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Opinion
Nir Kaissar

Lower Returns and Greater Turmoil to Test Stock Investors

It’s easy to hang on to shares during an impressive bull run. What happens when it stumbles?

These two will tangle and test investors’ resolve.

These two will tangle and test investors’ resolve.

Photographer: Alex Kraus/Bloomberg

Investors have a reputation for dumping their stocks when the market nose-dives, a reputation earned over decades of, well, dumping their stocks when the market nose-dives. Yet by all accounts, when the market tumbled last spring during the Covid-19 outbreak, an overwhelming majority of investors hung on to their stocks or bought additional shares as prices fell. 

What accounts for investors’ newfound grit? Perhaps they’re becoming savvier with their money, as the billions of dollars moving into low-cost index funds from high-priced actively managed funds suggests. Or maybe the market declined and recovered too quickly last year for investors to react —  the drop from peak to trough took just more than a month, and by August the market notched record highs.