Question of the Day: What percent of investors at Vanguard (a large investment firm) have NOT made any trades in the face of recent market declines?

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Mar 31, 2020
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Question of the Day, Investing, Stocks, Behavioral Finance

Answer: More than 90%

Questions:

  • Do you think it's hard to do nothing with your investments when the stock market has dropped over 20% in a month? Why or why not?
  • Your friend says "I know the market is going down in the next few weeks so I'm going to sell now and get back in when the prices go down?" Do you think it's easy to time the market and know when to sell and then buy back in?
  • What are strategies that you can use to calm your nerves when the market goes down like it has over the past month? 

Click here for the ready-to-go slides for this Question of the Day that you can use in your classroom.

Behind the numbers (Vanguard)

More than 90% of Vanguard U.S. investors are "staying the course" and not trading in response to recent market declines, according to research from Vanguard.

However, among those clients who are trading, there are some modest differences.

The typical trader is buying equities on the dips, but older, wealthier traders are moving modestly to fixed income. On balance, we believe these levels of trading indicate that the vast majority of investors are maintaining a long-term perspective despite the market turmoil. This is particularly true of investors who only have a Vanguard defined contribution (DC) account.

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More Questions of the Day here! 

 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.