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Financial Literacy of Investors

This section tries to shed some light on how institutions and countries can measure the success of any financial literacy program. UK treasury gave the financial service authorities a task to measure the level of financial literacy in the country. After a careful research work involving various stock market stakeholders it was found that it is possible to measure financial literacy of any given country (Torabi 2012).

Institutions decided to use customers, shareholders, and even employees in this process as financial products were found to be complex and not straight forward. However, this was made in a way that does not become an excuse for the research work. The task was carried out by provision of financial education to the employees and other participants before allowing to shift some of their income earned from appending to saving kits. The reputation of the financial market was found to improve and, as a result, people found themselves become richer after several years. They also found the standard of living to have improved with most of them utilizing necessary financial resources available to buy stock shares and debentures, meaning they moved forward in becoming good stock market investors.

 

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Further, the per capita income was found to improve with standards of living becoming higher (Stevenson 2009). People did not only depend on that amount earned as part of monthly salaries, but also used capital gains from the shares and debentures to spend and invest further in the stock market financial products. Due to this, it was concluded that financial literacy proved beneficial in the stock market and it was measurable.

The Future of the Financial Literacy to Modern Stock Market Investors

Stock market investors seem to have a brighter future due to the presence and immense growth of financial literacy education among the youth. Most of them have wider experience and knowledge of market stock shares, derivatives, and bonds (National Conference of State Legislatures 2005). This provides them with adequate knowledge on how to save early enough to become good future stock market investors. The risk of pumping money to unworthy projects due to low financial literacy level no longer exists. For example, in America the youth have formed Future Investment Clubs (FICA), which aim to provide financial aid, knowledge, and  careers to all those who believe that they can become good stock market investors. The program includes 10 to 25 members and is aimed at ensuring that the youth stays in schools and starts looking for white collar jobs. They should become business owners who will create jobs. They saw that the only chance to attain this target was to invest in stock markets through purchase of shares and bonds.

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Relationship between Financial Literacy, Age, and Wealth

Financial literacy level has been found to vary on the basis of age and income level of individuals (Malcolm 2007). According to various researches carried out in UK, it was found that literacy level on financial matters matches with age as stock market investors below 50 years are found to do better than those above this age (Hollister 2010). The amount of earnings and desire to earn high income are found to be very high at the age of 25 to 40 years. According to the research, age was found to adversely affect the investment level of stock markets, hence people should try to invest in early ages. On the other hand, it was found that high level of financial literacy among high income earners was found to contribute very little to their investment level in the stock markets as they see no need to save on shares, yet they have a large lump sum of cash in banks, for example, in China and Hong Kong (Lawless 2010).

It is necessary for the modern government and its people to view financial literacy in stock markets as an important tool that can free a country from heavy financial debts, unemployment problems, and, moreover, attract a lot of foreign investors who can help to build the country. Stock market holders must ensure they collaborate with shareholders and other people in ensuring that financial education has been provided for the growing generation. Secondly, regulatory frameworks are vital for ensuring good discipline in the field as it has been found that few individuals can decide to harm the stock market through hedging and speculations of the derivatives and bonds prices. Financial education presents good potential opportunities for all to become future stock market investors. Countries such as USA and UK have strong financial education centres for youth, hence it is quite essential for developing countries such as those in Caribbean, Africa, and Asia to educate the youths on how to invest through trading shares and bonds. In this way they will become rich and live an independent and high standard life full of joy.

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As mentioned in the beginning of this research paper, financial literacy in stock markets provides a better opportunity for the aspiring investors on shares and bonds investment. The risk present in trading shares, futures and forwards demands necessary knowledge and skills to be able to make predictions in the market. These skills save most of the investors from pumping money in the market reaping no benefits. This has been found to happen mostly in those countries, whose governments do not encourage financial literacy. They fail to understand that to live a sophisticated life one must invest well in shares and other financial stock market assets. The above mentioned effects of poor financial literacy must be avoided through having strong financial frameworks and controlling the ability of financial saving and spending of people by the government through full support of financial literacy education. As a result, people who once were merely spenders, turn to great savers and great stock market investors.

 

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