The center headline of today's USA Today reads, "
Invest in stocks? FORGET ABOUT IT
". The psychology of investing in the stock market has shifted. The
retail investors' thought process and behavioral biases remain
intact and flawed. The same factors that contributed to buying
in the past will likely repeat themselves over and over again until
investors create a
and recognize how emotions affect their decision-making.
can be summed up in one simple sentence, "
Playing the market isn't as sexy as it used to be.
" The interviews performed by the author are textbook examples of
the psychological impacts on investing and their negative impacts.
The "traumatic shock" suffered from the 2008-09 financial crisis
caused a shift in portfolios to a more conservative nature. This
shift, a move to cash or bonds, caused many investors to miss the
100% increase in the market from the depths of the bear market in
2009. The investment was not flawed; however, the decision to
change was. Most often, the decision to change was driven solely by
emotions, not a change in objectives or risk tolerance.
One of the most alarming stats is "the percentage of U.S.
households that own individual stocks or stock mutual funds dropped
to 46.4% last year, down 13 percentage points since 2001, ICI [
] data show. The reaction to investing in the stock market in the
future included: never, when "the market dips", and after "another
sizable swoon like 2009." However, the investment professional
disagree. They feel two things will drive investors back into the
stock market: the markets returning to all-time highs or when bond
affecting the value of the asset class investors have run to for
A recent update to Gallup's
Economy and Personal Finance poll
verifies this sentiment. The survey asked: "Which of the following
do you think is the best long-term investment: bonds, real estate,
savings accounts and CDs, stocks and mutual funds, or gold?" Gold
came out the winner as 28% of Americans' still perceive it as the
best long-term investment. Real Estate came in second at 20% with
stocks and savings accounts tying for third with 19%. A deeper look
into past surveys reveals stocks received their highest score in
April 2007 as many indexes approached all time highs. Their lowest
score came in April 2009 just as they were about to double over the
next 4 years. Survey takers were almost perfect at having the exact
Everyone thinks they are smarter than the crowd, or they can be
the person to time it right. A deeper look at their results and
data reveal investors get it wrong nearly every time.
The intent of this article is to help expand your financial
education. Although the information included may be relevant to
your particular situation, it is not meant to be personalized
advice. When it comes to investing, insurance and financial
planning, it is important to speak to a professional and get advice
that is tailored to your unique, individual situation. All
investments involve risk including possible loss of principal.
Investment objectives, risks and other information are contained in
the Snider Investment Method Owner's Manual; read and consider them
carefully before investing. More information can be found on our
website or by calling 1-888-6SNIDER. Past performance is not
indicative of future results.