to make informed decisions regarding their investments."

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