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Coronavirus Spotlights Investors’ Biggest Mistakes

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The coronavirus pandemic has shed unwelcome light on many aspects of American life. Now a new survey from MagnifyMoney reveals another one.

More than half of respondents regretted a past investment decision that came to light during the crisis, including 92% of arguably less-experienced Gen Z investors and 79% of Gen Xers.

In comparison, only 33% of baby boomers and 24% of older investors said they had made a mistake in their investments.

Qualtrics conducted the online survey from April 28 to May 1 among 2,008 Americans 18 and older, including 1,183 investors and 866 non-investors.

Mistakes Happen

The mistakes investors owned up to were not particularly surprising; they included the kinds of decisions advisors have long inveighed against.

Twenty-three percent of respondents — 29% of Gen X and 27% of millennials — regretted lack of portfolio diversification. Thirty percent of men in the survey did so, too, compared with 13% of women.

Nineteen percent of participants said they had taken on risky investments and regretted it. Most sorry were about a third of Gen Z respondents and a quarter of Gen Xers.

The report noted that high-risk investments included IPOs, structured products and venture capital trusts. Trying to time the market for maximum returns — considered a no-no by many experts — is also risky, it said.

A third investment mistake 13% of respondents and 27% of Gen Z owned up to was keeping all of their savings in the stock market. Considerably fewer investors from other generations said they had done this.

Mistakes have consequences. Survey participants with investment accounts estimated their stock market losses were about $24,400 on average since the coronavirus outbreak intensified in March.

Boomers and older investors — those likely relying heavily on their investments in retirement — lost roughly $56,000 and $63,300, according to the survey.

Women in the poll estimated that they had lost some $32,300 through the stock market, while men put their investment losses at around $18,700.

Recovery Prospects

Thirty-four percent of investors expressed full confidence that their investments would rebound by the end of 2020, but some were more hopeful than others.

Forty-eight percent of investors who identified as Republicans were very confident that their investments would recover by year-end, compared with 26% of Democrats and 22% of independents.

For their part, older investors were much less confident in their investments’ recovery prospects than younger ones.

As to how soon the stock market would recover, 22% said it would do so in two to five months. However, more than a third said it would take a year or longer.

This week, one analyst said the S&P 500 and the Dow Jones Industrial Average would recover most of the losses they incurred from February peaks in about 15 months.

As the stock market shows signs of growth despite the grim financial prospects of many Americans, more than half of respondents in the MagnifyMoney survey agreed that the stock market does not completely depict the average U.S. consumer.

Republicans and those with investment accounts, including a retirement savings account, were likelier to believe that the market mirrors the average consumer than were Democrats and those without investment accounts.

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