Combat and trauma create gun-shy investors

U.S. researchers found experiencing a trauma or psychological shock can affect investment behavior -- even when the trauma is not finance or health related. Lead author Vicki L. Bogan, David R. Just and Brian Wansink all of Cornell University found veterans with combat experience were 14 percent to 18 percent less likely than other veterans to invest in such risky assets as mutual funds and stocks. Combat veterans are more risk-averse investors than their counterparts who have never been in battle, and as a result may struggle to build wealth through long-term investments, Bogan said. "Combat veterans appear to be overly cautious and all the worse for it financially, since portfolio choices of stock historically have been critical to economic advancement and building wealth," Bogan said in a statement. "A person's investment decisions often are influenced by many factors that have nothing at all to do with income, wealth, education or the economy." However, the study also found once veterans came home, education could make a difference. "With education, the effects of trauma go away -- they will put their money in reasonable risks and obtain normal returns," Just said. "Without that education they will be at a financial disadvantage the rest of their lives. Strong educational support is one key to recovering from combat." The findings are scheduled to be published in Contemporary Economic Policy.