US Investors Deserting Equities? (RATE)

Even though the market for US stocks is at a four-year high, some 76% of Americans are not willing to invest more in equities. Only 18% of those surveyed by Bankrate.com (NYSE: RATE) plan to invest more heavily in stocks.

Bankrate.com’s Financial Security Index indicates the Americans’ feelings about their personal financial security is at its highest point since the company began computing the index in December 2010. The index reading for April is 99.9, just shy of the 100 that would indicate a greater feeling of security than a year ago.

Americans, apparently, are satisfied to put their money under their mattresses — or in savings accounts and CDs that return virtually nothing. (see our story on CDs here). Without delving too far into group psychology, the primary reason for this is that 76% of Americans are more interested in wealth preservation — that is, for a store of value that takes no or little default risk.

But savings at current rates offer little to protect against inflation risk. In fact, Warren Buffett has pointed out that over a long time frame, short-term US Treasuries have really provided no yields at all.

It appears that Americans are more willing to accept inflation in exchange for security of their capital. And the reason for that, is that long-term prospects are so uncertain. Investing in equities for the long haul right now does not seem prudent, and trying to time the market is, in most cases, a loser’s game. Put the cash under the mattress and wait may be an old time strategy that’s gaining new believers.

Or, as Mark Twain once said, “I am more concerned with the return of my money than the return on my money.”

Paul Ausick