Combat Makes for Gun-Shy Investors

Newswise — ITHACA, N.Y. — Combat veterans are more risk-averse investors than their counterparts who have never been in battle, according to a new Cornell University study. As a result, combat veterans may struggle to build wealth through long-term investments.

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, according to the research. The work suggests that traumatic experiences affect investment behavior. 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.

“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. We found that experiencing a trauma or psychological shock can affect your investment behavior —even when the trauma is not finance or health related,” said lead author Vicki L. Bogan, assistant professor of applied economics and management Cornell. The paper, co-authored with Dyson School colleagues David R. Just, associate professor, and Brian Wansink, professor, will appear in a forthcoming issue of Contemporary Economic Policy.

Once veterans come home, education becomes key, Just added. "With education, the effects of trauma go away -- they will put their money in reasonable risks and obtain normal returns. 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."