Bear Market Prompted Shift to Conservative Assets

May 30, 2001 ( - The drop in the market in the last few months has caused a shift towards more conservative holdings like certificates of deposit (CDs) and diversified mutual funds as opposed to the mass exodus from investing predicted by some analysts, a recent study reveals.

All the major US stock market indices retreated in 2000 and continued to decline into the first quarter of 2001. Despite rebounding slightly in April following the interest rate cuts by the Federal Reserve, the benchmarks have been off for the year, the Dow Jones Industrial Average managing only a 2% gain year to date.

The study by financial research firm, Dalbar, which polled 1,450 US households with incomes of $50,000 or more, shows that investors have not cut their overall level of savings. Retirement plan investing continued unabated throughout the downturn.

Investors told Dalbar that, as a result of the fall in the market, they expect to

  • hold more cash and diversify their assets
  • invest more in CDs, savings accounts and money market accounts
  • allocate less money to technology and international funds and
  • cut back on individual stock investment.

Despite the losses, 61% of respondents remained confident about investing and saw the recent fall as a buying opportunity.