Despite wanting to invest, today’s market conditions have more than three-quarters (77%) of investors concerned about fluctuations in the market and two-thirds (66%) say they are nervous about their money, according to a new study by Wells Fargo & Company.
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How inflation is diverting investment dollars. Who's doomscrolling? (Graphic: Wells Fargo)
Investors are so nervous that two out of five (42%) admit they want to cash out of their investments, and more than one in four (29%) would cash out their IRA or 401(k) investments if they could do so without tax penalties.
Inflation is cutting into household budgets, with a quarter of Americans with money in the stock market moving investing dollars into everyday essentials like groceries, gas, and housing. One in four (25%) are putting less into the stock market because they need to budget their cash for regular household expenses.
The top five budget areas in need of cash are:
- Groceries (58%)
- Transportation and gas (47%)
- Utility bills (42%)
- Debt (39%)
- Housing (34%)
A full two-thirds of investors say they’re “doomscrolling,” or continually checking their investments on their phone when the market is going down. 27% of women respondents and 50% of men check the value of their investments multiple times per week.
Americans with money in the stock market see inflation as the biggest threat to their investments, with two-thirds (65%) saying lower inflation would make them feel more confident. More confidence would also come from interest rates declining (44%); decreased gas prices (41%); the war in Ukraine ending (35%); a shift in U.S. politics (34%); an end to U.S. labor shortages (20%); and a cure for COVID-19 (15%).
“Uncertainty on so many levels can cause people to focus in on their present self, or immediate needs and circumstances – and to lose focus on their future self, or more strategic priorities like retirement readiness,” said Michael Liersch, head of Advice and Planning in Wells Fargo’s Wealth & Investment Management business. “The irony is that this is the moment when we need to keep balance between our present and future selves, and potentially even dedicate more, not less, to our future selves.”
“When you pull money out of your retirement accounts, you’ve locked in market declines. When you hold your money in cash, you forgo potential future investment returns. Remaining balanced in your approach may help you achieve short- and long-term financial success. Saving and investing is not a light switch that you turn on and off, it’s better thought of as a dimmer switch that you should regularly revisit and dial up or down based on your present and future needs,” he said.
Investor knowledge is key to participation rates
In addition to inflation, another barrier cited keeping people wary of the market is a lack of investing knowledge, with fewer than half (44%) feeling confident in knowing where to invest in today’s market. Even fewer (40%) would give themselves an A or B grade in terms of their investment knowledge.
More than one-third of all Americans (36%) do not have any money in the stock market.Among Americans without money in the stock market:
- Two out of three (68%) say they are unwilling to risk their money
- Three out of five (61%) believe it is not worth investing without a lot of money
- One-half (50%) cite lack of knowledge as a barrier to investing
- One-quarter (27%) believe that making money in the stock market is mostly a matter of luck
The study also revealed that many investors (57%) feel overwhelmed by investment options and need advice. Two-thirds (66%) want a second opinion from others before buying or selling an investment. While financial advisors, financial institutions, and family are the top resources that investors turn to for advice, those resources vary by generation.
- Gen Zers turn to family (50%), followed by social media sites such as YouTube and TikTok (44%)
- Millennials largely rely on family (52%)
- Gen Xers and baby boomers say financial advisors are key (46% and 55%, respectively)
- One in ten (10%) of investors feel they have no one to turn to for financial advice
“When people think about the younger generations, they often think of them as DIY (do it yourself) individuals,” said Liersch. “Our data show that nothing could be further from the truth. Human beings not only want advice from their device – whether it’s on YouTube or TikTok – but from human beings as well, regardless of age.
“Whether it’s family or a financial advisor, they’re trying to turn to someone for help. Digital advice serves to enable the information flow to inspire them to use their money more wisely or verify and validate what they’ve heard from others. It also helps people execute on their ideas in a quick and efficient way, whether that’s self-directed, with a professional advisor, or both. That said, it appears that people still continue to value human advice.”
Some see opportunity and will find money to invest
On the other end of the spectrum, almost one in five investors (18%) want to take advantage of the down market and free up money in their budget to invest more. The top five budget areas where investors are cutting back in order to invest more are:
- Entertainment (55%)
- Personal spending, such as clothing (46%)
- Restaurants (45%)
- Travel and vacations (36%)
- Online subscriptions (28%)
About the study
Versta Research conducted a national online survey of 2,000 U.S. adults, of whom 1,163 have money invested in the stock market. The survey was conducted September 21–27, 2022. Sampling was stratified, and final data were weighted to match current U.S. Census estimates for the adult population based on age, gender, race/ethnicity, region, income, and education. Assuming no sample bias, the maximum margin of error for full-sample estimates is ±2% overall and ±3% for those with money in the stock market (investors).
About Wells Fargo Wealth & Investment Management
Wells Fargo Wealth & Investment Management (WIM) is a division within Wells Fargo & Company. WIM provides financial products and services through various bank and brokerage affiliates of Wells Fargo & Company and is one of the largest wealth managers in the U.S., with more than $1.8 trillion in client assets. WIM provides personalized wealth management, brokerage, financial planning, lending, private banking, trust, and fiduciary products and services to affluent, high-net worth, and ultra-high-net worth clients. WIM operates through advisors in Wells Fargo Advisors, independent brokerage offices, and digitally through Intuitive Investor® and WellsTrade®, as well as through advisors in The Private Bank and other banking centers.
Wells Fargo Private Bank provides products and services through Wells Fargo Bank, N.A., Member FDIC, and its various affiliates and subsidiaries. Wells Fargo Bank, N.A., is a bank affiliate of Wells Fargo & Company.
Brokerage services are offered through Wells Fargo Advisors. Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC, and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company. Intuitive Investor® and WellsTrade® accounts are offered through Wells Fargo Clearing Services.
Wells Fargo Investment Institute, Inc. is a registered investment adviser and wholly-owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.
Wells Fargo Bank, N.A. offers various advisory and fiduciary products and services including discretionary portfolio management. Wells Fargo affiliates, including Financial Advisors of Wells Fargo Advisors, a separate non-bank affiliate, may be paid an ongoing or one-time referral fee in relation to clients referred to the bank. The bank is responsible for the day-to-day management of the account and for providing investment advice, investment management services and wealth management services to clients. The role of the Financial Advisor with respect to the Bank products and services is limited to referral and relationship management services. Some of The Private Bank experiences may be available to clients of Wells Fargo Advisors without a relationship with Wells Fargo Bank, N.A.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a leading financial services company that has approximately $1.9 trillion in assets, proudly serves one in three U.S. households and more than 10% of small businesses in the U.S., and is a leading middle market banking provider in the U.S. We provide a diversified set of banking, investment and mortgage products and services, as well as consumer and commercial finance, through our four reportable operating segments: Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth & Investment Management. Wells Fargo ranked No. 41 on Fortune’s 2022 rankings of America’s largest corporations. In the communities we serve, the company focuses its social impact on building a sustainable, inclusive future for all by supporting housing affordability, small business growth, financial health, and a low-carbon economy.
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