Individual Investors Shaken, Not Deterred by Recent Volatility

Despite recent volatility across the stock market and in other assets, most individual investors remain somewhat optimistic about their portfolios, according to Investopedia’s latest survey. 

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Key Takeaways

• Most individual investors remain somewhat optimistic about their portfolios despite recent volatility across the stock market, according to Investopedia’s latest survey. 
• Forty-two percent of those surveyed said they ‘bought the dip’ over the past two weeks, while 26% expect higher returns for the market over the next six months.
• The election is still our readers' top concern, followed by worries about a possible recession—61% of respondents think a recession is likely in the next twelve months.
• While investors may be worried about the election, inflation, and overvaluation, it would not deter many of them from buying more individual stocks if they had an extra $10,000 to spend.

Sharp downturns in major stock indexes over the past two weeks may have rattled individual investor confidence, but most remain relatively optimistic about their portfolios. According to Investopedia’s recent survey of its readers, nearly two-thirds describe their sentiment as “optimistic” or “cautiously optimistic.” 

While that level of optimism is slightly lower than was registered in June, 42% of those surveyed said they ‘bought the dip’ over the past two weeks, while 26% expect higher returns for the market over the next six months. Less than one-third describe themselves as ‘worried’ about recent market events.

The Recession Drumbeat Gets Louder

While investors mostly feel optimistic about the markets, renewed concerns about a potential recession appear to be curbing their enthusiasm, albeit slightly. 

Just over a quarter of respondents are expecting stock market returns of over 5% in the next six months, an eight percentage point drop from June. Meanwhile 27% are expecting another correction—a drop of 10% or more in the S&P 500—over the next three months. 

Of those expecting another drop in the stock market, nearly three-quarters think the decline will be tied to a recession, while two-thirds believe that high valuations will be to blame.

Where Are the Bubbles?

As for those concerns about overvaluation, investors continue to point to artificial intelligence-related stocks and mega-cap tech. That sentiment has been consistent, and barely unchanged for the past year as stocks like Nvidia (NVDA), Super Micro Computer (SMCI), and Meta (META) have delivered exceptional returns that have stretched their valuations. 

Forty-four percent of respondents still feel cryptocurrencies are overvalued, while less than 30% think housing stocks are overheated.

What Are Investors' Biggest Worries?

The upcoming presidential election has topped our list of investors’ biggest concerns for the past several months, and the recent shake-up of the Democratic ticket has only made that event even more uncertain. 

While the election is still our readers' top concern, the recent uptick in unemployment and a slowdown across some sectors of the economy like manufacturing has spurred worries about a possible recession. 

Hopes for a so-called ‘soft landing’ engineered by the Federal Reserve’s handling of interest rates appear to have faded slightly as 61% of respondents think a recession is likely in the next twelve months. That’s a nine-percentage point increase from June, and it’s not a surprise that a recession is now respondents' second biggest concern, followed by an escalation of the conflict in the Middle East.

What Would You Do With an Extra $10,000?

While investors may be worried about the election, inflation, and overvaluation, it would not deter many of them from buying more individual stocks if they had an extra $10,000 to spend. Individual stocks remain the top choice of our respondents, as they have for most of the year, followed by ETFs and stock index funds. CDs were their top choice throughout most of 2022 and 2023 as the Federal Reserve was raising interest rates to battle inflation, but with the prospect of lower interest rates on the horizon, investors are in search of higher yields from equities and equity-related products.

What’s in Your Portfolio?

Investopedia’s readers are as consistent as they are loyal to their favorite stocks. While many believe that the Magnificent 7 and large-cap A.I. stocks are overvalued, those stocks largely make up the majority of their favorites, according to our most recent survey. A notable return favorite into our readers’ top ten holdings is chipmaker AMD (AMD). Many of our reader favorites, including Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOGL), are also among the most-widely held stocks in equity mutual funds, index funds and ETFs. Investors of all sizes have ridden these stocks to incredible gains over the past decade and are loathe to give up on them.

Methodology

This survey was fielded online to Investopedia readers 18+ living in the U.S. from August 7-12, 2024. Readers must currently hold and manage investments to qualify.  Participation in the survey is entirely voluntary; sample composition reflects U.S. 18+ reader base.

• Age: 18-24 4% | 25-39 17% | 40-54 18% | 55-74 50% | 75+ 11%
• Region: South 34% | West 30% | Northeast 18% | Midwest 18%
• Gender: Man 78% | Woman 15% | Nonbinary or an identity not listed  1% | Prefer not to answer 6%
• Race/Ethnicity (multi-select): White 72% | Black or African American 5% | Hispanic, Latino or Latinx/Latine 6% | Asian 7% | Native Hawaiian or Other Pacific Islander 1% | American Indian or Alaska Native 1% | Middle Eastern or North African 2% | Another background  2% | Prefer not to answer 11%