When the Market Fluctuates, Boomers Stay Put

A new study of Americans age 50 and older finds that the majority claim to be ‘long-term investors who understand market fluctuations are natural’

Three in 10 boomer investors expect more volatility in the next decade, American Funds says. (Photo: AP) Three in 10 boomer investors expect more volatility in the next decade, American Funds says. (Photo: AP)

What do baby boomers do when the market fluctuates?

Most of them do nothing, according to a new study from American Funds.

American Funds, a family of mutual funds from Capital Group, interviewed U.S. adults age 50 years or older who have at least $100,000 in investable assets and found that many make an investment plan and stick to it.

Of the total 1,035 respondents that participated in the survey, 69% are “long-term investors who understand market fluctuations are natural,” the report says.

This week alone has already seen its fair share of market fluctuations.

When asked about their general expectations over the next 10 years, many of these older investors said they expect it to go higher but with significant volatility.

According to the the survey, 58% expect the market to climb in the next decade, averaging single-digit annual returns or performing as well as the bull market of the past five years.

The survey finds that three in 10 investors are “bracing for a bumpier ride over the next decade,” with market corrections and a potential crash resulting in lower returns relative to historical averages.

“But these investors do not change their plans when the market fluctuates,” according to American Funds’ “The Wisdom of Experience” report. “The long-term focus holds true across all the investors we surveyed, with older, wealthier and male investors voicing the most commitment to sticking to a long-term plan and strategy,”

Interestingly, the survey finds that wealthier investors are more likely to stick with their investment plan than those with less wealth.

According to the survey, 76% of the investors with $1 million or more in assets stick to their investment strategy – which is more than people with $500,000 or more in assets (68%) and more than those who have between $100,000 and $500,000 in assets (58%).

(Of those surveyed, 42% had $100,000 to $500,000 in investible assets, 31% had $500,000 to $1 million, and 23% had more than $1 million.)

Also interesting is that more retirees (75%) than non-retirees (62%) and more men (72%) than women (65%) are more likely to stick to their investment plan and strategy.

(Nearly half of the survey participants were retired and nearly half were women.)

The survey also digs deeper into these investors’ specific strategies and appetite for investing.

To generate income for a long retirement, 75% of the survey participants plan to stay invested in equities, and 74% also believe the right mutual funds can outpace the market and do better than average.

The survey also finds that 72% say mutual funds with objectives such as growth and income, lower volatility and low fees can help people “live better and enjoy their active retirement years.”

Four of five investors surveyed also said protecting their savings from market downturns is a key priority.

While investors in the survey expressed that they want to protect the downside and want funds that are less volatile and more resilient, the survey finds that their understanding of how funds perform in various market conditions is limited.

According to the survey, only half (53%) of investors are aware that index funds deliver the actual stock market performance and expose investors to the full ups and downs of the market. (American Funds is a major purveyor of actively managed funds.)

The survey also finds that nearly two-thirds of respondents didn’t agree that index funds were riskier for those with a shorter time horizon to bounce back from a market downturn.

---Related on ThinkAdvisor:

Page 1 of 2
Single page view Reprints Discuss this story
We welcome your thoughts. Please allow time for your contribution to be approved and posted. Thank you.

Related

3 Keys to Picking Active Retirement Investments: American Funds

Actively managed equity funds that met these three criteria historically generated more wealth for retirees compared with index portfolios, according...

Most Recent Videos

Video Library ››