Tags: mom | pop | investors | retail

MarketWatch: Mom and Pop Investors May Be Buying at the Top Again

By    |   Friday, 16 August 2013 07:48 AM

U.S. individual investors have pumped $92 billion into the stock market via stock mutual funds since the start of 2013, an unusually high amount that typically coincides with a market top, according to MarketWatch.

Data from Dalbar, a Boston stock investment consultancy, shows that "mom and pop" investors have rotten timing on when to get into and out of the stock market.

"Year after year, they have a self-defeating tendency to buy when the market has already risen, and sell after it has fallen," MarketWatch stated.

Editor’s Note:
Dow Predicted Will Hit 60,000 — Buy These 4 Stocks Now(Shocking)

Over the 20-year period through the end of 2012, the Standard & Poor's 500 returned an average annual return of 8.21 percent, meaning a $100,000 simple buy-and-hold investment during that time would have produced a profit of $384,000.

However, Dalbar said the average individual investor kept buying and selling at the wrong time during that interval, and received an average annual return of only 4.25 percent, creating a profit of only $130,000 on that same theoretical $100,000 investment.

While the S&P 500 has already risen about 19 percent this year, stocks could meet "numerous speed bumps in the next two months," according to Barron's.

The hurdles the market must overcome include more clarification in the Federal Reserve's plans to trim its huge monthly $85 billion monthly government bond-buying regimen that has supported stocks, and divisive debate in Washington over the 2014 budget and debt ceiling.

"Fed support has been a 100 percent tail wind for us, and now it may be cut to 80 percent," said Bob Doll, chief equity strategist at Nuveen Asset Management, of the bond-buying program.

Kate Moore, JPMorgan Private Bank's chief investment strategist, told Barron's that job growth and improvements in manufacturing and confidence would also be factors in the direction of stocks from here.

Even with the rise in stocks thus far in 2013, "most people I recently asked think the odds of the S&P 500 reaching 1800 this year are improbable," Barron's Kopin Tan wrote.

Economist Ed Yardeni, president of investment strategy firm Yardeni Research, predicted on his company blog that stocks might be in the "doldrums" for the rest of the summer.

As evidence, he noted second quarter S&P 500 earnings growth was 2.4 percent, but that third quarter estimates now have been lowered by 1.7 percent — perhaps cancelling each other out.

At the same time, Yardeni said Wall Street's full-year 2013 estimates of S&P 500 growth are unchanged at 7.3 percent over 2012, and that 2014 estimates have likewise not changed.

Editor’s Note: Dow Predicted Will Hit 60,000 — Buy These 4 Stocks Now(Shocking)

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U.S. individual investors have pumped $92 billion into the stock market via stock mutual funds since the start of 2013, an unusually high amount that typically coincides with a market top, according to MarketWatch.
mom,pop,investors,retail
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2013-48-16
Friday, 16 August 2013 07:48 AM
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