More Individual Investors Jumping Into Stock Market: Vanguard
Affluent investors are moving to fixed income, while those with defined contribution plan funds have stayed on the sidelines.
During the recent stock market volatility, most investors — more than 90% according to Vanguard — are staying the course with their money. However, about 8% of U.S. households have been active, making at least one trade between Feb. 19 and March 20, Vanguard found.
“Of the 22 trading days during that time, 16 were among the highest U.S. household trading days since we began tracking in 2011, a period that includes more than 2,000 trading days,” the paper stated.
And most those households, about seven in 10, moved money into equities rather than fixed income, Vanguard found. That said, affluent clients have moved into fixed income, which has had a modest positive net inflow. The paper noted that “This suggests that older and/or wealthier clients are more likely … to sell into stock declines while the typical household “buys on the dips.”
Also, the activity of households that traded between those dates was double the amount over the same time period in previous years. And the proportion of all U.S. household assets that traded was 4.8%, also double the amount over the same time in previous years.
Vanguard also found that households with defined contribution funds exhibited the lowest levels of trading at 2.5%. Meanwhile, affluent households with both IRAs and taxable accounts were among the most active traders at around 25%, up from just over 14% in previous years.
Despite the amount of households making trades, the actual number of trades is low. Of those who traded, roughly 50% made one trade during the period from Feb. 19 through March 20, lower than the previous year’s average of 65%. Eighteen percent of those who traded made two trades while 7.5% made six to nine trades.
As the paper highlights, most individual investors haven’t traded during the stock market gyrations: “On balance, we believe these levels of trading indicate that the vast majority of investors are maintaining a long-term perspective despite the market turmoil.”
— Related on ThinkAdvisor: