Scary Investment Trends; Fear or Greed?

Scary Investing Trends

With Halloween fast approaching, I'm seeing some very creative decorations around the neighborhood. Ghosts, tombstones with morbid etchings, and the like.



I am also seeing and want to report to you, some disturbing investment trends that are sure to scare some investors into making some bad money decisions. 

One trend in the works since the 2007-2008 market crash is stock ownership. The percentage of household that own stock has fallen from 65% to 55% in the last 10 years. 

Looking at the various age groups in the study, every age range except age 65+ saw a decline in stock ownership. And remember, we're had a very good bull market in stocks for 9 years now - after the bear market ended in March 2009! 



Why is that? Well, the reasons are many no doubt, but that last recession and bear market (2007-2009) cut deep into the psyche of many investors, many of whom lived through the 2000-2001 market meltdown also. As an example, if you were born in the mid-to-late 1970's and started your career and investing at age 25, in or near 2000, you experienced the "lost decade" from 2000-2010 when stocks were essentially flat; no gain or loss. Then you may have dipped you toe in the water in 2011 or 2012 and saw some nice gains from there. Fear of loss was stronger than your fear of missing out. 

Then a few years earlier, in 2005-2006, the real estate downturn started, and your biggest asset - your home - plummeted in value (unless you were prescient to sell at the top). 

No generation has been exempt from bear markets, where stocks fall sharply after bull markets end. That real estate bear market had never occurred before to that extent.

I will include real estate in this, and say that the 'lost generation of investors' includes those who owned stocks and real estate, since both suffered severe bear markets during that 10 year span. 

Looking really far back, to the Great Depression of the 1930's - research shows that adults who lived through that - they would be your grandparents or great-grandparents age-wise were 1/2 less likely to invest in stocks the rest of their lifetimes; just an average 13% ownership in stocks. 

That was the case for my grandparents, and I evidenced that first hand how they gravitated toward bank CD's, Government Bonds, and F.D.I.C. insured deposit accounts. 


Fidelity Investments dug in to their client accounts and unearthed what I find to be spooky trends that are in place right now.

 47% of Fidelity's 19.7 million retail brokerage accounts are invested in aggressive portfolios, defined as those containing 85% of more in equities (stocks). Huh? 85%? Maybe they have their bonds, cash and Gold assets parked with other brokerages or banks. Hmmm, not likely. 85% is okay if you are 25-35 years old, with 25-35 years until retirement, but not for many or all. As Clint Eastwood growled out in his 1973 Magnum Force movie, "A man's got to know his limitations".

On the brighter side, Fidelity also reported that one-half (50%) of their client's 401-k monies were invested in target date funds. Those are mutual funds and others that invest in stocks and bonds, but decrease your stock market exposure, and increase your fixed income (bond) holdings as you age, thus lessening the volatility of your money when you retire. That's a rather smart strategy if you don't want to hire a manager, or don't have the time or energy to do it yourself. To me, this show a reversal of the quip from above, in that investors are now more fearful of missing out vs. the fear of loss. 

Believe me, the fear of loss will rear its ugly head again. You could make an argument that it's begun already, with the popular stock market averages (Dow, S&P, Nasdaq) down 8%, 9% and 11% from their September highs as of today's closing quotes.

Bonds have been held back and have not countered the fall in stock prices. Gold has gained 4% since stocks peaked last month.



Be careful out there, watch the charts, and have a plan in place that's rules based, not emotional-based.