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2009Oct8 Changing Investor Attitudes

 

HAVE THE PAST TWO YEARS CHANGED THE WAY YOU VIEW YOUR INVESTMENTS?
 
 
Thinking about the last two years, has the amount of risk you take with your investments increased, decreased or stayed the same?
Two thirds of the respondents indicated they have reduced the amount of risk they are willing to bear. This is confirmed by recent trends in mutual fund purchases. This past year has been a winner for bond fund managers who have seen huge amounts of new capital flowing into their funds. The flip side is the departure of accounts experienced by stock mutual funds which have been recovering from the March market bottom.
 
Compared with two years ago, how has your attitude towards investing in the stock market changed, if at all?
Consistent with the increased risk aversion seen in the previous responses, 56% indicated they were less inclined to invest in the stock market. The remainder was split evenly between those whose attitudes were unchanged and those who were more likely to buy stocks, presumably because they recognized bargains.
 
Have you changed your investment choices in the last two years?
Almost 78% of respondents indicated a change in their investment choices. This is larger than just those who have shifted from equities to fixed income alternatives. Apparently, even those still interested in equities have made some adjustment to their asset allocation decisions. The trend among our respondents would imply a shift to the conservative side to avoid more losses.
 
If you were making an investment decision tomorrow, would the amount of professional advice you seek increase, decrease or stay the same?
For those investors using some form of advice, they remain undaunted in their need for the advice. Only eleven percent indicated they would decrease the use of advisors in their future investments.
 
Do you think the government protects investors adequately?
Only eleven percent of the respondents believe the government adequately protects investors. The remainder is equally split between insufficient protections and unsure about the issue. This really is an issue of understanding what the government has committed to do for investors facing losses. It is not insuring anyone’s market value. That is an investment risk decision that is controlled by portfolio construction. The government’s SIPC insurance is against loss from a brokerage firm becoming insolvent or from fraud by a firm’s employee’s or representative’s actions. Unlike the FDIC, the assets at a brokerage firm have fluctuating values. If you had 100 shares of IBM held at a failing firm, SIPC guarantees you will receive your 100 shares, not what they will be worth when returned to you.