Method experience-based fact box without a goal
Chances of investments – Comparative understanding and mixing of investment forms
Communicating uncertain events to consumers
Why is it relevant to communicate uncertain events to consumers?
The aim is for the consumer to be able to make (better) decisions. They need to know precise facts and figures - the so-called evidence - in order to weigh options against each other and better assess risks. In addition, the presentation of the exact case numbers helps the user not to underestimate or overestimate certain risks and to make informed decisions based on them.
Why is it problematic to communicate uncertain events to consumers?
If you want to communicate risks, you face a number of challenges:
- How can probabilities of occurrence be conveyed in general?
- How can very rare events be communicated in such a way that they are also recognised as rare?
- How can options for action be compared by considering potential harms and benefits?
- And how can the risks be presented in an appealing way so that consumers also enjoy engaging with them?
The method of the experience-based fact box can be used for risk problems, i.e. when reliable numbers are available about how often certain events occur. The fact box is supposed to give consumers an understanding of the probability of occurrence of certain events and give them options for action.
Learning from experience leads to different decisions regarding risks than learning from descriptions. It is crucial that experience-based learning, in which one learns what the consequences are for all options, can lead to better probability estimates. Fact boxes are an evaluated format of risk communication that presents decision options in a transparent, balanced and understandable way.
The dynamic visualisation of information should encourage consumers to learn for themselves and combine information with entertainment. For illustration and better understanding, an easy introduction, an accompanying explanatory text and a consistent narrative - a positioning in the life situation of the potential user - are important.
Proof of effectiveness
In our studies, visualisations with experience-based learning proved to be at least as successful in conveying the probabilities of several events as the best static figures to date. In addition, experience-based learning led to a longer engagement with the material.
- Bradbury, M. A., Hens, T., & Zeisberger, S. (2014). Improving investment decisions with simulated experience. Review of Finance, 19(3), 1019–1052.
- Cokely, E. T., Galesic, M., Schulz, E., Ghazal, S., & Garcia-Retamero, R. (2012). Measuring risk literacy: The Berlin numeracy test. Judgment and Decision Making, 7(1), 25–47.
- Frey, C. B., & Osborne, M. A. (2017). The future of employment: How susceptible are jobs to computerisation? Technological Forecasting and Social Change, 114, 254–280.
- Garcia-Retamero, R., & Galesic, M. (2010). Who proficts from visual aids: Overcoming challenges in people’s understanding of risks. Social Science & Medicine, 70(7), 1019–1025.
- Hasher, L., & Zacks, R. T. (1979). Automatic and effortful processes in memory. Journal of Experimental Psychology: General, 108(3), 356–388.
- Hau, R., Pleskac, T. J., Kiefer, J., & Hertwig, R. (2008). The description–experience gap in risky choice: The role of sample size and experienced probabilities. Journal of Behavioral Decision Making, 21(5), 493–518.
- Hertwig, R., & Erev, I. (2009). The description–experience gap in risky choice. Trends in Cognitive Sciences, 13(12), 517–523.
- Kaufmann, C., Weber, M., & Haisley, E. (2013). The role of experience sampling and graphical displays on one’s investment risk appetite. Management Science, 59(2), 323–340.
- McDowell, M., Gigerenzer, G., Wegwarth, O., & Rebitschek, F. G. (2019). Effect of tabular and icon fact box formats on comprehension of benefits and harms of prostate cancer screening: A randomized trial. Medical Decision Making, 39(1), 41–56.
- McDowell, M., Rebitschek, F. G., Gigerenzer, G., & Wegwarth, O. (2016). A simple tool for communicating the benefits and harms of health interventions: A guide for creating a fact box. MDM Policy & Practice, 1(1), 2381468316665365.
- Schwartz, L. M., Woloshin, S., & Welch, H. G. (2009). Using a drug facts box to communicate drug benefits and harms: Two randomized trials. Annals of Internal Medicine, 150(8), 516–527.
- Ungemach, C., Chater, N., & Stewart, N. (2009). Are probabilities overweighted or underweighted when rare outcomes are experienced (rarely)? Psychological Science, 20(4), 473–479.
- Wulff, D. U., Mergenthaler-Canseco, M., & Hertwig, R. (2018). A meta-analytic review of two modes of learning and the description–experience gap. Psychological Bulletin, 144(2), 140–176.
Option 1: You can embed the given visualisation
It is possible to embed the visualisation from our website including the frame text via iframe. To do this, use the following html-code for your website: <iframe frameborder="0" height="650px" src="https://risikoatlas.org/visualisations/sampling-vertical/sampling.html" width="1024px"></iframe>
Option 2: You can adapt the given visualisation
If you use your own data as a multiplier, your web developers can enter it into your own consumer fact box with experience-based learning.
We will provide the person responsible for your website with the documented code for download via github. You can then edit the material. The link to the repository is available on request. Contact details can be foundhere.
Risks and chances of your investments
Savings accounts are currently yielding hardly any profits. Although the money is well-deposited in these accounts, over the years it has become de facto less and less valuable due to inflation and the low-interest period. Therefore, it is worth considering whether one should invest part of the money in forms of investment that yield higher returns. But higher returns also mean higher risks.
Developments in the past are never a predictor for the future. This is particularly true for financial investments. However, with a quick look into our fact box you can get an impression of which investment forms usually yield more returns than others, and which ones may be less risky but also less profitable. Do you have a certain goal you would like to achieve with a certain investment amount over a fixed term? Then click through our fact box and find out to what extent your investment goal can realistically be achieved.
What does the chart show?
The fact box shows you how returns have developed over time in the past. It allows you to compare possible returns on an investment of 1000 euros in various individual investment forms over a period of 10, 20 or 30 years. You can draw a comparison between two of the six investment forms offered (shares DE Dax, shares DE general, gold UK, time deposits, federal bonds and shares USA S&P). Returns have already been adjusted for inflation, but taxes have not yet been taken into account. Each click on the "Determine risks more precisely" bar adds the profit or loss of another investor. The profits are divided into different amounts (up to 500 euros, up to 1000 euros, up to 2000 euros, and more than 2000 euros). There is also a column for losses. You can add further fictional investors individually (bars "individual") or in groups of 10 investors (bars "in groups"). The fact box should give you an impression of the relationship between risk and return and which forms of investment are riskier than others.
Where are the numbers coming from?
The data on which the fact box is based originate from the corresponding periods of the available financial history (maximum monthly entry date between 1 January 1950 and 31 March 2009). The following trends in performance were taken into account:
- Stock funds: Net performance of the stock index MSCI World (after withholding taxes) in Euro.
- ETF (DAX): Performance of the DAX
- ETF (Pension Index): Development of the German Pension Index (REX)
- ETF (US stocks): Performance of the S&P 500 Index
- Time deposit: Deutsche Bundesbank: "Sparbriefe mit laufenden Zinszahlung, vierjährige Laufzeit, Durchschnittsatz" (until 2002), "Banken DE, Neugeschäft, Einlagen privater Haushalte, vereinbartte Laufzeit von über 2 Jahre
- Gold: Development of the London Market Price
- Corporate bonds: Bond development
If different investment forms are mixed, the fact that this mix changes over time due to the different increases in value of the investment forms must be taken into account.
The costs for the individual investment forms were calculated as follows:
- Stock funds: 0,5% p.a.
- ETFs: 0,5% p.a.
- Time deposit: 0,05% p.a.
- Gold: 0,5% p.a.
- Corporate bonds: 0,5% p.a.
The data were obtained from the following sources: Allfinancialmatters.com, Deutsches Aktieninstitut e.V., Deutsche Bundesbank, Measuringworth.com, Prof. Richard Stehle (Humboldt-Universität zu Berlin).
What is the quality of the data?
In relation to the past, the quality of the data on actual trends is high. However, developments from the past are never a predictor for the future.
Empirical evaluation with consumers
Last update: 14 Oktober 2019.