U.S. Markets closed

3 Key Lessons For Investing Better Than Most Americans

Susan Lyon

It is widely recognized that Americans are poorly informed about global financial and economic issues, but what about when it comes to a key pillar of their own personal financial management: online investing?

A new study by InvestingNerd finds Americans have alarming financial illiteracy when it comes to the basics of online investing--a key skill in managing one's finances. The InvestingNerd survey polled more than 800 American adults and find that, when it comes to the basics of investment management, most scored poorly on a series of questions highlighting these key weaknesses in investing knowledge:

1. Know the basic concepts of investing. First and foremost, almost none of respondents knew what an online brokerage account was--or how to select the best online brokerage for their needs. Only one in five Americans could correctly identify that a brokerage account is the type of account needed to trade stocks online. Others guessed checking or savings accounts, money market accounts, CDs or said they did not know.

Additionally, most people surveyed do not know how to get started investing online, or they fear they do not have the confidence to do a good job of it. Many cited a lack of money as the reason they do not get started, but more than a quarter were worried they would lose money or said they had no idea how to get started investing.

2. Shop around for the best price. Although fully half of those surveyed said low prices and fees mattered the most to them in opening a new brokerage account, only 1 in 10 said they actually compared costs. Many selected their account based on a recommendation from a friend or company reputation/advertisement instead. Others had been handed down accounts they had not taken the time to research and then shift their money if necessary.

As NerdWallet pointed out recently, picking the best brokerage account for each investor's unique needs matters because they could be wasting money by paying fees for services they don't even want or need. Moreover, a recent InvestingNerd study found more 17 million investors collectively throw away a staggering $1.8 billion a year on unnecessary investing fees.

3. Learn your 401(k) plan fees. Unfortunately, many Americans have little or no knowledge of the total fees they pay. In fact, the survey found 9 in 10 Americans underestimated the 401(k) fees the average household will pay over a lifetime by several thousand dollars. The real average totals more than $150,000 per household, according to a recent study by Demos.

If you're new to the realm of managing your investments online, consider these tips:

-- Know what types of asset classes you want to trade

-- Decide your minimum initial investment

-- Figure out what you want to budget as your total trading costs using NerdWallet's free brokerage comparison tool

-- Rule out features you don't want to use and make sure you aren't paying extra for them

-- Sign up for an account and get started, making sure to take advantage of any introductory promotional offers.

Although Americans scored poorly when it comes to basic investing knowledge, taking these easy steps upfront can make them a smarter investor.

Susan Lyon is a senior strategy analyst for InvestingNerd, a financial literacy website dedicated to empowering consumers to make better financial decisions in investing and money management.

More From US News & World Report