In an Associated Press-CNBC poll of investors, 61 percent said the market's recent volatility has made them less confident about buying and selling individual stocks. And the majority of those surveyed 55 percent said the market is fair only to some investors.
The survey confirms that average investors have been growing more concerned about the stock market as a safe place to invest for retirement. And news about the market has been unsettling for ordinary investors of late: More than 60 percent of those surveyed said they had paid attention to news reports about swings in the stock market.
Perhaps as a result, investors have been moving their money away from stocks and into bonds, which are generally more conservative investments and less volatile.
Louise Pollard, 72, and her husband have decided to shift the bulk of their portfolio into bonds after the market nose-dived two years ago. The pair, a retired engineer and computer systems librarian who live near Salt Lake City, remain comfortable financially. But they don't foresee their finances climbing back to the level of three years ago.
"At this point, I would not want to get back into regular stocks," Pollard said. "I don't have any confidence in the stock market, to be honest. It's just a gut feeling."
This shift among investors like the Pollards has been huge. From January 2008 through July 2010, investors pulled a net $244 billion out of stock mutual funds, according to the Investment Company Institute, which represents mutual funds that collectively hold about $11 trillion.
While all that cash was flowing out of stocks, investors put nearly $589 billion into bond funds over that 31-month period.
May's "flash crash", in which the Dow Jones industrial average plunged nearly 1,000 points in less than a half-hour, has added to investors' worries. But those polled in the AP-CNBC survey blame Wall Street's swings more on economic uncertainty and company news than on computer-driven trading. Few considered the move to high-tech transactions harmful.
Wealthier people assign more blame to computers for dramatic stock market moves. Among those with assets of at least $250,000, more than half blamed computerized trading for the big swings, compared with about a third of those with a net worth of less than $50,000.
The perception that the market is unfair is widespread. Nearly 90 percent of those with portfolios of less than $50,000 said the market is unfair to small investors. People with substantially more money agreed. More than 75 percent of investors worth at least $250,000 say the market is unfair to the little guy.
Frank Schorr, 61, a computer network analyst from outside Atlanta, says the market's downturn has confirmed his conservative approach to investing. He has always kept about 70 percent of his retirement savings in bond funds and other stable assets, with the remainder in stock mutual funds. That's kept him from suffering big losses.
"I've had too many friends over the years lose their shirts," in the stock market, he said. "I'm getting too close to retirement to go messing around too much with anything speculative."
The poll also found widespread distrust in regulators' ability to oversee the financial system. Just 8 percent expressed strong confidence in regulators. Half expressed little or no confidence, including 16 percent with no confidence at all.
Asked to rate six investment options as a way to build wealth, mutual funds were the favorite, with 62 percent calling them a good investment. Exchange traded funds increasingly popular securities that track an index or basket of assets and can be traded throughout the day finished at the bottom, endorsed by just over a quarter of those polled. About half had no feelings either way about these funds, perhaps indicating that little is still known about them among the general public.
Drawing the highest number of negative reviews were real estate and savings accounts. Both were considered bad investments by about 1 in 4 people.
Better-off individuals were more likely to give good grades to most investments than more modest investors. About three quarters of those earning at least $100,000 annually rated mutual funds as good investments, compared with 58 percent of those making less than $50,000.
As for individual stocks, more than 60 percent of investors with assets of $250,000 or more favored them, compared with less than half of those worth under $50,000.
That sentiment switches for bank savings accounts. Sixty percent of those with investments worth less than $50,000 liked savings accounts, compared with 35 percent with assets of $250,000 and up.
Americans appear to have heeded the advice of investment gurus who have long warned against reacting to short-term swings in the market. Nearly 80 percent of those surveyed said the best way to make money in the stock market is to buy stocks and hold them for a long time before selling.
The Associated Press-CNBC poll on investing was conducted Aug. 26-Sept. 8, 2010 and is based on 1,035 interviews of adults who own stocks, bonds or mutual funds. The margin of sampling error is plus or minus 3.9 percentage points.
The national survey was conducted online by Knowledge Networks of Menlo Park, Calif., under the direction and supervision of AP's polling unit. Knowledge Networks initially contacted people using traditional telephone and mail polling methods and followed with an online interview. People chosen for the study who had no Internet access were given it for free.