Driven by market instability fears, investors are turning to cash in what appears to be a deliberate and longer-term fundamental change in investing, according to the findings of the latest MFS Investing Sentiment Survey released today.
Leading the pack in this switch to cash is Generation Y, says MFS. Investors surveyed had on average 26% of their portfolio in cash, with Generation Y investors having the highest cash position, 30%.
One-quarter said they liquidated a portion of their portfolio in 2010 or 2011 because of market concerns, with 52% of Gen Y having liquidated more than any other age group.
Nearly three in five investors cited financial market fears as the main reason for holding onto more cash and wanting immediate access to their assets, according to MFS Research.
Investors say it will take a meaningful change in either the economy or their personal circumstances to instill enough confidence for them to return to the equity market.
Besides the current unstable stock market, MFS officials say the recession of 2008 has had a profound--and longer-lasting--impact on investors' confidence.
"Investors are in cash for a reason and, regardless of time horizon, conventional investing wisdom no longer applies," says William Finnegan, senior managing director of U.S. retail marketing for MFS. "Investors, especially younger ones, would rather keep cash in the bank than chance the stock market."
Finnegan says with persistently high unemployment, spotty economic data, and uncertainty in Washington, D.C., "no one is going to tell investors they are wrong to have high cash balances."
"To the contrary," added Finnegan. "The data confirm that they are confident in their decisions to hold cash and they consider high cash balances to be integral to their investing approach."