U.S. investors see passive investing as a path to wealth
Highlights of history
- 71% of U.S. investors say index funds work better than stock picking
- 89% say “time to market” is a better strategy than “time to market”
- Few individual investors (19%) trade frequently; rarely do
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 âpassive investingâ (71%) is superior to âactive investingâ (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 âpassive investingâ as the purchase of index funds that follow the market average; âActive investingâ 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.
Preferred investment style of U.S. investors
What type of investment do you think is the best way to maximize long-term returns on investment? 1) Passive investing, where you buy index funds that follow the market average; 2) Active investing, where you choose specific stocks to try to outperform the market
|Passive investment||Active investment|
|18 to 49||71||29|
|50 to 64||66||34|
|65 and over||77||23|
|Over $ 100,000 invested||72||28|
|Less than $ 100,000||68||32|
|Gallup Panel, June 22-29, 2021|
Likewise, a large majority of all major investor subgroups believe that âtime in the marketâ is more important than âtime in the marketâ for obtaining high returns. However, the emphasis on âtime in marketâ 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.
US Investor Ownership of Equity and Individual Equity Funds
|Have a person
|Have the two individuals
and equity funds
|18 to 49||24||13||53||ten|
|50 to 64||24||5||64||7|
|65 and over||31||9||56||3|
|Over $ 100,000 invested||22||8||65||5|
|Less than $ 100,000||29||12||47||12|
|Gallup Panel, June 22-29, 2021|
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.
Frequency of Equity Trading Among U.S. Investors
How often do you trade (buy or sell) individual stocks inside or outside a retirement account?
|June 22-29, 2021|
|A few times a year||32|
|About once a year||12|
|Based on investors who own individual stocks|
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.
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.