If it feels like investors are devoting less of their portfolios to stocks these days, you're apparently right.
A study from three Dutch investment analysts, published in Financial Analysts Journal, shows that global investors allocated only 37.7 percent of their investable assets to stocks in 2012 and just 37.1 percent in 2011. That's the lowest level since 1959, when the data began.
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One of the authors, Trevin Lam of Rabobank, told
MarketWatch that cyclical and structural factors are behind the trend.
On the cyclical side, "there are periods in which the weight of equities increases at the expense of bonds . . . [but after the dot.com bust,] the weight of bonds rose quickly at the expense of equities," he said.
As for structural factors, institutional investors have markedly increased their investments in alternative assets, such as hedge funds and private equity, at the expense of stocks and bonds, Lam says.
In addition, many pension funds and individual investors have sought to reduce their risk over the past 10 years and thus shied away from stocks.
Michael Guillemette, a financial planning professor at the University of Missouri, says investors mistakenly shun risk when stocks fall.
"At its face, it seems fairly obvious that investors would be less risk tolerant when the stock market is underperforming," he said, according to
Phys.org. "However, this may lead to investors buying when the stock market is high and selling when the market is low."
Editor’s Note: Retire 10 Years Earlier With These 4 Stocks
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