U.S. investors see passive investing as a path to wealth

WASHINGTON, DC – Despite the proliferation of websites and online brokerage applications that can facilitate frequent trading, American investors – whom Gallup defines as adults with at least $ 10,000 invested in stocks or bonds – – are mainly attracted by investment strategies without intervention.

• The vast majority of investors say “passive investing” (71%) is superior to “active investing” (29%) in maximizing returns over the long term.

• Most investors think that “time in the market” (89%) is a more important factor than “time in the market” (11%) in achieving high returns.

• Four in five investors who own individual stocks (82%) say they only trade stocks a few times a year, including 22% who say they never do so. The bottom in five trades more frequently, but most say they trade monthly rather than daily or weekly.

These results come from the latest Gallup Investor Optimism Index survey, conducted June 22-29. The $ 10,000 threshold for adults to be eligible for the survey includes investments in stocks, bonds or mutual funds, inside or outside a retirement account. About four in 10 American adults meet this criterion.

‘Set it and forget it’ mindset prevails

The survey defined “passive investing” as the purchase of index funds that follow the market average; “Active investing” has been described as selecting specific stocks in an attempt to outperform the market.

When asked to say which of the two approaches “is the best way to maximize long-term returns on investment,” a large majority of all major subgroups of investors choose passive investing over passive investing. active investment.. While it can be assumed that young investors prefer the more aggressive approach, there is little difference between those under 50 – the youngest group Gallup can analyze, given the age asymmetry. investors with savings of at least $ 10,000 – and those 65 and older. There is also no significant difference in preferences by gender or by whether investors have more or less than $ 100,000 in investments.

Likewise, a large majority of all major investor subgroups believe that “time in the market” is more important than “time in the market” for obtaining high returns. However, the emphasis on “time in market” is almost universal among retirees, at 95%, while slightly fewer non-retirees (86%) favor this approach. Five percent of retirees versus 14% of non-retirees think it’s better to synchronize the market.

More equity funds than individual shares

The survey asked investors if they currently have money invested in each of the five types of financial instruments: equity funds (including index funds, mutual funds, and electronically traded funds) , individual stocks, bonds, real estate (excluding their primary residence) and gold. .

In line with their preference for passive investing, many more investors report owning equity funds than individual stocks, 84% vs. 67% respectively. In addition, 50% have money invested in bonds, 25% in real estate and 11% in gold. While this was not measured in the current survey, a recent Gallup investor survey found that 6% is invested in bitcoin.

While the majority of investors (58%) have both equity funds and individual equity investments, around a quarter (26%) have only equity funds and 9% have only equity funds. individual actions. The remaining 7% have neither; instead, they are invested in bonds, gold or real estate, excluding stocks.

Men and investors who have invested $ 100,000 or more are much more likely than their counterparts to have both types of equity investments – funds and individual stocks. Meanwhile, women and investors with less than $ 100,000 invested are more likely to have no type of investment. Women are also more likely than men to have only equity funds.

Investors rarely trade, rely on a full service broker

Of all the investors who have individual stocks, few can be described as “day traders”, with only 1% stating that they normally trade stocks on a daily basis. An additional 4% say they transact weekly and 14% monthly. Instead, investors’ penchant for the long-term view is confirmed by the finding that 82% only trade a few times a year or less, of which 22% never trade.

About a third of investors with individual stocks (31%) report trading their stocks themselves using a discount broker, while 44% use a full-service broker and 16% a combination of the two. The remaining 9% offer another way of trading.

When trading, most equity investors who use a discount brokerage report trading online using a computer (68%), while 24% report using an application; only 8% do so by phone.

Final result

Discount brokerage houses that offer low fees and investment apps make it easier than ever for Americans to invest in individual stocks and even day trading. Popular digital investing platforms have gained attention this year as many average investors have embarked on frantic stock buying involving GameStop and AMC Entertainment. So far, however, American investors who have invested $ 10,000 or more mostly avoid this excitement and instead buy and hold stocks or equity funds for the long term.

Previous Gallup research has found that U.S. investors at this level of investment focus primarily on saving for retirement, and the slight majority are quite risky. intolerant when it comes to investing. As a result, they are likely to stick with their cautious approach to investing for the foreseeable future.

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Learn more about how the Gallup Investor Optimism Index works.