Stock market love

NEW YORK – Luke Thomas, 44, an information technology field manager who lives in Miami, began investing in the US stock market in his early 20s, attracted by the prospect of learning “how to grow a little bit of money into a lot,” he said.

At the time, he put most of his money into a handful of small-cap and over-the-counter stocks.

Yet watching the Russell 2000 index of small-cap companies fall more than 60 per cent during the 2008-2009 financial crisis scared him into diversifying his portfolio.

He now invests in large-cap stocks, real estate, options, and cryptocurrencies such as bitcoin, spreading his risk over several asset classes.

“A younger Luke would have focused 90 per cent on crypto, putting all my eggs in one basket. But this way, I’m not overly exposed,” he said.

Mr Thomas is not alone in his hesitation to make big bets.

Ten years after the start of the financial crisis that erased $US16.4 trillion ($F33t) in assets from US households, Americans have yet to embrace the US stock market with the same fervor as before, holding fewer individual stocks and putting less money into equities overall despite an uninterrupted nine-year bull market that has pushed the S&P 500 up nearly 310 per cent from its 2009 lows.

Overall, US households have $US900 billion ($F1.8t)less invested in stocks than in 2007, according to Goldman Sachs research, leaving buying by US corporations now the greatest driver of demand.

In 401(k) retirement plans, meanwhile, investors now hold an average of 52.4 per cent in equity-only funds, down from the 64.7 per cent they held in 2007, according to Fidelity.

Instead, investors now hold an average of 33.2 per cent of their assets in blended target-date funds that combine stocks, bonds and cash based on a person’s expected retirement date, more than double the 14.5 per cent of assets invested in the category in 2007.

The decline in the assets invested in stocks comes even as investors have largely benefited from the recovery in equity prices.

The average 401(k) balance at the end of 2017 was $US104,300 ($F211,989), up 112 per cent from the average of $US49,000 ($F99,592) at the end of 2008 and up 54 per cent from the pre-crisis average of $US67,600 ($F137,397) at the end of 2007, according to Fidelity.

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