U.S Stock Ownership INTRO: The decade of the nineties has seen a great increase in the percentage of U.S. households that own stocks. Many investment professionals have wondered when the public will stop buying on market dips or if newer investors will cut and run when a bear market arrives. Bruce Hagan, certified financial planner with RAI Investments and Corporate Securities Group is with us today to tell us these fears may be overstated. Q1: What makes you feel confident that the public is committed to stocks for the long run? A1: Well, I’m not completely confident of that, but I’ve grown more confident of it as time has passed and these newer investors have become more seasoned. Expectations and sentiment certainly can change but I think now that would most likely take place over time rather than an overnight thing. Q2: Why is that? A2: Primarily because of the more widespread ownership of stocks and the apparent adherence of many investors to a buy and hold strategy. Recently a study was conducted jointly by the Investment Company Institute and the Securities Industry Association called "Equity Ownership in America". They surveyed 4,800 households and found that approximately half owned equities. They then examined those households in depth. Q3: What were the results of the study and were there any surprise findings? A3: I think some of the findings were surprising and encouraging. What wasn’t surprising was that owners of mutual funds exceeded that of direct stock holdings: about 85% of households studied owned mutual funds and 54% held individual stocks. What was rather surprising was that 87% professed to have a buy and hold strategy. They seem to be demonstrating that strategy through their actions. In 1998 55% of these households that own equities had no stock or mutual fund transactions outside of payroll withdrawals for 401(k)s for example. Of the remaining 45% that did transact, 11% did 12 or more trades, and 11% accomplished that trading over the Internet. Q4: So it would appear, then, that much of the day-trading phenomenon may be overplayed by the media? A4: Yes, apparently the on-line trading firms are competing fiercely for what is, at present, a fairly small market. The importance of that is that if an investor views stocks as a long-term wealth accumulation tool rather than a trading vehicle they’re more likely to hold stocks through corrections. Q5: Any other interesting results from the study? A5: Yes, 55% of the households owned an international mutual fund or a foreign stock. Also there were generational differences. Baby boomers have about 57% of their financial assets in stocks while the Generation X age group has about 80%. Given the longer time horizon of the younger investor that’s probably quite appropriate and pretty much what most advisors would recommend. So, the good news is we have some pretty savvy investors out there and they appear to be in it for the long run. Q6: Federal Reserve Chairman Alan Greenspan has talked about the "wealth effect" the rise in the market has created. Has that helped buoy consumer confidence and spending? A6: Yes, and along with that there’s been a good steady 4 to 5% annual increase in home values the last several years and that’s helped. 48% of households own stock but 67% own their own home. The discussion offered above and in the movie should not be considered an endorsement by Florida State University. They are offered in the educational sense of providing thought-provoking information for our Web audience. Copyright shared with Florida News Channel (FNC), all rights reserved. Broadcast 11/19/99