FEATURE-Fed-up stock investors don't mind selling low
Wednesday September 4, 2:53 pm ET
By Martha Graybow
NEW YORK, Sept 4 (Reuters) - Bob Askey has had it with stocks.
The 72-year-old individual investor from Longmont, Colorado, recently unloaded his stake in Citigroup Inc. (NYSE:C - News) and AOL Time Warner Inc. (NYSE:AOL - News), two blue-chip stocks that have been battered. He's decided to transfer the cash instead to more conservative bond funds as a safety cushion.
"I was glad that I got any money," said the semi-retired Askey, who narrates books for the blind. "I see no upturn coming."
So it goes for the millions of investors who -- already reeling from more than two years of stock market declines -- have had enough. Fed up with the bear market's false rallies, they no longer follow the "buy on the dip" mantra that reigned during the market's boom times. Instead, they now are unloading their shares even as market strategists say stocks have been oversold and are poised for a turnaround.
It's understandable that many investors are frustrated as they've watched their portfolios shrink, experts say. But they say selling now may prove to be a bad move because stocks are already down so much.
"It's my observation over the years that people insist on putting their money any place they haven't lost it lately," said money manager Ron Muhlenkamp, who runs the $600 million Muhlenkamp Fund (Nasdaq:MUHLX - News). "Most people buy stocks the way teen-agers buy clothes. They buy into the latest fad."
Buying high and then selling low -- a recipe for losing money -- is something that has played out time and time again among individual investors who panic when share prices fall, financial planners say. People with a sound investment strategy need to broaden their time horizons and ignore short-term volatility, even though that can be hard, they say.
The recent market downturn could prove to be "a very good time to buy, but it just makes you sick to your stomach, it just makes you queasy to look at the short-term fluctuations," said certified financial planner Debby Vinyard, of Vinyard Financial Planning and Associates in Marion, Illinois.
Still, many stock investors are not listening. They pulled a record $52.6 billion from U.S. stock mutual funds in July, according to the Investment Company Institute, an industry group. At the same time, investors deposited a net $28.1 billion into bond funds that month, the highest amount ever.
August outflows from stock funds are expected to total about $7.1 billion, according to preliminary estimates by fund tracking firm TrimTabs.com.
It's been months of fits and starts for the market. Stocks plunged in July, sparking many people to cash out. An August rebound then fizzled, with the average diversified U.S. stock mutual fund edging up just 0.2 percent for the month, leaving these portfolios down nearly 20 percent year-to-date, according to research firm Lipper Inc.
If things don't turn around, funds could post a third consecutive year of losses.
With gut-wrenching declines like these, it's no surprise many investors are jittery, said Ann Miletti, a portfolio manager at the Strong Funds who helps oversee about $4.1 billion in two stock portfolios.
"The market is kind of a boat on the sea floating on a sea of uncertainty," she said. "You just don't know which direction it really is going to take you."
For individual investor Askey, he thinks he's much better off than many other people because of his large stake in bonds -- which make up roughly 60 percent of his portfolio. But he hasn't gotten rid of all of his stocks. He's held Applied Materials Inc. (NasdaqNM:AMAT - News) and Intel Corp. (NasdaqNM:INTC - News), although he's not buying any more until he sees signs of a rebound.
"I am going to lie low, buy bonds and wait," he said.
(--Additional reporting by Cal Mankowski) |
