Tags: State Street | investors | allocations | cash

State Street Survey: Retail Investors Increase Allocations to Cash

By    |   Monday, 09 June 2014 12:41 PM

The five-year bull market in stocks apparently hasn't made believers out of retail investors.

People with investible assets ranging from less than $250,000 to more than $1 million allocated 36 percent of their portfolio to cash as of the first quarter, up sharply from 26 percent just two years ago, according to a study from State Street's Center for Applied Research.

And U.S. investors aren't alone. Retail investors in all 16 countries surveyed by State Street have increased their cash allocations to 40 percent on average from 31 percent two years ago.

Editor's Note:
18.79% Annual Returns ... for Life?

What's causing the cautious investment behavior? Fear, says Suzanne Duncan, global head of research at the State Street Center.

"If it wasn't fear, there'd be a much different variation by age," she tells The New York Times. "Certain cohorts need more liquidity than others. When you find consensus across age cohorts, you realize it's not for liquidity needs but lack of trust across all age and wealth levels."

Presumably the fear stems from stocks' plunge after the 2008 financial crisis. The S&P 500 produced a total return of negative 37 percent that year.

"Investors aren't able to stomach the volatility they perceive to be in play. Even when the market rises triple digits, as it did multiple times in 2013, investors seek comfort in cash," the study states.

Meanwhile, the latest American Association of Individual Investors (AAII) asset allocation survey both concurs and conflicts with the State Street Survey.

The AAII survey showed that individual investors' cash allocations hit an eight-month high of 19.2 percent last month.

And investors' allocations to stocks and stock funds slid to a six-month low of 65.3 percent. But the equity allocations stayed above their historical average of 60 percent for the 14th straight month.

Editor's Note: 18.79% Annual Returns ... for Life?

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InvestingAnalysis
The five-year bull market in stocks apparently hasn't made believers out of retail investors.
State Street, investors, allocations, cash
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2014-41-09
Monday, 09 June 2014 12:41 PM
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