Up down, up down. The U.S. financial markets, especially stocks, have been extremely volatile. Earlier this week, the Dow Jones Industrial Average sank 400 points midday. The drop had even the most professional investors reaching for the Alka Seltzer.
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Financial advisors are getting an earful from individual investors. According to the Eaton Vance Top-of-Mind Index, 80 percent of investors have expressed concern about the markets and volatility this quarter. “Fear has risen up in a big way,” John Moninger, Eaton Vance managing director, told FOX Business Network’s Maria Bartiromo during a recent interview. “It went from 55 percent of clients were worried about markets and were fearful to 80 percent.”
And, yet, just last week, equity mutual funds saw inflows of or 2.5 percent or $2.1 billion, according to Jeff Tjornehoj, head of Americas Research, Thomson Reuters Lipper. That optimism contrasts with the sentiment of the last three months, in which funds overall posted outflows, albeit small ones.
“We’re seeing a net drain out of the mutual fund industry over the last couple of months,” says TJonehoj. “I think it’s frustration. Small investors don’t like the volatility in equities and the market is getting off to a rough start.”
Through this week, the Dow and the S&P 500 have lost roughly 8 percent this year while the Nasdaq is experiencing a steeper drop of 13 percent.
There have been few places to hide in mutual funds. While small investors had turned to passively managed equity funds over the past few years to cut costs and improve returns, passively managed funds are barely outperforming actively managed funds for the year.
According to research provided by Morningstar, actively managed funds lost 9.2 percent for the year to date through Feb. 5, while passively managed funds lost 8.7 percent.
Most advisors counsel investors to stay the course when the road gets rocky. But the repeated downdrafts experienced by those on the cusp of retirement during their investing careers, such as the dotcom crash that occurred between 1999 and 2001 and the housing crash that took the stock market down in 2008 and 2009, has investors wary.
With good reason.