Less Active Investors Seeking Help

Fidelity Investments has released research data that finds varying investor reaction and behavior to the ongoing market volatility.

The firm recently polled active investors — those highly engaged individuals who trade 36 or more times a year, and general investors — those with retirement and brokerage accounts who may be less active in their trading –  and found general investors, although more cautious than active investors, have proactively reached out to Fidelity for help in navigating the markets’ daily swings. Fidelity said interactions via phone, investor centers, and through online asset allocation and planning tools are up 8% year over year.  

According to a press release, the firm’s business data shows more clients are choosing to hand over management of their investments to Fidelity’s managed account services team, with its new account openings growing 23%, and assets under management growing 40% year-over-year through June 2010.  

Broader financial issues such as potential tax increases are also impacting general investor confidence and behavior. Investors list “tax increases” as one of their top three financial challenges in the next 12 months, alongside “deciding where to invest” and “saving for retirement.” Eighty-nine percent of general investors said they expect their taxes to go up during the next 12 months, and Fidelity has found they are seeking help on how best to prepare for this changing tax landscape, the press release said.  

In an investor poll earlier this month, general investors showed their more risk-averse nature when roughly eight in ten (83%) said they would like to see a minimum of six months of market stability in order to feel comfortable making further investments, and of that group, nearly half would prefer a year or more. The poll showed that general investors’ expected investing returns varied greatly, and on average were surprisingly aggressive, with the median annual investment return expected to be 8%.  

Meanwhile, in a poll conducted last month with active investors, more than a third (36%) indicated that they believe the current state of the market is just a temporary setback. These more experienced traders told Fidelity they see market opportunities in today’s environment and are increasing their trading with nearly one-third (32%) saying they are taking advantage of bargains and attractive valuations right now.   

According to the press release, this more opportunistic view of the market is also reflected in the fact that 43% of active investors indicated they plan to decrease their portfolio’s cash allocation in the next six months with nearly half intending to decrease by more than 20%. Additionally, 67% forecasted they would beat the market in the next 12 months.