By Mark Hulbert
How the ‘Google effect’ affects retirement
Every month is a good month to beef up your financial literacy.
But there is a special focus on it this month, since October is National Retirement Security Month. One of its primary goals, according to the U.S. Senate resolution designating the month, is "increasing the…personal financial literacy of all people in the United States."
Levels of financial literacy have been dismally low for years, of course, so this need is hardly new. Yet our collective financial literacy appears to be facing a new and very modern threat: The internet.
According to research posted this summer on the Social Science Research Network (SSRN), the internet leads investors to think they know more than they really do, and the resulting overconfidence in turn causes their portfolios to perform less well. I first heard about this fascinating research from the always-insightful Joachim Klement, a trustee of the CFA Institute Research Foundation and former head of equity strategy for UBS Wealth Management.
The SSRN study, entitled "Confidence Without Competence: Online Financial Search and Consumer Financial Decision-Making," was conducted by Adrian Ward, a marketing professor at the University of Texas at Austin; Tito Grillo, a professor of marketing, business economics and law at the University of Alberta, and Philip Fernbach, a marketing professor at the University of Colorado at Boulder.
The study reached its provocative conclusion in several steps:
This new study reminds us of the dangers of overconfidence and the virtues of humility. But what I found most significant about the research–and most disturbing–is the pernicious way in which the internet leads us to increase our self-confidence without our even knowing that it is doing so. So even those of us who are trying to resist the dangers of overconfidence may still be led down the primrose path.
This consequence of the internet is not an accident, by the way. Sergey Brin, Google’s co-founder, said at a Google event in 2010 that "We want Google to be the third half of your brain." The authors of this recent study interpret that statement to mean that Google blurs "the boundaries between the knowledge that resides in one’s head and the knowledge that resides on the internet."
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at firstname.lastname@example.org.
(END) Dow Jones Newswires
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.
© Copyright 2022 Morningstar, Inc. All rights reserved. Dow Jones Industrial Average, S&P 500, Nasdaq, and Morningstar Index (Market Barometer) quotes are real-time.
Post expires at 10:20pm on Tuesday April 11th, 2023