Survey shows investment confusion

Tue, 10 Jan 2006

The difference between active and passive investments remains a mystery for the majority of investors, new research suggests.

A survey by Gfk NOP, commissioned by Invesco Perpetual, found that 83 per cent of investors were unable to identify the difference between these types of investment.

"The fact that so many investors do not know the difference between these two very different investment styles is extremely worrying," comments the marketing director at Invesco Perpetual, Rick White.

Almost a quarter of investors wrongly believe that passive funds offer low-risk investments. A further seven per cent were under the wrong impression that part-time fund managers control passive funds.

Actively managed funds were no better understood, with 22 per cent of those with investments believing stocks of these funds are traded daily.

Of those with investments, nine per cent believed active funds invest in riskier stocks in order to outperform other investments, while another nine per cent believed active funds aim to match the performance of the FTSE 100 or another benchmark index.

"A lack of understanding when making investment decisions can result in the wrong choices and ending up with an imbalanced portfolio," Mr White warns.

"Whilst we believe there is a place for both investment approaches within a portfolio , investors need to make informed decisions about the funds they are buying."

Mr White says that investors need more education, guidance and financial advice today to help them make the best investment decisions.

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