56% say their financial situation would be hurt by it
One in four say they hardly ever look at portfolio
Most investors are not acting proactively to shield their portfolio as less than half say they are consulting with a financial advisor (48%) or rebalancing their portfolio (40%) in anticipation of a correction. Even fewer say they are selling stocks to help protect from future losses (18%) or buying bonds to help reduce their exposure to market risk (20%).
“One of the consequences of a protracted bull market is, unfortunately,
investor complacency. With a market correction inevitable at some point,
it’s important for investors to check their confidence with a
comprehensive risk assessment to determine how a market correction could
affect their overall investment strategies,” said
One reason investors may be feeling somewhat complacent is that they aren’t hearing much in the news about a possible market correction. Only 36% say they have heard a lot or moderate amount about this in the news, while 63% have heard little or nothing.
Additionally, the financial wound of the recent recession finally
appears to be healing for many. The percentage of investors who say they
have not financially recovered from the recession is now 26%, down from
These findings come from the
Correction Pain Would be Widespread
Even though investors aren’t fretting over a possible market correction,
56% say their financial situation would be hurt either a lot (13%) or a
moderate amount (43%) by such a downturn. The overall percentage
believing they would suffer financially includes 60% of high asset
investors – those with
At the same time, investors hedge when asked if they feel prepared for a market correction. Barely a third (32%) strongly agree they are prepared, while another 48% somewhat agree they are prepared. Fully one in five (20%) says they are not prepared.
“It’s noteworthy that investors say that their financial situation would be hurt by a market correction and yet they’re still not highly prepared,” added Hunt-Ruddy. “This underscores the need for professional financial advice or, at the least, a written investment plan and regular rebalancing of one’s portfolio.”
Those Who Snooze May Lose
When investors were asked to say which one of four investing styles most closely matches their own, most say they are a “good listener,” defined as investors who know where to get sound advice and usually follow it (55%). However, the next largest group, at 24%, is self-proclaimed “snoozers” who say they hardly ever look at their portfolio. Just 10% consider themselves “pros” that do their own research and feel confident in their abilities while 8% admit they are “instinctive investors” who mostly wing it.
Most investors – regardless of their gender, age, retirement status or
investment class –describe their investing style as a good listener.
However, non-retirees (26%) are more likely than retirees (18%) to
describe themselves as snoozers. Also, investors with less than
Half Rely on Professional Advisor for Market Advice
Despite investors’ recognition that they are not investing pros, only about half (49%) say they are most likely to turn to a professional financial advisor to help them through a market correction. A third would rely on their own knowledge or research (35%) while 13% would turn to a trusted friend or family member and just 1% would rely on financial news commentators.
Do They Know Knowledge –and Diversification–is Power?
The poll reveals other risks to investors’ ability to weather a correction. Barely a quarter of investors, 28%, describe their portfolio as highly diversified. Another 48% say it is somewhat diversified while 21% say it is not too diversified or not diversified at all.
Rebalancing is another mechanism for maximizing gains in a portfolio and can be especially important leading up to a correction. Yet less than half of investors (46%) report that they rebalance their portfolio at least annually; 21% say they do it less often and 29% say they never do it. Three in 10 investors (31%) say they would rather be stuck in traffic for an hour than rebalance their portfolio.
“In my view, diversification is the hallmark of savvy investing and one of the most important ways to weather a market correction,” said Hunt-Ruddy. “It’s concerning that more investors are not taking advantage of diversification and rebalancing of their portfolios.”
The poll included two questions testing investors’ basic knowledge about the markets. While most investors were right on at least one, less than half (46%) answered both correctly.
“With just 46% of investors answering both of these fundamental investing questions correctly, the remaining 54% may be ill-equipped to be managing their own investments without professional advice,” said Hunt-Reddy. “This underscores the need for financial advisors to be consistently helping investors understand the market as well as their own portfolio.”
Many Investors Still Risk Averse
Although investors aren’t fearful about a correction, aversion to market losses remains an important part of investors’ psychology, as seen in three different questions on the poll.
These findings are part of the
The Index of Investor Optimism had a baseline score of 124 when it was
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