Fidelity: Our clients are not panicking

Given the stock market’s rocky start to the New Year, you would think that the phones at a big mutual fund company like Fidelity Investments would be ringing off the hook, but that assumption would be wrong.

Instead of panicking about the sell-off, a lot of the Boston-based company’s clients are putting more money to work.

“We have about 30 percent more buyers than sellers,” said John Sweeney, Fidelity’s executive vice president of retirement and investing strategies for personal and workplace investments. “People are taking advantage of some of the choppiness in the market.”

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The fourth-largest asset manager in the U.S., according to Institutional Investor, Fidelity typically sees strong inflows at the beginning of the year as investors will put money in their IRAs, or invest discretionary bonuses distributed at year-end.

The difference in 2016, Sweeney said, is that even though the S&P 500is down more than 10 percent in 2016, the inflows are stronger than they have been for the past couple of years.

John Sweeney, Fidelity Investments

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John Sweeney, Fidelity Investments

“It shows the investor has confidence in the market,” he said.

It also shows retail investors are more savvy about buying on the dips, and are more disciplined about their long-term strategies.

Sweeney attributes the stronger-than-usual inflows to a number of different factors.

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First of all, he said, Americans are saving 2 percent more of their income than they have in the past. Second, the job market has stabilized and incomes are starting to creep up, leaving investors with more money to put in the stock market or bonds. Lastly, he believes people are taking more control over their retirement investments.

“You have the baby boomers, who when they reach 50 can catch up contributions to their retirement savings because of a raise or a bonus payment,” he said. Fidelity is also seeing millennials put more money to work. The company’s Retirement Savings Assessment study found in 2015 millennials were saving 7.5 percent of their salaries each month, up from the 5.8 percent they were putting away in 2013.

Driving the increased savings rate among this group, Sweeney said, are expectations they will live longer lives and that today’s “gig” economy will mean they will have more employers in their lifetime, though not necessarily more employee-funded retirement savings.

So what have these investors been buying? Sweeney said the added inflows are going into equity funds as well as fixed income funds, suggesting the aging baby boomers recognize they need to have a balanced portfolio of growth and income as they near retirement.

Certainly, the stock market’s swings have investors checking in. Sweeney said the most common question asked to Fidelity representatives is, “What’s going on in the market?”

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While Fidelity will walk investors through some of the issues overshadowing the markets these days, like slowing growth in China and the impact persistently low oil prices have on energy companies, Sweeney said the mutual fund encourages its clients to zero in on what their goals are if they feel skittish about the markets.

Sweeney said Fidelity’s clients typically fall into three categories.

Nervous investors do not have a plan, so when they call concerned about the market, the firm will work with them to guide them to the appropriate strategy. The second category, confident investors, understand they have different tools in the toolbox they can use to reach their goals, so here Fidelity will go over the structure of their portfolio and help them adjust it if it’s needed.

The last category is the bold investor, or the traders, who are looking at valuations and asking if certain investments are at a price point now that make them an attractive long-term investment.

[“source -pcworld”]