As the coronavirus pandemic took a hold of the global economy in early 2020, investors everywhere panicked and sent the stock market plummeting to some of its worst days in recent history. Now that some of the immediate panic has subsided, many American investors are reflecting on recent investment moves that they now regret.
In a new MagnifyMoney survey, we found that many Americans regret their previous investing decisions in light of the COVID-19 crisis. However, many investors are also hopeful for the market’s future, which could make this a perfect time to plan your own future investing moves.
- Key findings
- The most common investing regrets amid coronavirus pandemic
- How to avoid investing regrets
- More than half of investors regret past investing decisions brought to light by the COVID-19 crisis.
- Younger generations, who are arguably less experienced investors, have more regrets than older investors. A whopping 92% of Gen Z investors admitted to an investing regret in some form or another.
- Still, 79% of Gen X had regrets, compared to much lower numbers from baby boomers (33%) and the silent generation (24%).
- About one-third of investors have full confidence that their investments will rebound by the end of 2020, but some have more hope than others.
- Republicans are about twice as likely as Democrats and Independents to be very confident that their investments will recover by the end of the year.
- Meanwhile, baby boomers and the silent generation are much less confident in their investments’ recovery than younger investors.
- Consumers with investment accounts estimate their stock market losses are about $24,400 on average since the coronavirus outbreak slammed the United States in March.
- Baby boomers and the silent generation lost the most, at roughly $56,000 and $63,300, respectively. Unfortunately, these are the generations likely relying heavily on their investments in retirement.
- Women estimated they lost about $32,300 through the stock market, while men estimated their investment losses to be around $18,700.
- More than one-third of Americans think it will be at least a year before the stock market recovers from the pandemic.
- However, it’s worth noting that more than 1 in 5 (22%) respondents believe the market will recover in just two to five months.
- As the stock market shows signs of growth despite the bleak financial picture of many Americans, more than half of respondents agreed that the stock market does not completely depict the financial picture of the average U.S. consumer.
- Republicans and those who have investment accounts (including a retirement savings account) are more likely to believe the market mirrors the average consumer (around 35% in each group), compared to Democrats (24%) and those without investment accounts (13%).
The most common investing regrets amid coronavirus pandemic
Among our respondents, the top investing regret was a lack of portfolio diversification, a regret cited by 23% of respondents. Gen X respondents regretted this mistake the most at about 29%, with millennials not far behind at 27%. At 30%, men also cited this regret more than the 13% of women who admitted to making this error.
The second most common investment regret cited (19%) was taking on risky investments. Nearly one-third of Gen Z investors got burned by a risky investment. And while baby boomers and the silent generation were less likely to make this mistake, a quarter of Gen X confessed regretting this potentially costly move.
Some examples of high-risk investments can include initial public offerings (IPOs), structured products and venture capital trusts. You also may take on considerable risk if you’re trying to time the market for maximum returns, which many experts caution against.
The third common investment regret among respondents (13%) was keeping all of their savings in the stock market. Gen Z investors were the most guilty of this mistake, with 27% regretting keeping all of their savings in investments, followed by 15% of millennials, 13% of Gen X, 7% of baby boomers and a mere 2% of the silent generation.
How to avoid investing regrets
Luckily, these investing regrets are easily avoidable. Even if you found yourself regretting your pandemic-induced investment moves, there’s still time to recover.
Diversify your portfolio
For starters, it’s important to keep your assets diversified, or spread among different investments and across industries, whether you’re a beginner or an investing veteran. That way, when one part of the market takes a tumble, the other parts of your portfolio aren’t hit as badly, or at all. Essentially, by avoiding putting all of your eggs in one basket, your investments can be better protected in a downturn.
Cushion your risky investments
Keeping your portfolio well-balanced and diversified can also help mitigate risky investments that you might have taken on. It also helps to invest your money incrementally rather than in lump sums. That way, you’ll invest in both down and up times, balancing out your investment gains rather than going all in now and regretting your risk-taking later.
Acting reactively to the market is also a risk of its own. If you sell your assets just because everyone else is panicking, prices are driven down and you end up losing money because you’re making less on the sale than what you paid when you bought the asset. Instead, ride it out and keep your money invested. The markets will recover, and your assets’ valuation will go back up, too.
Invest toward long-term gains
Due to its nature, investing is a risky business. There’s the chance of losses and there is no guaranteed payout amount waiting for you. Because of these factors, it’s generally a bad idea to place all your savings bets on your investments. If you need cash in a downturn, you’ll be selling at a loss to withdraw from your investment accounts. Even further, selling off assets and turning them into cash takes time, making this a much less convenient method of withdrawing money than, say, heading to the ATM.
Instead, you should keep your investments geared toward the future, establishing more long-term goals for your investment accounts. This is why retirement accounts are often investment-based — it gives your investments time to accumulate, but also to ride out the many fluctuations of the market.
For your more immediate cash needs, keep money in a high-yield savings account. This allows for easier withdrawals and transfers, and ensures your money still grows. You can also open an interest-bearing checking account to make sure your money is growing no matter what account it’s in.
MagnifyMoney commissioned Qualtrics to conduct an online survey of 2,008 Americans, with the sample base proportioned to represent the overall population. The sample population included 1,183 investors and 866 non-investors. We defined the generations in 2020 as follows:
- Gen Z is defined as ages 18 to 22
- Millennials as ages 23 to 38
- Gen X as ages 39 to 53
- Baby boomers as ages 54 to 73
- Silent generation as ages 74 and over
The survey was fielded from April 28 to May 1, 2020.