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TheStreet Open House

Invest Instead of Save? No Interest, Study Finds

NEW YORK ( TheStreet) -- Americans are worried about their savings and investments, and banks could wind up being a big beneficiary of that anxiety.

That's one of many conclusions drawn by a study of 702 individual U.S. investors from Natixis Global Asset Management, a Boston-based financial services company.

Americans are so worried about the economy that 83% of them, according to the study, say they "won't be able to meet their retirement income goals."

For banks, the takeaway is that financial consumers don't trust the stock market, mostly due to what they perceive as alarming "volatility" on the equity side these days. Fifty-three percent of Americans in the Natixis study say "fear losing money due to market volatility" and 58% say they "will take on minimal investment risk, even if it means sacrificing returns."

That means investors are willing to park more cash in bank savings vehicles such as certificates of deposits and money market accounts, even though those vehicles don't generate significant returns thanks to a historically low interest rate environment.

Consider CD rates. According to the BankingMyWay Weekly CD Rate tracker, a typical one-year CD is paying a paltry 0.247%, while the average return for a two-year CD offers only 0.412%.

Money market rates aren't any better. BankingMyWay pegs the current average money market account rate at 0.128% -- perilously close to getting nothing back on a bank money market investment.

But investors seem to be willing to accept low returns as long as there is some guarantee they won't lose any money on their investments.

"Individual investors are concerned about achieving their long-term financial goals. They recognize that they need to grow their savings, but they are paralyzed by fear and uncertain about how best to generate returns or protect principal in today's volatile markets," says John T. Hailer, chief executive officer at Natixis. "They would like to try new ways of investing, but they would also like to sleep at night."

Besides stock market volatility, what worries financial consumers most? The Natixis study takes a stab at that, too, reporting the following:

  • 89% of Americans are worried about declining consumer confidence.
  • 88% say they are worried about higher taxes on investments, while 85% are anxious about higher taxes on earnings.
  • 87% are worried about continuing debt woes in Europe and concerned the problem will hurt the U.S economy.
  • 85% are nervous about the upcoming presidential and congressional elections and what the outcomes might mean to their pocketbook.

Additionally, a 57% of U.S. investors are so concerned about the economy and their portfolios that they are "not reducing the cash investments in their portfolios."

It's no secret the financial markets offer few guarantees and that investors are notoriously a nervous lot.

But the Natixis study shows that this may go down as one of the most anxious years for investors in recent memory, with stability a huge priority among American financial consumers -- even at the cost of a decent return.

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