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The Reformed Broker

Survey: Americans don't understand interest rates' effect on investments

A surprisingly high number of Americans don't understand the impact of interest rates on their retirement accounts and investment portfolios, according to a recent survey. But the level of comprehension increased with age, to a point. 

By Guest blogger / August 22, 2013

Fed Chairman Ben Bernanke's news conference is shown on a television screen on the floor of the New York Stock Exchange in June. According to a recent survey, a large proportion of Americans don't understand how rising interest rates, which could be on the way in the near future, will affect heir investment accounts.

Richard Drew/AP/File

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Shocking but not shocking survey sponsored by Edward Jones asks Americans about the impact of interest rates on their investments and retirement portfolios:

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Joshua has been managing money for high net worth clients, charitable foundations, corporations and retirement plans for more than a decade.

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The survey of 1,008 Americans conducted by ORC International, gauged how well they understood the impact potential rising interest rates would have on investment portfolios.

Age and Awareness

One-third of respondents between the ages of 18 and 34 replied they have “no idea” how interest rate changes will impact a portfolio. As respondents’ age increased, their level of awareness increased as well with the exception of the oldest age group. One-quarter of those 65 and older also indicated they had “no idea.”

Gender Breakdown

Men and women are evenly matched when it comes to respondents who, while understanding there will be some impact to portfolios, do not quite understand the specifics (40 percent and 39 percent, respectively). A division occurs among respondents who admit they “do not understand at all” what those impacts may be. While 29 percent of women admitted they do not understand the issue, just 19 percent of their male counterparts did.

Income Discrepancy

Respondents in the lowest income bracket were most likely to misunderstand the impact of rising rates, with 35 percent of Americans surveyed identifying as such. Just 13 percent of those with household incomes of $100,000 or more indicated the same.

They're learning the hard way right now, it would appear. Just wait until those quarterly statements arrive and detail the losses of their "safe" bond funds.

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