Back to Basics! The Educational Gap of Online Investors and the Conundrum of Virtual Communities

This paper presents a survey on a sample of online investors in a virtual community in Italy. The survey aims to understand what this new type of investor is like – subjects studied range from occasional to independent and semi-professional investors – and it examines the implications emanating from their online exposure. By looking at motivation, risk propensity, education and online experience, we found that knowledge sharing and learning in virtual communities cannot compensate for the financial education-gap of these investors. Secondly, results showed that online exposure tends to increase investors’ propensity for risk, which in turn does not guarantee better portfolio performance. Only a robust education level and more trading experience were found to promote good portfolio performance, and help investors to keep risk under control. Our results cast serious doubts about the mantra of online knowledge generation, and calls for urgent initiatives to improve the financial literacy of online investors.