Five years into the bull market, the 2008-2009 financial crisis is still an unhealed scar when it comes to some investors’ views of the stock market.
A third of affluent investors surveyed by Wells Fargo said they’re still skeptical about putting money into equities. The S&P 500 has more than tripled since March 2009, though many mom-and-pop investors wary of stocks have missed the gains.
Of those investors who remain cautious of the market, one in five don’t plan to invest any additional money in stocks.
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“Investors’ confidence needs to be rooted in the conviction that they’re taking appropriate risks to meet their long-term goals,” Dean Junkans, chief investment officer for Wells Fargo Private Bank, said in a statement. “Without that conviction, emotional investing and reacting to the daily news are a road to failure.”
It’s clear that individual investors who sat out the recovery have missed out on huge market gains, but it’s less clear whether jumping into the market now would pay off.
Even if this rally continues, analysts expect 2014 to be a more volatile year, and one in which U.S. stocks will have a tough time replicating the nearly 30 percent gains of 2014. At the same time, bond prices may face pressure if interest rates rise, as many expect.
Despite the uncertainty, most financial planners agree that having some money in the stock market is crucial to a balanced portfolio, although the allocation varies by age and risk tolerance.
Investors told Wells Fargo the most important lessons they learned from the crash were to stay disciplined (34 percent), be diversified (33 percent), and avoid action based on emotions (18 percent).
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