Those who gave themselves a five were also the least likely to say "I don't know" to a question where that was an option.
This could indicate overconfidence on the part of some investors, which can have serious long-term consequences, especially if they overestimate their ability to understand things like risk and effective investing strategies.
"Over time, financial markets tend to increase," says Dr. John Longo, Professor of Professional Practice in the Finance & Economics Department at Rutgers Business School. "That is, a rising tide lifts all investment boats or portfolios. Hence, active investors think they are probably performing well.
"However, investors rarely compare their performance in a rigorous manner to appropriate benchmarks, such as the S&P 500. If they did, they would probably find out that it is hard to beat the market and that investing in index funds makes sense for most people. Therefore, they are probably too optimistic or overconfident on their investment prowess."
Our results back this up.
Who scored well on the investing basics quiz?
Respondents over the age of 54 had the best scores of any age group, though they still only averaged 52% correct. Those who directly own stocks have stronger investing knowledge than those who don't, as well (also 52%).
Americans with more investing experience (those with over five years had an average of 58% correct -- the highest of any group) and higher-value portfolios posted higher average scores on the investing basics quiz.
Americans who have taken a personal finance class scored higher than those who hadn't -- an average of 51% and 46%, respectively.
Demographic patterns in investing knowledge
While anyone can learn about investing, research has shown some consistent patterns in the past. Our quiz results tend to support those conclusions.
Men scored slightly higher than women, but were significantly less likely to say "I don't know"
Research shows women tend to do better than men when it comes to long-term returns. But they're also less likely to be confident in their investing skills.
The average American woman answered 45% of questions correctly on our investing basics quiz, while the average American man scored 52%.
However, women were more than twice as likely as men to say "I don't know" on a question where it was an option. Women answered 35% of possible questions with "I don't know," compared to 16% from men. Men were half as likely to say "I don't know," but only scored about 10% better than women.
Dr. James Philpot, associate professor in the Department of Finance and Risk Management at Missouri State University, has some insight on this phenomenon: "There is much research evidence over 40+ years showing that, on average, passively managed portfolios outperform actively managed ones."
"The median male, being more confident, is likely an active manager while the median female is more likely to be a passive manager," says Philpot. "In this light, the confidence of the average male can be interpreted as overconfidence."
Previous research also supports the idea that men are more overconfident than women when it comes to investing.
Kathryn Finney, founder and CEO of Genius Child and general partner at the Greenhouse Fund, points out that men and women receive different messages when they're young and that these ideas are carried forward.
"Women are taught to take care of their homes, while men have traditionally been groomed as breadwinners. Those conversations perpetuate societal norms on a woman's role in finances, resulting in a lack of confidence in their own personal investing or access to resources needed to make sound investment decisions," says Finney.
"Women need to talk about money and investing with their networks and find opportunities to educate themselves with books, podcasts, and online learning opportunities."
Americans gain investing knowledge as they age
Unsurprisingly, Americans who have had more time to see what happens in the stock market or do some investing themselves scored better on the quiz.
