Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. Welcome back, David.
David Nelson:
Thank you very much.
Brandy Auterson-Hurst:
So it seems like the stock market has been on a lot of people’s minds recently. What are some of the things you’re seeing in regards to that?
David Nelson:
Well, we look at a lot of different things, but I guess today I wanted to focus on one of them that I think is really, really important, and that is investor sentiment, another way of saying investor behavior. And what we find in looking in the rear-view mirror is that oftentimes individuals are kind of out of sync at extremes as far as doing what they should be doing versus what they are doing. Meaning they have really over-allocated as far as to some areas that have been hot for quite a while.
The chart that I have today kind of drives home this point, and it’s looking at investor behavior and it’s looking at what people actually own. And we’re looking specifically at stocks as far as what percentage that individuals have in the stock market. And what we see is that at various points in time, I want to point out the ’80s. The ’80s, the allocation of stocks was at a very, very low level, which in hindsight was probably a really bad decision as far as for many people.
Also, we look at the peak of the year 2000. We see that the allocation of stocks was an all time high, 65%. So I mean 65% of your money in stocks during that period of time, bad decision. Now, if we look to the far right, what we see is that we’re getting at those extreme levels again, which again makes us very, very nervous for a lot of individuals out there.
Brandy Auterson-Hurst:
So what does this mean for investors going forward?
David Nelson:
Well, history suggests that once we hit these high levels as far as that the average person is investing this much in equities, history says that the returns going forward are generally very low, so be very careful as far as making decisions at this point.
Brandy Auterson-Hurst:
If you missed any of our discussion, we’ll make it available for you on Ourquadcities.com.
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This video includes a paid appearance.