The British Columbia Securities Commission (BCSC) announced Oct. 15 the launch of a Return on Investment Calculator (ROI) and an Investment Growth Calculator on its investor education website, InvestRight.org.
The BCSC developed the ROI calculator after conducting survey research to determine B.C. residents' understanding of ROI. Respondents were asked to make calculations based on two questions – a relatively straightforward question and a slightly more complicated one. “The survey identified that an ‘overconfidence gap’ significantly widened when respondents answered the more complicated question,” says the regulator.
At the outset, the survey asked respondents about their comprehension of ROI, and 86 per cent of respondents indicated a degree of comfort with the concept. When asked to calculate the first question, 79 per cent of respondents answered correctly – an overconfidence gap of seven per cent. However, just 23 per cent of respondents answered the second question correctly, increasing the overconfidence gap significantly to 63 per cent, says the BCSC.
"We are seeing from this data and our overall experience that investors need tools to help them understand important investing concepts," said Pamela McDonald, BCSC Director of Communications and Education. "The launch of these two calculators and other improvements to InvestRight.org are part of our ongoing efforts to improve investing literacy in British Columbia so that investors can have the best investment outcomes."
The new Investment Growth Calculator shows investors how investment contributions can grow over 20 years. Visitors to the website can choose a portfolio size and see how two different amounts grow. The calculator uses a conservative rate of return to demonstrate that investing on regular basis can increase savings over time through compounding returns.