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Voice of the American Shareholder Quarterly Poll – Wave 6 Prepared for: BetterInvesting Final Report June 8, 2005. Table of Contents. Study Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

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Voice of the American Shareholder

Quarterly Poll – Wave 6

Prepared for:

BetterInvesting

Final Report

June 8, 2005


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Table of Contents

Study Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Overview of Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Detailed Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

What Does A Typical Shareholder Look Like, and How do they Behave?. . . . . . . . . . . . . . . . . . . 15

How Do Shareholders Feel about the Economy and Stock Market? . . . . . . . . . . . . . . . . . . . . . . . 23

How Do Shareholders Feel about Second Half of 2005?.................. . . . . . . . . . . . . . . . . . . . . . . . 40

What Do Shareholders Feel about Investing in the Global Marketplace? . . . . . . . . . . . . . . . . . . . . 46

How Do Shareholders Feel about Investing in the Chinese Market? . . . . . . . . . . . . . . . . . . . 69

How Do Shareholders View the European Union and the US Market?. . . . . . . . . . . . . . . . . . . . . . . 82

Demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Detailed Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93


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Study Objectives

  • BetterInvesting commissioned Harris Interactive to conduct a series of research studies to better understand the attitudes and behaviors of American investors. This study represents the sixth wave of research conducted for BetterInvesting. The previous waves were conducted in September 2003, January 2004, May 2004, November 2004, and February 2005.

  • By regularly reporting on these findings, BetterInvesting expects to capture the voice of the American shareholder.

  • The survey questions are designed to measure a few key trends in shareholders’ portfolios and investing behavior as well as to understand shareholders’ attitudes and views toward current issues. Specifically, this wave of research focused on the following topics:

    • Investment profile, goals, strategy, and future plans;

    • Views toward the stock market and outlook for the second half of 2005;

    • Perceptions of international markets including reasons for and against investing in the growing Chinese market; and,

    • Views toward the European Union and the U.S. marketplace.


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Overview of Methodology

  • Sample includes 1,002 shareholders defined as U.S. adults aged 18 or older who currently own individual stocks or stock mutual funds.

  • Interviewing was conducted between April 26 - May 6, 2005.

  • The interview averaged 10 minutes in length.

  • All interviewing was conducted online using the Harris Poll Online (HPOL) database consisting of several million members who have agreed to participate in survey research.



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Current Investment Environment

  • The typical American investor continues to be somewhat cautious in today’s marketplace. However, they are in it for the long term and recognize that stocks can yield the greatest returns.

    • In each wave of data, the majority of investors indicate that they plan to make no changes to their portfolios in the near future (the next six months).

    • The average risk level of investor’s portfolios is steady at about 4 on a 7 point scale where 1 is not at all risky and 7 is very risky.

    • When asked, how they would invest either $10,000 or $100,000, half indicate that they would put that money in either individual stocks or stock mutual funds.

  • Investors’ overall level of confidence in the economy and stock market continues to wane.

    • The NAIC Investor Confidence Index has declined again to its lowest level at +5.0 from a high of +19.3 in January 2004.

    • There is a great deal of fluctuation in the components that make up the Index and the data shows that investors are increasingly thinking that it’s a good time to move into safer investments.

    • Belief that the overall direction of the US economy is going in the right direction has declined to its lowest level since measurement began. Less than half (49%) think the economy is headed in the right direction.

  • Since February women have shown a considerable drop in confidence in the US economy.

    • Men’s views of the economy are consistent since November 2004.

    • Half of men still feel that it’s a good time for new investors to get involved in the stock market. In comparison, the proportion of female shareholders who feel this way has decreased since February (40% vs. 50%).

    • The proportion of men who feel that it’s a good time to move into safer investments has steadily increased from a low of 29% in January 2004 to 46% in May 2005. Women, on the other hand, have increased in their agreement of this statement (rising from 44% to 49% today).


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Views toward the economy and stock market

  • Shareholders’ confidence in the direction of the U.S. economy continues to fall, reaching its lowest levels in this series of research.

    • When asked about confidence in the United States economy, 49% of shareholders indicate that they have “a fair amount” or “a great deal” of confidence that it is moving in the right direction – down from 55% in February 2005 and a high of 71% in January 2004.

      • Women (40%) have significantly less confidence than do men (55% a great deal/fair amount).

  • Despite the fact that many shareholders have not made changes to their portfolios, they are lukewarm in their overall view of the market.

    • Fewer than half of shareholders (45%) believe it’s a good time for new investors to get involved in the stock market, down from 50% in February 2005 and a high of 62% in January 2004.

    • Agreement that most stocks are a better bargain now than they were a year ago has risen by eight percentage points (37% now versus 29% in February 2005).

    • However, shareholders increasingly agree that it’s a good time to move money into safer, lower risk investments from higher return/higher risk investments, with 47% who now hold this view.

      • Male and female shareholders are showing similar levels of agreement (46% of males versus 49% of females).

      • The proportion who agree that it’s a good time to move money into less risky investments has steadily increased since January 2004.


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Views toward the economy and stock market

  • The BetterInvesting Shareholder Confidence Index has dropped again from +7.8 in February 2005 to +5.0 today.

    • Currently the BetterInvesting Index is +5.0, down from +19.3 in January 2004. On a scale from -100 to +100 (where zero indicates a neutral attitude towards the stock market), an Index of +5.0 shows trace levels of optimism tempered by concern about the direction of the economy.

    • Men(+8.6) are more confident than women (-0.4) and confidence declines with age.

      • Among those 65 and older, the index is -4.9.

    • The Index has also decreased by region with those in the West (-2.0) currently having the most negative view of the stock market.


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Outlook for Second Half of 2005

  • Despite lower levels of confidence and concerns about the economy, the majority of shareholders think the market will stay the same or improve in the second half of 2005.

    • One in five (21%) think the market will worsen.

    • Men are more optimistic than women with 42% believing the market will improve.

  • Investors continue to think that the best industries to invest in are real estate, pharmaceutical and technology.

    • Roughly the same proportion of investors consider these among the best investments now as they did in November 2004.

  • There has been more fluctuation among industries considered poor investments.

    • Automotive now tops the list of the worst industries to invest in followed by travel and education, which were both viewed differently in November.

  • More than half of shareholders feel that oil prices will continue to increase and they most commonly mention international politics as the primary reason.


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Perceptions of the Global Market

  • Shareholders agree that international investments will be important in the future and are part of a diversified portfolio.

    • Shareholders residing in the West feel that international investments will be important in the future (65%), used to guard against a weak economy (53%) and tend to yield larger returns (45%).

    • Just one-third (33%) feel comfortable making international investments.

  • Further, majorities of shareholders feel that the declining value of the US dollar, outsourcing, strong economic growth abroad, high oil prices and slow domestic economic growth have at least somewhat contributed to international funds outperforming domestic US funds.

    • Female shareholders tend to attribute this trend to US companies moving operations overseas (89%), slow economic growth (87%) and high oil prices (85%) than males (81%, 75%, and 78% respectively).

  • Overall, shareholders still have the majority of their investments within the US. However, they indicate their plan to increase their investments in international markets.

    • Those who are under the age of 35 indicate they will have a higher percentage of international investments in the next five years.

    • Nearly half (45%) have no international investments and are fully invested in domestic markets.

  • When it comes to investing internationally, there is a greater likelihood of shareholders investing in individual stocks in US based companies with a global presence than shares in international stock funds, individual stocks in foreign based companies, and shares in international bond funds.

    • Shareholders who indicate they are comfortable with international investments are significantly more likely to diversify their foreign investments through shares in international stock funds (37%), US based companies with a global presence (24%), and shares in international bond funds (21%) than those who are less comfortable.


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Perceptions of the Global Market

  • Investors have mixed views about the impact foreign economies will have on the United States.

    • Fewer than half think any economy examined in the survey (Russia, China, Japan, India and the European Union) will have a positive impact on the US economy, though current international investors are more likely to perceive a positive impact.

    • China is viewed most negatively; 50% of shareholders think China will have a negative impact on the US economy.

  • India, China and especially Russia are viewed as risky investments by majorities of shareholders.

    • On average, Japan and the European Union are rated about as risky as investors’ current portfolio (roughly 4 on a 7 point scale where 7 is very risky).

    • Interestingly, current international investors are more likely to think investments in each of these areas are risky as compared to those fully invested in domestic markets.

  • Majorities of investors report that they are not likely to invest in the countries or regions explored in the survey.

    • Between 61% (Russia) and 90% (Russia) are not likely to invest in these international markets (69% China, 65% Japan and 75% India).

    • Women are even less likely than men to invest in these areas as are those 65 and older.


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Feelings About the Marketplace in China

  • Although one half of shareholders say they do not plan to invest in China, a third say they are taking the “wait and see approach” before they decide to invest.

  • Nearly six in ten shareholders say the largest barrier to invest in China is lack of confidence in the communist government. Three in ten feel that human rights violations and corporate/government corruption are deterrents.

    • Current international investors are more likely to cite human rights violations (36%) as an obstacle to investing in the Chinese economy, while non-international investors are deterred by corporate and government corruption (34%).

  • In order to understand possible motivators to investing in the Chinese market, shareholders were asked to identify the biggest opportunities in that market. Half of shareholders view the supply of workers (50%) and the fast growing economy (48%) as the top opportunities in the market.

    • The fast growing economy (56%) is key for current international investors.

  • When looking at the various industries, manufacturing (59%) is considered by far the best investment in the Chinese market.

  • The perceived worst industry segments in which to invest include health care (36%), real estate (29%), insurance (28%) and media (25%).

    • While men view banking and finance as among the worst industries (28% vs. 14% females), women are more likely to mention the automotive industry (22% vs. 12%).


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Views of the US and European Union Markets

  • When evaluating the impact of EU’s economy on the US economy, most shareholders do not view the EU’s economy as a threat.

    • Among younger shareholders, there is less of a likelihood of viewing the European Union’s economy as a threat to the US’.

  • In order to understand the advantages of each market, shareholders were asked to evaluate which market has the advantage on a number of factors. Real estate, productivity, and supply of workers are viewed as US advantages. Conversely, shareholders feel the EU has an advantage when it comes to social programs and healthcare/retirement.

    • Females see the advantages of the EU market as healthcare/retirement (63% vs 54% males), effects of government regulations (52% vs. 43%), and productivity (40% vs. 24%).

    • On the other hand, males feel the US economy has the lead on productivity (76% vs. 60%), effects of government regulations (57% vs. 48%) and healthcare/retirement (46% vs. 37%).




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The typical investor has more money invested in stock mutual funds than individual stocks.

Total Amount Invested in Individual Stocks and Stock Mutual Funds

Q1441: You mentioned that you have the following investments. About how much do you have invested in the following…?

Base: All Shareholders


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Shareholders maintain a wide variety of investments. funds than individual stocks.

Types of Investments Owned

Q430: Please indicate which types of investments or investment accounts you personally have. Do you currently have . . .?

Base: All shareholders


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For the most part, shareholders plan to make no changes to their investments over the next six months.

Plans for Investments Over The Next Six Months

Q510: Again thinking about your investment portfolio, over the next six months, do you plan to increase, decrease or make no change in your investments in each of the following?

Base: All shareholders


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Three in ten men plan to increase their investment in individual stocks and one in seven plan to increase their investment in bond mutual funds compared to only 19% and 8% of women respectively.

Plan to Increase Investments Over The Next Six Months By Gender

Q510: Again thinking about your investment portfolio, over the next six months, do you plan to increase, decrease or make no change in your investments in each of the following?

Base: All shareholders (n=1,002; Male=547; Female=455)


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Whether they have $10,000 or $100,000 to invest, shareholders would continue to invest half in stock mutual funds and individual stocks.

Percentage Allocated to Each Investment

Q515: If you had $10,000/$100,000 to invest, how much would you invest in each of the following?

Base: All shareholders

Note: For this question, half of all respondents were asked to allocate $10,000 across the investments listed above and the

other half were asked to allocate $100,000 across the investments listed above.


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Shareholders investments are a mix of risk levels but, on average, are moderately risky.

Risk Level of Current Investments

Sept ‘03Jan ’04May ’04Nov ’04Feb ’05Feb ‘05

MEAN = 4.0 4.1 3.9 3.9 3.9 4.0

Q505: Investment risk is typically defined as a greater likelihood that your portfolio may lose value but is often associated with higher returns. On a scale from 1 to 7, in which “1” represents “not risky at all” and a “7” represents “very risky”, how would you characterize most of your investments?

Base: All shareholders


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Four in ten male shareholders characterize their investments as risky while just 3 in 10 female shareholders do the same.

Risk Level of Current Investments By Gender

Q505: How would you characterize most of your investments on a scale from “not risky at all” to “very risky”?

Base: All shareholders


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How Do Shareholders Feel about the Economy and Stock Market? as risky while just 3 in 10 female shareholders do the same.


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Confidence in the U.S. economy has fallen in the past couple of months to it’s lowest level since the survey began.

Confidence in the U.S. Economy

Q410: How much confidence do you have that the United States’ economy is generally moving in the right direction?

Base: All shareholders


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Female shareholders have less confidence that the U.S. economy is moving in the right direction, falling 13% since February.

Confidence in U.S. Economy By Gender - A Great Deal/Fair Amount (Net)

Total

Men

Women

Q410: How much confidence do you have that the United States’ economy is generally moving in the right direction?

Base: All shareholders


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For the first time since January 2004, fewer than half of shareholders think it’s a good time for new investors to get involved in the stock market and three in ten disagree.

“It’s a good time for new investors to get involved in the stock market.”

Q501: How strongly do you agree or disagree with each of the following statements?

Base: All shareholders


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Consistent with women’s views about the direction of the economy, they are also less likely than men to think it is a good time for new investors to get involved in the stock market.

% Strongly/Somewhat Agree:

“It’s a good time for new investors to get involved in the stock market.”

Q502: How strongly do you agree or disagree with each of the following statements?

Base: All shareholders


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Agreement has shifted in the past couple of months, with more agreeing today that stocks are a better bargain than one year ago.

“Most stocks are a better bargain now than they were one year ago.”

Q502: How strongly do you agree or disagree with each of the following statements?

Base: All shareholders


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Male and female shareholders are equally likely to agree that stocks are a better bargain now than they are likely to a year ago.

%Strongly/Somewhat Agree:

“Most stocks are a better bargain now than they were one year ago.”

Q502: How strongly do you agree or disagree with each of the following statements?

Base: All shareholders


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The proportion of shareholders who agree that it’s a good time to move money into safer investments has continued to increase, with nearly half of shareholders now holding this belief.

“It’s a good time to move money into safer, lower risk investments from higher return/higher risk investments.”

Q501: How strongly do you agree or disagree with each of the following statements?

Base: All shareholders


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Male and female shareholders again equally agree that it’s a good time to move money into lower risk investments.

% Strongly/Somewhat Agree:

“It’s a good time to move money into safer, lower risk investments from

higher return/higher risk investments.”

Q502: How strongly do you agree or disagree with each of the following statements?

Base: All shareholders


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The BetterInvesting Index of Shareholder Confidence continues to fall, dropping to + 5.0.

May 2005

Component Scores for Each Item Included in BetterInvesting Index

May 2005

BetterInvesting INDEX

+5.0

Note: The BetterInvesting Index was calculated based on 7 components that reflect shareholder confidence in the economy and stock market and is rated on a scale from -100 to +100 where 0 is the midpoint. A more detailed explanation of the Index is found in the Detailed Methodology.


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The BetterInvesting Index of Shareholder Confidence has declined significantly for women since February 2005 to -0.4 today. The Index for men has remained steady since February.

Male

Female

Note: The BetterInvesting Index was calculated based on 7 components that reflect shareholder confidence in the economy and stock market and is rated on a scale from -100 to +100 where 0 is the midpoint. A more detailed explanation of the Index is found in the Detailed Methodology.


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The BetterInvesting Index of Shareholder Confidence is much higher for male shareholders.

May 2005

Component Scores by Gender

Note: The BetterInvesting Index was calculated based on 7 components that reflect shareholder confidence in the economy and stock market and is rated on a scale from -100 to +100 where 0 is the midpoint. A more detailed explanation of the Index is found in the Detailed Methodology.


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The Index decreases with age and indicates a negative view of the market for older shareholders.

Index Scores by Age Groups

Note: The BetterInvesting Index was calculated based on 7 components that reflect shareholder confidence in the economy and stock market and is rated on a scale from -100 to +100 where 0 is the midpoint. A more detailed explanation of the Index is found in the Detailed Methodology.


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The BetterInvesting Index of Shareholder Confidence declines with age.

May 2005

Component Scores by Age Groups

Note: The BetterInvesting Index was calculated based on 7 components that reflect shareholder confidence in the economy and stock market and is rated on a scale from -100 to +100 where 0 is the midpoint. A more detailed explanation of the Index is found in the Detailed Methodology.


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The Index has declined among Western region residents, but risen among those in the Midwest.

Index Scores by Region

Note: The BetterInvesting Index was calculated based on 7 components that reflect shareholder confidence in the economy and stock market and is rated on a scale from -100 to +100 where 0 is the midpoint. A more detailed explanation of the Index is found in the Detailed Methodology.


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The BetterInvesting Index of Shareholder Confidence is highest among residents of the Midwest and South.

May 2005

Component Scores by Region

Note: The BetterInvesting Index was calculated based on 7 components that reflect shareholder confidence in the economy and stock market and is rated on a scale from -100 to +100 where 0 is the midpoint. A more detailed explanation of the Index is found in the Detailed Methodology.


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The majority of shareholders say they do not benchmark their investments against the S & P 500 index. A quarter of shareholders say they rely a great deal or somewhat on the stock market indexes to make decisions.

Benchmarking to S & P 500 Index

Reliance on stock market indexes

Q715: How much do you rely on stock market indexes to make decisions about your investment strategy?

Q720: Do you benchmark your investments against the S & P 500 Index?

Base: All shareholders (n=1,002)


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What do Shareholders think about investments against the S & P 500 index. A quarter of shareholders say they rely a great deal or somewhat on the stock market indexes to make decisions.

the Second Half of 2005?


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A third of shareholders are optimistic and see the market improving in the second half of 2005.

Q700: Thinking of the second half of 2005, how do you think the market will perform?

Base: All shareholders (n=1,002)


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Men are more likely than women to think the market will improve in the second half of 2005.

Q700: Thinking of the second half of 2005, how do you think the market will perform?

Base: All shareholders (n=1,002)


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Similar to investors’ outlook in November 2004, they think that the best investments for the second half of 2005 include real estate, pharmaceuticals, and technology.

Best Investments For the Second Half of 2005 – Top 3 Best Industries Top 10 Mentions

Q705: Thinking of the current economy, please indicate which three of the following industries you think are the best for investing for the second half of 2005. Please indicate your first choice, second choice and third choice.

Base: All shareholders (n=1,002)


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When thinking about the worst industries in which to invest in the second half of 2005, the automotive industry tops all, which is a significant increase from November 2004.

Worst Investments For the Second Half of 2005 – Top 3 Worst Industries Top 10 Mentions

Q710: Once again, thinking of the current economy, please indicate which three of the following industries you think are the worst for investing for the second half of 2005. Please indicate your first choice, second choice and third choice.

Base: All shareholders (n=1,002)


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More than half of shareholders expect a continued increase in oil prices. The most common reason cited for high oil prices is international politics.

Q635: Do you expect oil prices to continue to increase, level off or decrease?

Q640: Which of the following best describes why you think oil prices are at their current levels?

Base: All shareholders (n=1,002)


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What do Shareholders think about in oil prices. The most common reason cited for high oil prices is international politics.

Investing in a Global Marketplace?


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The majority of shareholders have most of their portfolio in domestic markets but plan to increase their investment in international markets slightly.

Proportion of Domestic vs. International Investments

Mean %

Currently

% 0 International Investments 45%

% 100% Domestic investments 45%

Q600: Please indicate the actual or expected percentage of your portfolio in the following types of investment markets for each time frame below.

Base: All shareholders (n=1,002)


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Women are more likely to have had a higher percentage of international investments in the past than men. That gap persists through to their projected percentage in five years.

Proportion of International Investments by Gender

Mean %

Q600: Please indicate the actual or expected percentage of your portfolio in the following types of investment markets for each time frame below.

Base: All shareholders (n=1,002)


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While investors of all ages expect to increase their percentage of international investments, younger shareholders anticipate that international investments will comprise nearly ¼ of their portfolio.

Proportion of International Investments by Age

Mean %

Q600: Please indicate the actual or expected percentage of your portfolio in the following types of investment markets for each time frame below.

Base: All shareholders (n=1,002)


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Shareholders agree that international investments will be important in the future and are part of a diversified portfolio. However, just one third feel comfortable making these investments.

Attitudes Towards International Investments

Q645: Please indicate your level of agreement or disagreement with the following statements about international investments.

Base: All shareholders (n=1,002)


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Men are more likely than women to agree that international investments are part of a diversified portfolio and that they are comfortable making these investments.

Attitudes Towards International Investments By Gender

%Strongly/Somewhat Agree

Q645: Please indicate your level of agreement or disagreement with the following statements about international investments.

Base: All shareholders (n=1,002)


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Those under the age of 50 are more likely to agree that international investments guard against a weak US economy, and say they are comfortable with international investments.

Attitudes Toward International Investments By Age

% Strongly/Somewhat Agree

Q645: Please indicate your level of agreement or disagreement with the following statements about international investments.

Base: All shareholders (n=1,002)


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Those in the West agree international investments will be important in the future, used to guard against a weak US economy, and yield larger returns.

Attitudes Toward International Investments By Region

% Strongly/Somewhat Agree

Q645: Please indicate your level of agreement or disagreement with the following statements about international investments.

Base: All shareholders (n=1,002)


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Shareholders are most likely to invest in individual stocks in US based companies with a global presence. However, nearly two-thirds indicate they are not likely to invest in individual stocks in foreign companies or international bond funds.

Likelihood of Making Various Kinds of International Investments

Q605: Thinking about the international investments that you have or expect to make in the future, how likely are you to make these investments through the following vehicles?

Base: Currently have or expect to have international investments (n=580)


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Those who are comfortable with international investments are not surprisingly more likely to make international investments through all these investment vehicles.

Likelihood of Making Various Kinds of International Investments By Comfort Level with International Investments

% Extremely/Very Likely

Q605: Thinking about the international investments that you have or expect to make in the future, how likely are you to make these investments through the following vehicles?

Base: Currently have or expect to have international investments (n=580)


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US companies moving operations oversees and the declining value of the US dollar are viewed as the most contributing factors for why international funds have recently begun to outperform domestic funds.

Reasons Why International Funds Outperform US Funds

Q630: Some data suggests that international funds have recently begun to outperform domestic U.S. funds. How much do you think each of the following contributes to this?

Base: All shareholders (n=1,002)


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Women are more likely than men to attribute the shift in international fund performance to slow economic growth in the US, high oil prices, and US companies moving operations overseas.

Reasons Why International Funds Outperform US Funds By Gender

% A lot/Some Contribution

Q630: Some data suggests that international funds have recently begun to outperform domestic U.S. funds. How much do you think each of the following contributes to this?

Base: All shareholders (n=1,002)


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Majorities of investors report that they are not likely to invest in Europe, China, Japan or India, and especially in Russia.

Likelihood of Investing in Specific Regions or Countries

Q610: How likely are you to invest in the following regions or countries?

Base: All shareholders (n=1,002)


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Women are far less likely to say they will invest in India, China, Japan or the European Union. There are no gender differences in likelihood to invest in Russia.

Likelihood of Investing in Specific Regions or Countries By Gender

% Somewhat/Not at All Likely

Q610: How likely are you to invest in the following regions or countries?

Base: All shareholders (n=1,002)


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Older investors are the least likely to invest in Russia, China, Japan or the European Union.

Likelihood of Investing in Specific Regions or Countries By Age

% Somewhat/Not at All Likely

Q610: How likely are you to invest in the following regions or countries?

Base: All shareholders (n=1,002)


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Investors have mixed views about the impact of Japan and the European Union on the US economy. Conversely, half of investors feel China will have a negative impact on the US economy.

Impact of Other Economies on the US Economy

Q620: In the long run, do you think the following economies will have a positive or negative impact on the United States’ economy?

Base: All shareholders (n=1,002)


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Current international investors are more likely to feel these countries will have a positive impact on the US economy.

Impact of Other Economies on the US Economy By International Investors

% Very/Somewhat Positive

Q620: In the long run, do you think the following economies will have a positive or negative impact on the United States’ economy?

Base: All shareholders (n=1,002)


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Non-international investors are more likely to perceive a negative impact on the US economy from these foreign economies.

Impact of Other Economies on the US Economy By International Investors

% Very/Somewhat Negative

Q620: In the long run, do you think the following economies will have a positive or negative impact on the United States’ economy?

Base: All shareholders (n=1,002)


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Most do not see the European Union or Japanese markets as very risky investments, however Russia is viewed as the riskiest investment.

Risk Level of International Investments

Mean Scores

RussiaChinaIndiaJapanEU

5.7 4.8 4.8 3.8 3.8

Q625: Regardless of where you may invest or the risk level of your investments, please indicate your current view about the risk level of domestic and international markets. Please use a scale of 1 to 7 in which “1” represents “not risky at all” and “7” represents “very risky.”

Base: All shareholders (n=1,002)


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Men are more likely to see Russia as risky, while women view Japan as riskier than men.

Risk Level of International Investments – By Gender

% Very Risky (5, 6, 7 Net)

Q625: Regardless of where you may invest or the risk level of your investments, please indicate your current view about the risk level of domestic and international markets. Please use a scale of 1 to 7 in which “1” represents “not risky at all” and “7” represents “very risky.”

Base: All shareholders (n=1,002)


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Investors age 65+ are more likely to categorize Japan and the European Union as risky investments than those under 65.

Risk Level of International Investments – By Age

% Very Risky (5, 6, 7 Net)

Q625: Regardless of where you may invest or the risk level of your investments, please indicate your current view about the risk level of domestic and international markets. Please use a scale of 1 to 7 in which “1” represents “not risky at all” and “7” represents “very risky.”

Base: All shareholders (n=1,002)


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While Russia is seen as a risky investment among large majorities of investors, this is particularly true among those who say they are comfortable with international investments.

Risk Level of International Investments – By Comfort Level

% Very Risky (5, 6, 7 Net)

Q625: Regardless of where you may invest or the risk level of your investments, please indicate your current view about the risk level of domestic and international markets. Please use a scale of 1 to 7 in which “1” represents “not risky at all” and “7” represents “very risky.”

Base: All shareholders (n=1,002)


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Among non-international investors all countries are seen as more risky compared to current int’l investors.

Risk Level of International Investments – By International Investors

% Very Risky (5, 6, 7 Net)

Q625: Regardless of where you may invest or the risk level of your investments, please indicate your current view about the risk level of domestic and international markets. Please use a scale of 1 to 7 in which “1” represents “not risky at all” and “7” represents “very risky.”

Base: All shareholders (n=1,002)



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Although half of shareholders say they do not plan to invest in China, a third indicate they are taking the “wait and see” approach.

Current Investment in China

I do not plan to invest in China

I am taking a “wait and see” approach

I am planning to invest in China in the next 2-3 years

I am already investing in China and will continue to do so

Q680: Which of the following best describes your current belief as it relates to investing in China?

Base: All shareholders (n=1,002)


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The largest barrier to investing in China is the lack of confidence in the communist government, followed by human rights violations and corporate and government corruption.

Obstacles to Investing In China

Q650: Now we have a few questions specifically about the Chinese economy. Which of the following do you see as the biggest obstacles to investing in China? Please select up to two responses.

Base: All shareholders (n=1,002)


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Females are more likely to see human rights violations as an obstacle, while men are more likely to see China’s lack of a strong financial system as a barrier.

Obstacles to Investing In China By Current International Investors By Gender

Q650: Now we have a few questions specifically about the Chinese economy. Which of the following do you see as the biggest obstacles to investing in China? Please select up to two responses.

Base: All shareholders (n=1,002)


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While there is agreement that lack of confidence in communism is the primary obstacle to investing in China, current international investors are more concerned about corporate/government corruption, while non-international investors are concerned about human rights violations.

Obstacles to Investing In China By Current International Investors

Q650: Now we have a few questions specifically about the Chinese economy. Which of the following do you see as the biggest obstacles to investing in China? Please select up to two responses.

Base: All shareholders (n=1,002)


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Despite the barriers, shareholders see the biggest opportunities as the supply of workers, a fast growing economy, and outsourcing of manufacturing to China.

Opportunities to Invest in China

Q660: Which of the following do you see as the biggest opportunities as it relates to investing in China? Please select up to two responses

Base: All shareholders (n=1,002)


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Men are more likely to see China’s fast growing economy as an opportunity for investing than women.

Opportunities to Invest in China By Gender

Q660: Which of the following do you see as the biggest opportunities as it relates to investing in China? Please select up to two responses

Base: All shareholders (n=1,002)


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The fast growing economy is key for current international investors.

Opportunities to Invest in China By Current International Investors

Q660: Which of the following do you see as the biggest opportunities as it relates to investing in China? Please select up to two responses

Base: All shareholders (n=1,002)


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By far, manufacturing is considered the best investment in the Chinese economy.

Best Investments in China – Top 3 Best Industries

Top 10 Mentions

Q670: Which segments of the Chinese economy do you see as the best investments? Please indicate your first choice, second choice and third choice.

Base: All shareholders (n=1,002)


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Women are more likely to say technology is one the best segments of the Chinese economy to invest in, while male shareholders are more likely to see the automotive industry as among the best investments.

Best Investments in China – Top 3 Best Industries By Gender

Top 10 Mentions

Q670: Which segments of the Chinese economy do you see as the best investments? Please indicate your first choice, second choice and third choice.

Base: All shareholders (n=1,002)


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Current int’l investors are more likely to see the telecommunications industry as one of the best. However, non-international investors are more likely to think technology and travel are among the best industries.

Best Investments in China – Top 3 Best Industries By International Investors

Top 10 Mentions

Q670: Which segments of the Chinese economy do you see as the best investments? Please indicate your first choice, second choice and third choice.

Base: All shareholders (n=1,002)


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Health care, real estate, insurance and media are viewed as the worst segments of the Chinese economy in which to invest.

Worst Investments in China – Top 3 Worst Industries Top 10 Mentions

Q675: Which segments of the Chinese economy do you see as the worst investments? Please indicate your first choice, second choice and third choice.

Base: All shareholders (n=1,002)


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While there is general agreement about the worst investments, men are more likely to think that media and banking/finance are among the worst investments. For women, automotive is among the worst.

Worst Investments in China – Top 3 Worst Industries By Gender

Top 10 Mentions

Q670: Which segments of the Chinese economy do you see as the best investments? Please indicate your first choice, second choice and third choice.

Base: All shareholders (n=1,002)


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How do Shareholders View the European Union and US Markets? investments, men are more likely to think that media and banking/finance are among the worst investments. For women, automotive is among the worst.


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Most shareholders do not perceive the European Union’s economy as being a threat to the US economy.

EU’s Degree of Threat to US Economy

62%

A Little/ Not at All

38%

Great Deal/ Somewhat

Q685: To what degree do you see the European Union’s economy as a threat to the United States’ economy?

Base: All shareholders (n=1,002)


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As age increases so does the belief that the EU economy poses a threat to the US economy. Younger shareholders are least likely to believe this.

EU’s Degree of Threat to US Economy By Age

Q685: To what degree do you see the European Union’s economy as a threat to the United States’ economy?

Base: All shareholders (n=1,002)


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As compared to the EU, shareholders feel the US economy has the advantages of real estate values, productivity and supply of workers. On the other hand the European Union has the advantage of social programs and healthcare.

Economic Advantage – US vs. EU

Q690: Please indicate which economy you currently think has the advantage given each of the following factors.

Base: All shareholders (n=1,002)


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Women are more likely to feel the EU economy has an advantage over the US economy with regards to productivity, effects of gov’t regulation, and healthcare/retirement.

Economic Advantage by Gender

% European Union

Q690: Please indicate which economy you currently think has the advantage given each of the following factors.

Base: All shareholders (n=1,002)


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Men, however, are more likely to feel the US economy has an advantage over the EU economy with regards to productivity, effects of gov’t regulation, and healthcare/retirement.

Economic Advantage by Gender

% United States

Q690: Please indicate which economy you currently think has the advantage given each of the following factors.

Base: All shareholders (n=1,002)


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Demographics advantage over the EU economy with regards to productivity, effects of gov’t regulation, and healthcare/retirement.


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Shareholder Demographics advantage over the EU economy with regards to productivity, effects of gov’t regulation, and healthcare/retirement.

Gender

Total

%

Male 60

Female 40

Age

Total

%

35 years old or less 23

36-49 29

50-64 27

65+ 22

MEAN 49.4

Marital Status

Total

%

Single, never married 16

Married 64

Divorced 10

Separated 1

Widowed 5

Living with partner 4

Race/Ethnicity

Total

%

White 79

Black/African-American 8

Asian or Pacific Islander 2

Native American or Alaskan Native *

Mixed racial background 1

Other race *

Hispanic 8

Decline to answer 2

Children in Household Under 18

Total

%

0 71

1 15

2 10

3+ 4

MEAN 0.5


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Shareholder Demographics (Cont’d) advantage over the EU economy with regards to productivity, effects of gov’t regulation, and healthcare/retirement.

Education

Total

%

High school graduate or less 27

Some college 28

College (e.g., B.A., B.S.) 33

Graduate school (e.g., M.S., M.D., Ph.D.) 12

Party Identification

Total

%

Republican 37

Democrat 31

Independent 32

Employment

Total

%

Employed full-time 43

Employed part-time 8

Self-employed 12

Not employed, but looking for work 3

Not employed and not looking for work 1

Retired 30

Student 6

Homemaker 7

Political Philosophy

Total

%

Conservative 33

Moderate 48

Liberal 20


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Shareholder Demographics (Cont’d) advantage over the EU economy with regards to productivity, effects of gov’t regulation, and healthcare/retirement.

Household’s Total Net Worth

Total

%

Less than $50,000 13

$50,000 to $99,999 12

$100,000 - $249,999 17

$250,000 or more 36

Not sure 3

Decline to answer 19

Investable Assets

Total

%

Less than $50,000 26

$50,000 to $99,999 15

$100,000 - $249,999 16

$250,000 or more 17

Not sure 6

Decline to answer 20

Household Income

Total

%

Less than $50,000 22

$50,000 to $99,999 33

$100,000 to $149,999 22

$150,000 or more 11

Decline to answer 12

Member of Investment Club

Total

%

Current Member 3

Former Member 6

Never a Member 91

Knowledge of Investing

Total

%

Not at all Knowledgeable 14

Somewhat Knowledgeable 68

Very Knowledgeable 14

Extremely Knowledgeable 3

Heard of National Association of Investors Corporation (NAIC)

Total

%

Yes 33

No 67


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Shareholder Demographics (Cont’d) advantage over the EU economy with regards to productivity, effects of gov’t regulation, and healthcare/retirement.

Region

Total

%

East 25

Midwest 21

South 32

West 22


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Detailed Methodology advantage over the EU economy with regards to productivity, effects of gov’t regulation, and healthcare/retirement.


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Detailed Methodology advantage over the EU economy with regards to productivity, effects of gov’t regulation, and healthcare/retirement.

The Voice of the American Shareholder Quarterly PollWave 6 was conducted by Harris Interactive on behalf of BetterInvesting. Interviewing was conducted between April 26 and May 6, 2005 among a nationally representative sample of 1,002 U.S. adults aged 18 and older who currently have investments in individual stocks or stock mutual funds. The length of the questionnaire was 10 minutes in length, not including the demographics.

SAMPLE SELECTION

Harris Interactive maintains the Harris Poll Online database (HPOL) comprised of several million respondents who have agreed to participate in survey research. The HPOL database was used as the sample source for this study. E-mail addresses for respondents in the database have been obtained from over 100 sources, including the HPOL registration site, Yahoo!, HPOL banner advertisements, and MSN/Hotmail.

Qualified respondents for this study were U.S. adults age 18+ who identified themselves as currently having investments in individual stocks or stock mutual funds in response to the question “Please indicate which types of investments or investment accounts you personally have.”

ONLINE INTERVIEWING PROCEDURES

Interviews were conducted using a self-administered, online questionnaire, via proprietary, web-assisted interviewing software. The HPOL interviewing system permitted online data entry of interviews by the respondents. Questionnaires were programmed into the system with the following checks:

1.      Question and response series

2.      Skip pattern

3.      Question rotation

4.      Range checks

5.      Mathematical checks

6.      Consistency checks

7.      Special edit procedures


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Detailed Methodology (cont’d) advantage over the EU economy with regards to productivity, effects of gov’t regulation, and healthcare/retirement.

ONLINE INTERVIEWING PROCEDURES (cont’d)

To maintain the reliability and integrity in the sample, each invitation contained a password that is uniquely assigned to that e-mail address. A respondent was required to enter the password at the beginning of the survey to gain access into the survey. Password protection ensured that a respondent completed the survey only one time.

To increase the number of respondents in the survey and to improve overall response rates, up to two additional reminder invitations are typically mailed at 2-4 day intervals to those respondents who have not yet participated in the survey. For this study, one reminder was sent to potential respondents.

To increase the number of respondents in the survey and to improve overall response rates, respondents were provided with a summary of some of the survey responses. This too was done via the Internet. Respondents were sent an email that provided them access to a web site that contained the survey findings. As with the survey itself, this was a password protected site that was accessible for a limited period (1-2 weeks).

All data were then tabulated, checked for internal consistency and processed by computer. A series of computer-generated tables were produced for each of the key sample groups that showed the results of each survey question, both by the total number of respondents and by the key subgroups.


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Detailed Methodology (cont’d) advantage over the EU economy with regards to productivity, effects of gov’t regulation, and healthcare/retirement.

WEIGHTING

Completed interviews were weighted to figures obtained from the Current Population Survey (CPS). Harris used several demographic variables (e.g., sex, age, education, race and ethnicity and income) to generalize survey results to the population at large.

In addition, Harris Interactive applied a proprietary technique to the data called "propensity weighting" that essentially balanced all the characteristics (e.g., demographic, attitudinal, and behavioral) of online respondents. It is no surprise that certain kinds of people have a greater or lesser likelihood to be online and therefore to reply to our surveys. To account for this, Harris gave each individual a “propensity weight” which corresponded to their likelihood to be online. This ensured that the sample represented the general shareholder population at large and was not skewed toward more active online users or survey takers. In addition, people who had a lesser likelihood to be online acted as a proxy for those who are not online at all. Typical propensity weights that were used included measures of activity (our online respondents do more things), knowledge (our online samples are better informed), and attitudes (our online samples are more skeptical or cynical).


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Detailed Methodology (cont’d) advantage over the EU economy with regards to productivity, effects of gov’t regulation, and healthcare/retirement.

WEIGHTING (CONT’D)

It is also worth mentioning that Harris conducts parallel telephone and online research on a regular basis through The Harris Poll, our monthly omnibus survey. By conducting this research, Harris is able to track results to make comparisons between data collected online and by phone, closely examine the biases and most importantly, develop strategies for correcting these biases. In fact, Harris has an internal department that is entirely focused on conducting this “research on research.”

EDITING AND CLEANING THE DATA

The data-processing staff performed machine edits and additional cleaning for the entire data set. Our edit programs acted as a verification of the skip instructions and other data checks that were written into the online program. The edit programs listed any errors by case number, question number and type. These were then resolved by senior personnel, who inspected the original file and made appropriate corrections. Complete records were kept of all such procedures.


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Detailed Methodology (cont’d) advantage over the EU economy with regards to productivity, effects of gov’t regulation, and healthcare/retirement.

CALCULATION FOR BETTERNVESTING INDEX

  • The BetterInvesting Index measured shareholders’ overall perspective in the stock market from three different vantage points or categories: 1) overall confidence in the stock market and economy, 2) personal investment behaviors and 3) attitudes about risk and the value of stocks.

  • Within each of these vantage points, the Index was derived from component items from the BetterInvesting Voice of the American Shareholder January 2004, May 2004, November 2004, February 2005, and May 2005 surveys. The component items are as follows:

  • 1) Overall confidence in the stock market and economy:

  • Q410: How much confidence do you have the U.S. economy is generally moving in the right direction?

  • 2) Personal investment behavior

  • Q511 a, b: Thinking about your investment portfolio, over the next six months, do you plan to increase, decrease, or make no change in your investments in (individual stocks; stock mutual funds)?

  • Q505: Investment risk is typically defined as a greater likelihood that your portfolio may lose value but it often associated with higher returns. How would you characterize most of your investments on a scale from “not risky at all” to “very risky”

  • 3) Attitudes towards investment risk and the value of stocks:

  • Q502: How strongly would you agree or disagree with the following statements:

    • It’s a good time to move money into safer, lower risk investments from higher return/higher risk investments.

    • Most stocks are a better bargain now than they were a year ago.

    • It’s a good time for new investors to get involved in the stock market.


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Detailed Methodology (cont’d) advantage over the EU economy with regards to productivity, effects of gov’t regulation, and healthcare/retirement.

CALCULATION FOR BETTERINVESTING INDEX – (cont’d)

For each component item within the three overall categories, a ‘component score’ was calculated by taking the difference of the percentage of positive responses and the percentage of negative responses.

  • For example, in May 2005, Q410: “How much confidence do you have that the United States’ economy is generally moving in the right direction?”

    • 14% responded that they have a great deal of confidence in the direction of the economy, 77% responded that they had a fair amount or not much confidence and 9% indicated they had no confidence at all.

  • This yielded a component score of 14% - 9% = 5.0%

  • To calculate the BetterInvesting Shareholder Index, we then took the mean of the 7 component scores.


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Detailed Methodology (cont’d) advantage over the EU economy with regards to productivity, effects of gov’t regulation, and healthcare/retirement.

CALCULATION FOR BETTERINVESTING INDEX – (cont’d)

The following table shows the component scores for each item used in calculating the Index for September 2003, January 2004, May 2004, November 2004, February 2005, and May 2005.

Please note that since the three statements that make up Q502 were not asked in the September 2003 survey, the scores below should only be used to get a general sense of how the scores have changed on the other items that were repeated between September 2003 and November 2004.


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Detailed Methodology (cont’d) advantage over the EU economy with regards to productivity, effects of gov’t regulation, and healthcare/retirement.

CALCULATION FOR BETTERINVESTING INDEX – (cont’d)

Validating the Index

In order to measure the validity of the BetterInvesting Index, an investment allocation exercise question was included in the January 2004, May 2004, February 2005, and May 2005 surveys. The purpose of this question was to be able to link the “attitudinal” nature of the NAIC Index to observable behavior in future waves of this research.

The question (Q515) asked: “If you had ($10,000/$100,000) to invest, how much would you invest in each of the following?

  • Individual stocks

  • Stock mutual funds

  • Individual bonds

  • Bond mutual funds

  • Cash

  • Alternative Investments

  • This question was structured so that half of all shareholders interviewed were shown $10,000 in the question and the other half were shown $100,000.

  • The idea was that changes in shareholder confidence, as measured by the Index, should be reflected in changes in portfolio allocation. As confidence improves, we would expect that shareholders would become growth-oriented and conversely as confidence weakens, we would expect that shareholders would allocate money towards safer investments.


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