Are you a bear or a bull?
Just under half of Americans feel bullish about the stock market, according to a recent survey by the American Institute of CPAs. The survey stated that 48% of adults "believe that a volatile market gives them an easy opportunity to make a profit."
The number is comprised mostly of Millennials and Gen Xers, who are more likely to agree "about the potential profitability of this short-term buying and selling high-risk behavior." Broken down by group, 62% of Millennials, meaning 20 to 37-year-olds, believe in a volatile market, and so do 55% of Gen Xers, meaning 38 to 53-year-olds.
However, only 37% of Boomers believe in short-selling and high-risk behavior. The age group is limited to 54 to 72-year-olds.
The study notes that experience may play a role when it comes to the different age groups investing strategies. Millennials, for example, have only experienced a bull market as adults, so they may not be aware of the "dangerous downturns that are a natural part of the market cycle."
"Investing is not a get-rich-quick scheme and trying to time a volatile market with hopes for huge gains is a serious financial risk," said Greg Anton, chairman of the AICPA's National CPA Financial Literacy Commission. "Many people who enter the market looking for a quick buck find they can't handle watching their investment lose value, which leads them to sell at a loss. For most people, seeking incremental gains over a longer time horizon is a safer, more sustainable approach."
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The study warns that investors should understand their risk tolerance. Another important factor to consider would be to understand the amount of money that can be invested so that investors don't over-invest.
"Investing in financial markets is inherently risky and times of market volatility are difficult to navigate," according to the study. 59% of Americans who are involved with their household investing don't plan on making an investment within the next year.
"Before Americans invest their hard-earned money, it's important they take control of their financial future and do some research," advised Anton.
36% of Americans surveyed want a steady annual return when looking into investing, but 26% of investors cited volatility as an important investment decision.
The kicker? 28% of those surveyed said they never do research into investments. However, 63% do research, but it's either done every quarter or less frequently. In total, 32% of Americans make high risk investments.
"A well researched and properly diversified portfolio that matches an investors risk tolerance will give [investors] confidence to stay focused on long-term strategy and protect from the temptation to sell during short-term price swings," said Anton.