March 04, 2010
--- Most mutual fund investors did not abandon stocks during the market
decline of 2008 to 2009, but, unlike previous recoveries, have not
shown considerable interest in adding to their equity positions during
the subsequent rebound, according to research by Vanguard. ---
“In Equity Abandonment in 2008-2009: Lower Among Balanced Fund Investors,” Vanguard researchers found that only a very small percentage of equity investors sold out of the market entirely during the market tumult. The equity abandonment report analyzed the activity of 2.7 million IRA investors from the beginning of 2007 through October 2009, and found only about 1% of them selling out of the market at the peak of its volatility in October 2008.
Men were 10% more likely to discard equities than women. Vanguard said prior academic research has suggested that in general, men might trade more actively than women as a result of greater overconfidence in their ability to make good investment decisions.
People age 65 or older were more than twice as likely to abandon equities as investors between the ages of 45 and 54—consistent with the widely held belief that investors become more risk averse as they age, Vanguard said. Vanguard also found investors with a low level of equity exposure were more likely to abandon equities.
Meanwhile, balanced investors tended to stick with their funds, especially those who held only one balanced fund, which includes both stocks and bonds. The abandonment rate of these balanced investors was about 50% lower than that of investors who owned equity funds and no balanced funds.