Despite being badly spooked by the 2008-09 financial crisis,
Americans have retained their faith in the stock market.
That's one key lesson in the latest IBD/TIPP Economic Optimism
"Given what people went through in the downturn, I expected
more people to shy away from stocks," said Raghavan Mayur,
president of TIPP, a unit of TechnoMetrica Market Intelligence,
IBD's polling partner. "But it's not so. They're investing less
aggressively. But they're still investing with stocks."
The survey results show those mixed feelings.
Among investors who took at least some money out of the
market in response to the market meltdown, 66% are waiting to put
money back in.
Apparently, many of those investors are not convinced the
current rally is for real, Mayur says.
Likewise, 67% said they have become less aggressive
investors. But instead of abandoning stocks totally, they have
shifted somewhat to more conservative, higher-yielding stocks
rather than investing mainly in growth stocks.
Similarly, 58% of people polled said that in recent years
they have begun to invest less in individual stocks and more in
Here too, they are seeking professional management and the
benefits of diversification rather than turning their backs on
Defensive measures have a limit. While 43% said they are
investing less in stocks than in other assets such as bonds, real
estate and precious metals, a majority -- 53% -- said they are
not cutting back on stocks in favor of other assets.
"People recognize that stocks grow better than bonds over the
long run," Mayur said. "And they know they can hurt their
long-term returns by shying away from stocks too much."
Another sign that people don't want to get too conservative
with their investments was the broad commitment they expressed to
Seventy-seven percent of people surveyed said they did not
pull all or even most of their money from the stock market as a
result of the 2008-09 financial crisis.
IBD/TIPP polled 915 adults March 25-30.
That's a smart approach to investing, says T. Rowe Price
financial adviser Judith Ward.
"The more you keep emotions out of investing, the better off
you'll be in the long run," Ward said. "Many people who did move
money out during the crisis have not seen gains as big as those
who stayed in the market. They've missed some of the early market
Jitters remain despite the ongoing market rally. The caution
is fueled by the slow pace of economic growth and jobs gains.
A majority of the people polled feel that the U.S. is in a
recession. And 20% of households have at least one person looking
for a full-time job.
About 30% of those polled are somewhat to very concerned that
they or someone in their family will be laid off within the next
"Those are signs of lingering after-effects of the downturn,"
Preparing For The Future
So how should people prepare for the next big market
"Invest in an asset allocation that's right for you, based on
your age and goals," Ward said. "If you're close to retirement,
you may not want to be 100% in stocks."
A more balanced portfolio will likely lose less than the broad
stock market in a pullback.
Knowing that your portfolio is already positioned to absorb
shocks better than a 100%-stock portfolio should make it easier
to stay invested and keep contributing.
"Even if the market goes down, your dollars will buy more
shares," Ward said. "When the market comes back, you'll be in
even better shape."