Investing effectively requires not only financial resources, but also well-defined competencies and strategies. According to a study conducted by Allianz across more than 7,000 individuals in seven countries, financial literacy plays a fundamental role in achieving better returns.

How does financial literacy affect investment returns?

A study conducted by Allianz (on a sample of more than 7,000 individuals across seven countries) divided participants into three groups based on their level of financial knowledge (low, medium, high). The tests focused on key concepts such as interest rates, inflation, and diversification. By analysing the results, the analysts constructed model portfolios for each level of competence, taking into account local economic conditions and market trends over the past twenty years. The findings showed that those with a stronger financial education tend to achieve consistently higher returns.

Why do individuals with greater financial competence earn more?

The data show that, in Italy, a household with sound financial knowledge can earn up to €2,300 more per year compared with those who have limited understanding. This occurs because those with adequate knowledge are more inclined to use diversified instruments (equities, funds, bonds) and to seize market opportunities, rather than leaving their money sitting in a current account.

What are the most common mistakes made by those with limited financial knowledge?

The Allianz study highlights that those without sufficient competence tend to:

  • Favour cash or keep their savings idle in a current account.
  • Miss earning opportunities offered by better-performing instruments, such as equities and funds.
  • Underestimate the importance of diversification and of following a medium-to-long-term investment plan.

How can one improve the management of personal financial resources?

To optimise the use of one’s money, it is essential to:

  • Define specific objectives, such as purchasing a home, planning for retirement, or addressing other personal needs.
  • Allocate dedicated resources to each financial goal, avoiding waste and achieving better returns.
  • Develop one’s competencies, by drawing on courses, reading, and targeted advisory to remain up to date on the principal economic and financial concepts.

Why engage an independent financial adviser?

An independent financial adviser can help you to:

  • Personalise investment strategies in accordance with your specific needs.
  • Develop plans that take into account your short-, medium-, and long-term objectives.
  • Avoid conflicts of interest, proposing solutions designed exclusively for your profile, free from commercial pressures from banks or other intermediaries.

Conclusions

The Allianz research demonstrates that financial literacy can make a material difference to the returns achieved on one’s investments. Investing with clear objectives, diversifying, and planning in a strategic manner increases the likelihood of success. If you would like professional and impartial support, contact me.