I think it's safe to say that a large percentage of the millions of individuals investing today really don't know what they are doing.

The results of far too many surveys will back me up. When tested on their knowledge of investing, many people get a failing grade.

It's not that investors are stupid. It's just that the world of investing has become much more complex. For example, if you want to invest in a mutual fund, you need to understand terms such as "expense ratio," "no-load," "front-end load" and "back-end load," as well as the difference between index funds and managed funds.

The basics aren't so basic anymore.

That's why the Securities and Exchange Commission wants to make sure that part of the $1.4 billion settlement announced last month with 10 Wall Street firms will be used to fund programs and research to help investors get the education they need to make smart investment choices.

The settlement was sought by regulators to resolve allegations of conflicts of interest at the nation's top investment firms. Investigators made a strong case that analysts regularly issued research reports with glowing stock recommendations so their firms could win or keep investment-banking business from the companies that issued the stock.

As part of the settlement, the firms agreed to pay $900 million in fines and $450 million to buy independent research that will be given to clients of the brokerage firms.

But it's not enough to have objective research if you can't understand how to use it. So $85 million of the settlement has been earmarked for investor education. The SEC has proposed establishing an Investor Education Settlement Fund handled by a review panel that would decide which entities would get grants and for how much.

"The more investor education we have in schools and in the workplace, the better able investors will be to make appropriate decisions," SEC Commissioner Cynthia A. Glassman said in an interview. "From my perspective as an economist, we have to make sure people have the financial background to investigate their choices."

She's right about that. And right now that's not the case.

For example, in a recent survey conducted by American Express Retirement Services, participants in 401(k) retirement plans expressed frustration at their lack of knowledge. One respondent needed "someone to hold my hand and do the numbers so I can determine exactly what I need to be doing now."

Many of the investors surveyed just wanted a simplified breakdown of investment options.

"For nearly a decade, participants couldn't lose with their 401(k) investing strategies," said John Baker, senior vice president of client services for American Express Retirement Services, a service group of American Express Financial Advisors. "No one really considered how to diversify for a flat or down market or assessed their true risk tolerance. After two years of a bear market, retirement-plan investors are getting fatigued and looking for help."

Under the SEC's proposal, the $85 million would provide some of that help. The money could underwrite programs that help increase investors' understanding of financial statements and other required investment-related disclosures.

Grants may be awarded to nonprofits that want to create commercials, brochures or other materials designed to assist people in making investment decisions. The money could also be used to help people steer clear of fraud or for academic research into the best techniques or programs to educate investors, Glassman said.

"We are interested in proposals that really make a difference," said Susan Wyderko, director of the SEC's Office of Investor Education. "We want people to learn how to protect themselves in this marketplace."

Wyderko said the SEC is recommending that none of the money be used to promote a particular company, product or service. Any nonprofit, school or individual educator who applies for a grant has to have a strong plan, including details on how results will be quantified, according to the SEC's draft proposal.

"It's tremendously important that there be total accountability on how this money is spent," Wyderko said.

I'm inclined to agree with the SEC that it's better to have one fund and one panel to oversee the distribution of the $85 million.

This money, if spent wisely and effectively, could go a long way to fund existing financial literacy programs or create ones that will teach people what they need to know about investing. I just hope the powers-to-be make sure that happens.

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While Michelle Singletary welcomes comments and column ideas, she cannot offer specific personal financial advice. Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071, or by e-mail at singletarym@washpost.com.