Most Australians are already investors, whether they actively think of themselves that way or not. Our superannuation savings are invested across financial markets, while millions of Australians also hold shares, exchange traded funds (ETFs), investment properties and other assets outside super.
But investing and understanding investing are two different things.
The inaugural GXIQ Investor Scorecard 2026 provides a national benchmark of Australians’ investment knowledge. Based on research involving 2,012 current and prospective investors, Australians recorded an average GXIQ score of 63 out of 100. Only 15% of current investors reached the Advanced category.
A score of 63 gives Australia a pass mark, but it also points to considerable room for improvement. More importantly, the research suggests that investment knowledge influences how people construct portfolios, assess risk and make financial decisions.
So, what does it mean to understand investing, and how would your knowledge compare?
Investment knowledge goes beyond market commentary
It’s easy to associate investment knowledge with following the share market, understanding economic forecasts or remembering which assets performed best last year. Those things may be useful, but they are only part of the picture.
The GXIQ assessment examines 15 questions covering fundamental concepts such as diversification, compound interest, risk, tax and general investing principles. Participants receive a score between zero and 100 and are placed into one of four knowledge groups:
- Beginner: 0 to 39
- Intermediate: 40 to 69
- Proficient: 70 to 89
- Advanced: 90 or above
Among current Australian investors, 22% were classified as Beginners, 32% as Intermediate, 31% as Proficient and 15% as Advanced.
To be clear, these categories are not a judgement on someone’s intelligence or their ability to become a successful investor. They indicate how well a person understands concepts that can help them make more informed decisions.
Useful investment knowledge includes understanding why an asset belongs in your portfolio, what could cause it to lose value and how it interacts with everything else you own.
Knowledge can shape investor behaviour
One of the clearest findings from the GXIQ research is the relationship between investment knowledge and investment behaviour.
Beginner investors were more than five times as likely as Advanced investors to invest without a strategy, at 34% compared with 6%.
The differences were also clear when it came to diversification.Almost two-thirds of Advanced investors (64%) diversified across different types of assets, compared with 22% of Beginner investors.
Advanced investors were also four times as likely to diversify across countries or regions, at 32% compared with 8% of Beginners.
"These findings don’t mean that a high knowledge score guarantees better returns.. Nor do they suggest that every knowledgeable investor will make the same decisions. Investors have different goals, circumstances, time horizons and tolerances for risk.
What the research does indicate is that knowledgeable investors tend to approach decisions more deliberately. They are more likely to have a strategy, consider a broader range of assets and recognise that managing risk involves more than trying to avoid short-term market falls.
Could you explain the thinking behind your portfolio?
A portfolio can grow gradually and without a clear plan. Someone might buy a few Australian shares after speaking with a friend, add an ETF that has recently performed well and invest more into whichever asset feels most familiar. Each decision may appear reasonable in isolation. Over time, however, those decisions can produce a portfolio with overlapping exposures, unclear objectives or more risk than the investor realises.
A simple way to assess your investment knowledge is to consider whether you can explain the purpose of what you own.
For each investment in your portfolio, ask:
- What role is this investment intended to play?
- What are its main risks?
- How does it generate a return?
- What fees, taxes and transaction costs apply?
- Which countries, sectors or asset classes does it expose me to?
- Does it add something different to my portfolio, or duplicate exposure I already have?
- What circumstances would lead me to sell it?
If the only explanation is that an investment was popular, familiar or performing strongly at the time it was bought, further research may be worthwhile.
Three areas every investor should understand
Investing can become technical, but three principles provide a useful foundation.
1. Diversification
Diversification involves spreading your investments across different assets, markets or sources of return.
The aim is to reduce your dependence on any single company, sector, country or asset class. Diversification cannot prevent a portfolio from declining, particularly when markets fall broadly. It can, however, reduce the effect that one unsuccessful investment has on the entire portfolio.
Owning several investments does not automatically produce meaningful diversification. Ten companies from the same industry, for example, may respond similarly to changing economic conditions.
2. Risk
Risk is often treated as another word for volatility, but temporary price movements are only one form of investment risk.
Investors may also face:
- the risk of permanent capital loss;
- concentration risk;
- inflation risk;
- currency risk;
- liquidity risk;
- interest-rate risk; and
- the risk that returns will be insufficient to meet a long-term goal.
Understanding risk starts with identifying which of these factors apply to an investment and deciding whether they are appropriate for your circumstances.
3. Costs
Management fees, brokerage, transaction costs and taxes can reduce the amount an investor ultimately keeps. The effect may appear small over one year but become more significant when compounded over a long investment period.
The GXIQ research found that Advanced investors were twice as likely as Beginners to focus on low-cost investments, at 24% compared with 12%.
Cost should not be the only consideration when selecting an investment. But comparing the total cost of different options can still help investors make a more informed choice.
How do you stack up?
Take the 15-question GXIQ Investor Knowledge Quiz to test your understanding of investing fundamentals and discover your GXIQ score.
