Investors Pay Closer Attention after Enron

That was the conclusion of a new investor sentiment survey from Charles Schwab, which found that nearly three quarters of those polled have changed their investing ways.

Specifically:

• 33% avoid companies they don’t understand,
• 31% gather more research information,
• 27% buy a wider range of investments for diversification purposes,
• 22% admit listening more closely to a financial advisor, and
• 15% say they worry more

Ongoing Habits

The Schwab survey also asked about investors’ ongoing habits.

A large majority of survey respondents, or 71%, believes they should review their 401(k) accounts at least every six months – yet only 61% actually do so.

And, while only 4% say there’s no need to ever review a 401(k) plan once it’s been set up, 15% admit they have never reviewed their own account.

When it comes to company stock – a central issue in the Enron case – a quarter of the respondents who listed company stock as one of their investment options, report that it accounts for 20% of the assets in their portfolios.

Schwab researchers said the 20% figure is troubling because it means those investors are beginning to have a portfolio that’s too concentrated on company stock, and therefore much riskier.

One in five respondents didn’t know how much company stock they hold, or even if it is a plan investment option.
 
The survey also revealed that 34% of respondents don’t know which companies constitute the largest stock holdings of their mutual funds. Another third have only “a general idea,” and just 21% are “very clear”.
 
The survey was conducted by telephone in February 2002, among 620 adults who reported they have a 401(k) plan.