The thought must have plagued many investors in the pandemic. Why not just get out of the markets and switch into cash?
Fund management giant Vanguard Group looked at the investors who did just that, in a recently published study.
Now, the Vanguard audience is not exactly that of Robinhood – between February 19 and May 31, only 5% of the self-directed defined contribution plan participants were traded. The share was slightly higher among the self-directed households in retail trade, with 17% making some trades during that period.
For both sets of investors, less than 0.5% of customers in the portfolio move with all-cash, Vanguard said.
The defined contribution panics assumed that they had 69% of their $ 105,000 portfolios in stock at the end of 2019, and the retail cash panics went from having 77% of their $ 70,000 portfolios in equities. In both cases, these investors were typically in their mid-1950s and held accounts for more than a decade.
About two-thirds of the defined contribution panics were female; the split-cash panicker split was 46% male, 29% female and 25% a household of two or more members.
Vanguard then went on to compare the distributions of their actual realized returns with their personal pre-pandemic benchmark returns.
By the end of March, cash panickers had performed better, with 56% of defined contribution and 58% of individual investors sporting better returns.
That changed when the market rebounded.
At the end of May, 84% of the defined contribution panics had less revenue than their pre-pandemic portfolio, leaving 86% of cash panics in retail less.
These numbers are now probably more current, as is the S&P 500 SPX,
added another 11% between May 11 and Wednesday, according to FactSet data.
The S&P 500 has risen more than 50% since its lowest point in March, and the Nasdaq Composite COMP,
has gained more than 60% from the depths of March.
.
