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Jonathan Burton's Life Savings
July 30, 2010, 12:01 a.m. EDT · Recommend · Post:
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By Jonathan Burton, MarketWatch
SAN FRANCISCO (MarketWatch) -- The buyers are back in town.
Bullish sentiment among investors rose to 40% from 21% in the first week of July, according to the latest survey from the American Association of Individual Investors, while 33% of respondents were bearish, down from 57% earlier in the month.
Is gold's rally over? Precious-metals mutual funds lost almost 9% in July as concerns about global economic woes eased, Money & Investing Editor Jonathan Burton reports in This Week in Mutual Funds.
That's what happens when stocks soar, as U.S. markets did in July. The Standard & Poor's 500 Index /quotes/comstock/21z!i1:in\x (SPX 1,100, -1.34, -0.12%) rose about 7% in the month through July 29, while the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 10,446, -21.12, -0.20%) moved in tandem, making this one of the hottest Julys ever on Wall Street.
Sentiment improved as Europe's economic crisis eased, U.S. corporate earnings came in relatively strong, and investors became less concerned about inflation.
The reversal is noteworthy, given that investors at the start of July were deep in the summertime blues. In fact, early in the month stock investors were the most pessimistic they've been since early March 2009, just when stocks hit bottom.
But which investors are we talking about? A recent survey shows once again that people's ability to handle market uncertainty hinges on what type of investor they are.
Active, experienced traders are more bullish and see market volatility as an opportunity, mutual-fund giant Fidelity Investments found in a June study that was published this week. Two of every five active investors polled said they expect to trim portfolio cash positions in the next six months.
Retail investors were not so cheery. More than 80% of general investors said the market would need to be stable for at least six months before they'd feel comfortable adding to their stock positions.
It's these Mom and Pop investors who've poured cash into bonds. Around $20 billion in new money went to corporate and government bond funds in the first three weeks of July while almost $9 billion exited U.S. stock funds, according to estimates from the Investment Company Institute, an industry trade group.
Bonds have been fund buyers' security blanket for the past couple of years, even as a growing chorus of advisers loudly warns these income-seekers to be careful with an investment that may have seen its best days.
The problem is that many individual shareholders are even more certain that stocks have seen better days. For many small-scale investors, stocks aren't worth the heartache, and after two bear markets in less than a decade, certainly haven't lived up to their billing. Moreover, there's a sense that the old ways of investing, rooted in company fundamentals and stock valuation, can't compete in a Wall Street game that appears to favor big institutions and computerized, high-frequency traders.
Indeed, this generation of individual investors, having weathered the Great Recesssion, may avoid stocks the way Americans did after the Great Depression. They know that bulls and bears may get rich, but when you're in doubt, it pays to stay out.
If that kind of sentiment continues, it's going to take a lot more than six months of stability to convince buyers the stock market is anywhere close to being on their side.
Jonathan Burton is MarketWatch's money and investing editor, based in San Francisco.
Jonathan Burton is the investing editor for MarketWatch and covers investing strategies and mutual fund-related news from San Francisco. He also writes the "Life Savings" column. Previously he held contributing editor positions at Bloomberg Personal Finance, Mutual Funds and Individual Investor magazines, and was a reporter with the Far Eastern Economic Review and Investor's Business Daily. He is also the author of two books on investing.
Postponing its IPO would be a big gamble for Facebook, writes Therese Poletti.
12:52 p.m. Today12:52 p.m. July 30, 2010 | Comments: 4
- Wallfly | 11:22 p.m. July 29, 2010
"Investor sentiment gets hotter in July http://bit.ly/9MvrzB" 12:19 a.m. EDT, July 30, 2010 from MKTWBurton
"#Gold bugs get swatted in July: http://bit.ly/bvBBDP" 6:32 p.m. EDT, July 29, 2010 from MKTWBurton
"#Investing in #small-cap #Chinese #stocks -- the hype and the hope: http://bit.ly/bXZHhi" 12:46 a.m. EDT, July 29, 2010 from MKTWBurton
"Fee-laden #fund #investors may get relief from 'killer B's': http://bit.ly/bKf3IU" 12:27 a.m. EDT, July 23, 2010 from MKTWBurton
"#Investors could see lower #mutual #fund fees under #SEC proposal: http://bit.ly/b3aRuB" 1:05 p.m. EDT, July 21, 2010 from MKTWBurton
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