While individual investors put their faith in equity mutual funds in a big way throughout the 1990s, their overall equity holdings fell.
Net sales of all equities by individuals were negative in six of the past eight years. And the equity ratios of the total financial assets of individual investors dropped 11.5 percentage points to 33.4% in 1997 from 44.9% in 1968.
An analysis of Federal Reserve Board Flow of Funds data by David L. Babson & Co. Inc., Boston found investors were heavy net sellers of individually owned stocks every year since 1990. H. Bradlee Perry, the former chairman who now is a consultant to the company, hypothesized a generation gap may be responsible for the stock selloff. Older investors are concerned about the high level of stock valuations and have been selling in order to protect and rebalance their equity ratios. The ever-growing number of retirees also might be selling shares to fund their retirement needs.
Mr. Perry also noted anecdotal evidence that indicates younger investors are pouring money into equities, primarily in mutual funds through their retirement plans. Since such investors haven't experienced a bear market, Mr. Perry suggested they have higher performance expectations than older investors and might be more willing to stay the course.
