Investors are so nervous in today’s market conditions that two out of five (42%) admit they want to cash out of their investments, and more than one in four (29%) would cash out their 401k or IRA investments if they could do so without tax penalties.
That’s according to a new study by Wells Fargo & Company, which also found that more than three-quarters (77%) of investors concerned about fluctuations in the market and two-thirds (66%) say they are nervous about their money.
“Uncertainty on so many levels can cause people to focus in on their present self, or immediate needs and circumstances—and to lose focus on their future self, or more strategic priorities like retirement readiness,” said Michael Liersch, head of Advice and Planning in Wells Fargo’s Wealth & Investment Management business. “The irony is that this is the moment when we need to keep balance between our present and future selves, and potentially even dedicate more, not less, to our future selves.”
The new study found inflation is cutting into household budgets, with a quarter of Americans with money in the stock market moving investing dollars into everyday essentials like groceries, gas, and housing. One in four (25%) said they are putting less into the stock market because they need to budget their cash for regular household expenses.
“When you pull money out of your retirement accounts, you’ve locked in market declines. When you hold your money in cash, you forgo potential future investment returns. Remaining balanced in your approach may help you achieve short- and long-term financial success,” Liersch said. “Saving and investing is not a light switch that you turn on and off, it’s better thought of as a dimmer switch that you should regularly revisit and dial up or down based on your present and future needs.”
A full two-thirds of investors say they’re “doomscrolling,” or continually checking their investments on their phone when the market is going down. Twenty-seven percent of women respondents and 50% of men said they check the value of their investments multiple times per week.
Americans with money in the stock market see inflation as the biggest threat to their investments, with two-thirds (65%) saying lower inflation would make them feel more confident. More confidence would also come from interest rates declining (44%) or decreased gas prices (41%).
Investor knowledge key to participation rates
In addition to inflation, another barrier cited keeping people wary of the market is a lack of investing knowledge, with fewer than half (44%) feeling confident in knowing where to invest in today’s market. Even fewer (40%) would give themselves an A or B grade in terms of their investment knowledge.
The study also revealed that many investors (57%) feel overwhelmed by investment options and need advice. Two-thirds (66%) want a second opinion from others before buying or selling an investment. While financial advisors, financial institutions, and family are the top resources that investors turn to for advice, those resources vary by generation.
• Gen Zers turn to family (50%), followed by social media sites such as YouTube and TikTok (44%)
• Millennials largely rely on family (52%)
• Gen Xers and Baby Boomers say financial advisors are key (46% and 55%, respectively)
• One in 10 investors feel they have no one to turn to for financial advice
“When people think about the younger generations, they often think of them as DIY (do it yourself) individuals,” said Liersch. “Our data show that nothing could be further from the truth. Human beings not only want advice from their device—whether it’s on YouTube or TikTok—but from human beings as well, regardless of age.
Versta Research conducted a national online survey of 2,000 U.S. adults, of whom 1,163 have money invested in the stock market. The survey was conducted September 21-27, 2022.
SEE ALSO:
• Americans Point to Inflation for Lack of Retirement Savings
• How Engaged 401k Participants are Saving Significantly More
• Survey Says Few Americans Achieving Retirement Planning Goals
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
