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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

Think investing is confusing? We wondered whether others think so, and so focused our monthly poll on this topic. Highlights of our findings:

Some investors aren't aware they are confused
Half of Americans find the investing process confusing, and women confess to having a harder time with it than men.
At least four out of 10 investors admit that several aspects of investing are difficult.
Very few investors really know how much they are paying in investment fees.

Bankrate commissioned GfK Roper to conduct a random survey of America's investing behavior as part of our yearlong Financial Literacy series. Over a thousand people were asked where they invest their money; some 669 respondents actually own investments (other than CDs or money market accounts), so we polled them more in depth.

Confusion widespread
Even as Americans are increasingly forced to save for their own retirement, half of current investors (47 percent) admit that investing is confusing. While 38 percent of men admit to feeling confused, that number jumps to 56 percent for women.

John Bogle, founder and former CEO of Vanguard, suggests the possibility that women are just being more honest.

"First, I'm just guessing that a lot of people who say they don't find investing confusing are lying through their teeth," he says. "We've created an investment system that places the focus on complexity rather than simplicity."

The confusion created helps drive big profits to the financial industry, he says. But the creator of the index fund has a simple solution: Buy the entire market at a cheap price.

Influencing factors
While age and income differences factor into the way Americans invest, the biggest disparity across the board exists between the sexes. By a significant margin, women tend to find investing more difficult and to rely more on others for advice.

I'm just guessing that a lot of people who say they don't find investing confusing are lying through their teeth

John Grable, associate professor in personal finance planning at Kansas State University, says the poll confirms what the research shows: Women are more likely to avoid financial risk taking, in part because they feel hampered by a lack of knowledge. Differences are likely rooted in socialization and education, he says.

"Women, in general, are not encouraged or trained to take risks," he says.

It's true that women in general are more risk averse than men, says Alicia Munnell, professor at Boston College's Carroll School of Management and the director of its Center for Retirement Research. However, she cautions that the pattern may be more complicated than the findings suggest.

"Investment decisions seem to be driven more by a combination of gender and marital status. Single women and married men are most likely to invest primarily in stocks. Married women are more likely than single women to choose interest-earning assets. Thus, women as a group may not be more conservative and cautious than men."

-- Posted: Oct. 22, 2007
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