Heightened geopolitical tensions, soaring inflation and the subsequent tightening of monetary conditions recently decimated the longest-running bull market in history and ushered in a rare bear market for both stocks and bonds. Along the way, investors understandably grew more anxious about the economy and the markets, but in a sign of remarkable resilience, most have stayed true to their long-term plans and remain invested.
According to a recent survey of approximately 2,000 self-directed investors age 50 and older conducted by Janus Henderson (opens in new tab), 86% reported being “concerned” or “very concerned” about inflation and nearly as many (79%) were worried about the stock market. Despite these elevated levels of unease, just 13% moved money out of stocks or bonds and into cash due to recent volatility or rising inflation.
"The stock market is a device to transfer money from the impatient to the patient."
Warren Buffett
The old adage, “It's not about timing the market, but about time in the market,” appears to have resonated with a demographic that experienced both the dot-com bubble of the late 1990s and the global financial crisis that occurred just over a decade ago. The fact that the majority of self-directed investors opted to stay the course through a period when a portfolio comprised of 60% stocks and 40% bonds was down by double digits is particularly admirable. And with the S&P 500 rising 6% during the first month of 2023, this patience has not gone unrewarded in the new year.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Belt-Tightening Over Panic-Selling
Digging deeper into the findings, the same survey revealed that, rather than cashing out of stocks and bonds during the downturn, investors were more likely to tighten their budgets: Nearly half (49%) reduced their spending or planned to reduce spending to offset rising costs and less discretionary income.
For some, expectations for better days ahead might help to explain why they did not increase cash allocations, as the majority of respondents (60%) expect the S&P 500 to close 2023 at a higher level than the end of 2022, while only 26% believe the index will close the year lower, and 14% anticipate it will be relatively unchanged.
While the research didn’t probe further into why investors were staying the course amid unprecedented volatility, the findings suggest that awareness of the challenges of market timing is improving, particularly among investors who are approaching retirement age.
Advisers Shine Amid Market Volatility
The research also found that 9% of respondents hired or planned to hire a financial adviser, while less than 2% planned to change financial advisers due to whipsaw market volatility. Notably, 13% of investors were planning to meet more often with their existing financial adviser. These findings suggest very few investors blamed their adviser for lower portfolio values.
Given their impact on portfolio balances, market declines can often lead to delayed retirements and budget adjustments for some investors. However, despite the challenging environment experienced in 2022, a significant number of investors are still confident they can have the retirement they envisioned: 55% reported that their confidence in their ability to have enough money to live comfortably throughout retirement has not changed.
Many Investors Taking a Measured Approach
In an age when many news outlets portray retail investors engaged in reckless day trading and basing investment decisions on information from online forums like Reddit and Twitter, it’s encouraging to see that many investors are taking a measured approach to market volatility. They’re sticking to their long-term plans, avoiding impulsive decisions and resisting any urges to try to time the market.
This type of responsible investing behavior might not make for colorful headlines and anecdotes, but it has proven time and time again to be an effective approach to achieving one’s retirement goals.
This material is not intended to be legal or fiduciary advice or a full representation of all responsibilities of plan sponsors and advisors. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.
The opinions and views expressed are as of the date published, are subject to change and may not reflect the views of others in the organization. They are for information purposes only and should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation to buy, sell or hold any security, investment strategy or market sector. There is no guarantee that the information supplied is accurate, complete, or timely, nor are there any warranties with regards to the results obtained from its use. C-0223-48680 02-15-24
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC (opens in new tab) or with FINRA (opens in new tab).
-
-
Longevity: The Retirement Problem No One Is Discussing
Many people saving for retirement fail to take into account how living longer will affect how much they’ll need once they stop working. What should they do?
-
Capital Gains Taxes Trap: How to Avoid Mutual Fund Tax Bombs
It’s bad enough when your mutual fund’s assets lose value, but owing unexpected capital gains taxes after those losses is doubly frustrating.
-
Longevity: The Retirement Problem No One Is Discussing
Many people saving for retirement fail to take into account how living longer will affect how much they’ll need once they stop working. What should they do?
-
Capital Gains Taxes Trap: How to Avoid Mutual Fund Tax Bombs
It’s bad enough when your mutual fund’s assets lose value, but owing unexpected capital gains taxes after those losses is doubly frustrating.
-
Why Investors Should Avoid Buying the Banking Sector Dip
Even though things appear to have settled after SVB's collapse, that doesn’t mean all is clear. Consider options like healthcare and consumer staples instead.
-
Four Sustainable Investments That Could Have a Positive Impact
As we celebrate Earth Day, consider doing some research aimed at transitioning to a more sustainable and responsible portfolio. These four companies are worth a look.
-
In an Overpayment Scam, Your Bank Could Be a Thief’s Best Friend
One man learned the hard way that an overpayment scam can happen to anyone, but the even harder lesson might be that his bank did nothing to protect him.
-
Want to Do Board Service? Start the Search Before You Retire
Seasoned executives who want to shift to advisory and thought leader roles should evaluate motivations and skills and build a strong professional network.
-
Why Investing in Debt-Free DST Properties Makes Sense Today
Headlines about world-class real estate firms being forced to relinquish assets show the dangers of investing in leveraged real estate.
-
Don’t Hand Your Retirement Income Planning Over to AI Just Yet
Some are saying artificial intelligence can replace human financial advisers, but even ChatGPT recognizes the value of experience, judgment and a beating heart.
