No question, 2008 is a year that few investors will soon forget; the stock market suffered its worst losses in a generation and left millions of Americans without any financial security. But now, with five years of strong stock market gains behind us since the nadir of the Great Recession, average investors are finally feeling more confident -- and getting back into investing for their financial futures.
The most recent Financial Review & Outlook Survey from TD Ameritrade (AMTD) showed several concrete signs that investor confidence has risen dramatically in the years since the crash. Let's take a look at some of the most important indications that ordinary Americans are moving in the right direction again.
1. More People Are Actually Benefiting From Strong Markets
In 2013, the Dow Jones Industrials (^DJI) rose 26.5 percent, the index's best year since the mid-1990s. Yet in past years, during the five-year-long bull market, ordinary investors have been less likely to reap the benefit of the gains, as many cashed out of stocks during the financial crisis and missed a fair chunk of the rebound.
The most recent survey results show that in 2013, though, that trend has definitely shifted. Fully two-thirds of those who responded said that 2013 was an excellent, very good, or good year, compared to just 11 percent saying that conditions were tough or very tough. Especially given that bond-market investments lost ground in 2013, the survey results suggest that investors were back in the stock market and enjoying its outsized gains last year.
2. More People Are Investing More Money in the Stock Market
Investors have recovered their optimism about the stock market.
The survey found that almost 80 percent of investors were putting the same amount of money or more as they did in 2012 into the stock market in 2013, up from 67 percent when TD Ameritrade did its similar survey in 2010. Correspondingly, the percentage of investors putting less money into the stock market has fallen by about a third, with only 21 percent now reporting that they're less inclined to invest in stocks.
3. More Retirement Investors Are Ahead of Their Target
One of the big concerns during the financial crisis was that retirees and near-retirees had suffered steep investment losses at the worst possible time. Now, after five years of gains, many of those who are saving for retirement are back on track to meet their goals, and a substantial percentage are actually ahead of where they expected to be. The 2013 survey showed 67 percent of investors ahead of their predicted pace on saving for retirement, compared to just over half in 2010. Again, that shows that most retirement investors stuck to their overall strategies and participated in the market's gains in recent years.
4. More Investors Are Moving Ahead with Major Financial and Life Moves
During periods of uncertainty, it's easy to put off big decisions like buying a new home or car, or going on costly trips. But in 2013, investors became more willing to spend, with fewer people procrastinating on big purchases.
In particular, the housing recovery and record low interest rates have almost eliminated procrastination in buying a home, with just 4 percent reporting that they'd delayed on a home purchase in 2013 compared to 13 percent in 2010. Just 26 percent put off travel expenses in 2013, and 18 percent deferred a vehicle purchase, down from 35 percent and 25 percent respectively in 2010.
5. Investors Are Smarter About Getting Rid of Debt
One of the major lessons from the financial crisis was how crippling debt can be when times get tough. The 2013 survey found that people have become a lot wiser about how to use unexpected income. Specifically, among those who said they would use a $1,000 windfall differently now than they would have before the recession, a quarter said they'd use it to reduce debt. That's more than triple the number who would've done that before the recession.
6. Investors See a Bright Future
As strong as 2013 was, investors think 2014 could be even better. More than twice as many respondents believe that 2014 will be better financially for them than 2013 was, with only 16 percent thinking that this year will be worse for them than last year. Overall, investors are optimistic about the economy as well, with optimistic views outnumbering pessimistic ones by nearly two-to-one.
Don't Get Wrapped Up in Day-to-Day Fears
Perhaps the most surprising thing about the TD Ameritrade survey findings is that when you look back at 2013, there were plenty of scary events that made many investors nervous day-to-day. Yet taking a step back and looking at the longer-term perspective, things worked out in the end , and those who stayed the course reaped big returns for their patience.
By having a long-term investing strategy and sticking with it, smart investors have proven that they can weather even the worst of market storms from the Great Recession.
You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+. He doesn't own shares of the companies mentioned in this article. The Motley Fool recommends TD Ameritrade. The Motley Fool owns shares of TD Ameritrade.
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