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Financial Literacy - Financial tuneup
National poll results
Americans admit there's a lot to be confused about in investment matters.
Investment tuneup

Half of Americans say investing is confusing

Stock market volatility
"Stock market volatility seems to trouble the 25- to 49-year-olds," says McBride. "If they truly did have asset allocation figured out, they'd understand that short-term volatility should not disrupt long-term financial planning."

Knowing when to sell
"It is not surprising to find that people, regardless of gender, age or income, find the decision of when and how to sell an investment difficult," says Grable. "The investment industry is built upon getting people to buy something. Very few financial advisers proactively make plans to account for triggers which would cause a client to sell an asset. This is particularly true for people who make their own investment decisions."

Investment choices
Only about a quarter of Americans (26 percent) invest in individual stocks and bonds.

Where are you invested?

"Individual stocks are usually the most underutilized option since investing in them requires specific company knowledge, from a fundamental and technical standpoint, and most people do not have that the ability and time to monitor these investments," says Pallaria.

"Conversely," he adds, "it's no surprise that the 401(k) plan is the most popular (vehicle in which people invest), since those arrangements tend to be the product most people are familiar with through their company."

According to our poll, half of American men have a 401(k) or equivalent account, compared to 40 percent of women -- a 10 percentage point difference. Similarly, 38 percent of men own mutual funds, compared to 28 percent of women.

Those results don't tell the whole story, says Dee Lee, author of "Women and Money; Your Personal Finance Guide." Lee, also a CFP who serves on the national board of directors of the Financial Planning Association, explains that the raw data can be interpreted different ways.

"My conclusion is that men did indeed appear to invest more in mutual funds, but when you look carefully at the categories, women are in mutual funds probably if they are invested in IRAs or retirement plans at work. They may have answered that question differently than a man," she says.

McBride points out that only 32 percent of investors have an IRA and just 23 percent have both an IRA and a 401(k).

"Part of proper planning for retirement means taking full advantage of the tax incentives Uncle Sam provides," he says. "Having both an IRA and a 401(k) or similar plan at work are important to staying on track for retirement. It's not an either-or proposition. Both are important and should be utilized as much as possible."

-- Posted: Oct. 22, 2007
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