Americans appear to treat both their employee benefit plan and personal stock holdings the same: as long-term investments not to be messed with even during market roller coaster rides.
Indeed, individual investors - whether they do or don't also own stock through pension and retirement plans - say they aren't about to sell, even if the market drops another 10%. Yet most consider the U.S. market to be overvalued.
Those are among the results of a nationwide survey, commissioned by Pensions & Investments and a sister publication InvestmentNews. The random telephone survey Oct. 28 and 29 checked the pulse of 300 individual investors in the midst of the wild global market swings that began late last month.
Some 71% of respondents had at least some of their stock or stock fund holdings in retirement plans. For 43% of them, most of their equity exposure is through their retirement plans.
Yet in every key question, only five percentage points or less separated employee benefit plan investors from those with only personal investments. Those differences are statistically insignificant, however, because the survey had a margin of error of plus or minus 5.7%. Among the highlights:
*Almost 23% of individual stock investors and mutual fund shareholders would buy if the market drops another 10%.
*Some 53% believe the market is still overvalued.
*More than 78% said they were inclined to stand pat, neither buying nor selling, even after the stock market began its gyrations in late October.
*Only 4% said they sold any holdings between Oct. 27 and Oct. 29; 16% said they bought.
Individual investors' faith in the 1990s market - "buy on the dips" has been the mantra of the lengthy bull run - was clear, although the majority (53%) of those polled said they believe current prices exceed the true values of the underlying companies. Even if it's overvalued, the market will be higher at year's end than it is today, predict a whopping 77% of those polled.
"Almost nobody is willing to sell," observed Matthew Smith, vice president at Leo J. Shapiro and Associates Inc., the Chicago-based behavioral research firm that conducted the survey for P&I.
"They're not willing to accept (last month's market mania) as an indicator that things can get worse."
The continuing belief that what goes up must go higher suggests investors could reassess their feelings if the markets create more bad news before the year is out.
Still, most expect to hold fast to their positions, even if stocks head south. Of the 66% who said they would stand pat in a future correction, nearly nine in 10 insisted they weren't likely to change their minds. By contrast, just 34% of the few who expect to sell if the market slumps are certain that's what they would do.
"I think people are getting a little bit smarter when it comes to the market," said East Smithfield, Pa., resident David Morgan, 68, a retired owner of a trucking company and one of the poll respondents.
Mr. Morgan calls himself an active trader with a balanced portfolio of individual stocks, bonds and real estate investment trusts. He owns no mutual funds. He also is a do-it-yourselfer, making buy and sell decisions on his own using a discount broker. He trades stock options regularly and bought several puts, or options to sell specific stocks, in the last week of October. For his derivatives trading, he does consult a professional.
Mr. Morgan sees the market continuing to head up over the next couple years or so after which time he expects a major slide. "I'll try and get out (before that)," he said.
Few investors bothered to seek advice while Big Board volume records were being shattered late last month. Just 17% asked advisers, family, friends or employers for advice; more than half of those turned to brokers; only about 6% consulted their employer.
The most common reasons, roughly paraphrased, that investors gave for their nonchalance:
*The market always rises and falls; it will go back up (36%);
*I am a long-term investor; I'm in it for the long haul (19%);
*Prices are lower, so it's a good time to buy (12%);
*I'll wait and see what happens (7%).
The 300 investors polled, split evenly between men and women, had varying ages, levels of income, experience in the market and portfolio sizes.
Respondents were roughly divided between with those stock portfolios worth less than $50,000 and those worth more. Nearly half, as might be expected, were baby boomers. The next largest group (17%) were between the ages of 56 and 65. A significant plurality (42%) had 12 or more years' experience investing in stocks. Another 26% had six to 12 years' experience; the rest had five or fewer years in the market.
Among the significant differences among the subgroups: Men were much more inclined than women to buy last week. About a quarter of the men saw themselves as buyers while just 13% of the women did.
In addition individuals with portfolios of $100,000 or more were more apt to see buying opportunities in a future correction.
