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Investing Blog Roundup: How America Invests

For many years, Vanguard has published an annual study (“How America Saves“) that looks at investor behavior within employer-sponsored plans. Last week, Vanguard released a new study: “How America Invests,” which looked at the portfolios and transactions of Vanguard clients in more than 5 million retail households from 2015 through the first quarter of 2020.

There’s a lot of material, but one thing that strikes me — and which is in keeping with the data from the annual employer-plan studies — is that individual investors (at least, those who are Vanguard clients) aren’t the dummies they’re often made out to be.

For instance, most Vanguard clients don’t jump in and out of the stock market at inopportune times, because most Vanguard clients don’t really do very much at all, other than simply buy more of whatever it is that they already own (which happens to be quite a good investment strategy, in my opinion, hence the name of this blog).

Here’s one such piece of data:

Fewer than one-quarter of Vanguard households trade in any given year, and those that do typically only trade twice. [Mike’s note: they’re defining trading here as moving money from one investment option to another within an account.] Most traders’ behavior is consistent with rebalancing or is professionally advised. […] Twenty-two percent of households traded in the first half of 2020—a rate typical of trading for a full calendar year. Despite the increase in trading, less than 1% of households abandoned equities completely during the downturn, while just over 1% traded to extremely aggressive portfolios. The net result of the portfolio and market changes was a modest reduction in the average household equity allocation, from 63% to 62%.

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