5.02.2013



Why are investors afraid of stocks?

5.02.2013

Thursday, May 02, 2013

By Doug Orton, Vice President, Advisor Development

As I write this, the Dow Jones Industrial Average, the S&P 500, and the NASDAQ have all blown past their respective historical highs. Yet anemic job growth, geopolitical crises and the sequestration's ripple through the US economy still fuel concerns about recession. The contradictory market and economic trends shed light on why so many investors hesitate to invest in stocks, even as the bulls rule Wall Street.

In fact, our latest Investing Sentiment Insight research confirms that investors are hypersensitive to economic news, which influences their behavior much more than any stats about stock growth potential.1 They are viewing equities through an emotional lens—one colored by a shaky US jobs picture, a slow economic recovery and turmoil in European bond markets. If clients are mired in doubt, what can you do to help them shake off anxiety and invest appropriately for the future?

You might begin by acknowledging their concerns and refocusing on the elements they can control to help them gain perspective. Empowered by knowledge rather than emotion, clients may be able to see past current events and focus further out on their investment horizons.

Our Chief Investment Strategist James Swanson writes a regular blog that brings reasoned analysis to the speculation and misinformation that may have investors clinging to cash. His blog can be shared with investors and may help you shape productive conversations with your clients that lead to more measured, intellectual responses to current economic uncertainties.

To receive timely updates from James Swanson click here to subscribe.


1Source: MFS 2012 Investing Sentiment Insights MFS, through Research Collaborative, an independent research firm, sponsored an online survey from August 29 to September 10, 2012, of 923 individual US investors with $100,000 or more in household investable (non-retirement) assets and 603 licensed US financial advisors (either FINRA or SEC) who have been licensed for at least three years with $500,000 or more in annual mutual fund sales. All investor respondents make or share in making financial decisions for their households. MFS was not identified as the sponsor of the survey. Generation Y investors are those under the age of 33; 193 participated in the survey. Generation X is defined as investors between the ages of 33 and 47; 256 participate in the survey. Baby Boomer investors are those between the ages of 48 and 66; 301 participated in the survey. There were 173 participants over 67 years of age.

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