No. 2025-16 - Closing the Investment Gap: How Targeted Financial Information Reduces Demographic Gaps in ETF Allocation

Abstract:

The increasing complexity of financial markets and the shift towards individual responsibility for retirement savings highlight the importance of sound financial decision-making. However, significant gaps persist, with women and individuals from lower socioeconomic backgrounds often exhibiting lower financial literacy and market participation. While the effectiveness of broad financial education is debated, the impact of targeted, concise information on specific investment behaviors remains unclear. We conducted a pre-registered randomized controlled trial with a representative sample of U.S. adults (N=2,568) to investigate whether providing specific information about Exchange-Traded Funds (ETFs) - comparing their risks and returns to those of alternatives like gold, individual stock, savings, and cryptocurrency - could influence investment choices and reduce demographic gaps. Participants made allocation decisions for a real $100 lottery prize invested for one year. We find that the informational intervention significantly increased allocation to ETF (+17.8 percentage points) on average, shifting funds from savings, gold, and individual stock. Crucially, the intervention had larger effects among women, individuals without a bachelor's degree, and those from lower social origins, substantially eliminating the gender gap and narrowing gaps based on education and social origin. These results demonstrate that targeted, product-specific financial information can be a powerful tool to reduce investment inequalities and promote financial inclusion.