Retail Investors Say The Future Looks Bright: Here’s Where You’re Investing Now.

It’s been an interesting few months in the markets (to say the least) so we checked in with over 3,800 of you around the world to see how you’re feeling about it all, for our quarterly Modern Investor Pulse.

You're optimistic about stocks right now.

After a rocky start to the year – what with the collapse of Silicon Valley Bank triggering all kinds of fears in the banking sector and the economy – markets really came into their own last quarter, at least in the US. Case in point: the S&P 500 continued its upward march, ending the three months up 16% from where it started the year – marking its best performance for that period since 2019. If you consider that’s already well above the index’s average historical yearly return of around 12%, and outpaces inflation by a considerable margin, that’s pretty good going.

And that’s got you buzzing about the longer term too: 71% of Finimizers reckon global stock markets will be higher in a year’s time – which is the most optimistic you’ve been in our surveys since 2021. That bullish sentiment is at odds with some of the pros, mind you: the latest Bank of America Global Fund Manager survey – which checked in with 247 investment managers who oversee $708 billion in assets between them – found a more cautious view on stocks in general. Those pros said they’d dropped their allocation to stocks to a five-month low, probably in part because of hints that the Federal Reserve is looking to continue its rate hikes after a pause last month.

But you’re taking a sensible approach: stocks aren’t your ride-or-die.

You’re not all going gung-ho here: around half of you are planning to hold steady with the risk you take with investments over the next three months and continue to invest as usual. That makes sense when you consider that over two-thirds of you who responded to the survey are long-term investors and have over three years of investing experience. You’ve seen how quickly things can change in the market, and obviously have an inkling that keeping consistent and not trying to time the market can be a savvy strategy.

Responses to “Are you planning to take more or less risk with your investments over the next three months?” Source: Finimize.

Sure, stocks are the biggest draw right now, but they aren’t the only place you’re socking away surplus income. Much like in the previous quarter, you’ve been investing in ETFs and real estate – great ways to diversify and hedge against still-present inflation, respectively. But what really stands out is the climb up the rankings of bonds and money market funds, both of which offer up an element of safety, compared to stocks, and probably indicate that you’re hedging your portfolios against any potential downsides. That stands to reason: with interest rates soaring high these days, investors can lock in pretty decent returns for relatively low risk, and they’re making the most of that right now.

Crypto’s still hanging in there too, albeit toward the lower end of the list, reflecting split opinion on where bitcoin and its ilk will be a year from now. That mixed sentiment clearly shows in its performance last quarter: the bulk of its impressive 84% rise this year came in the first quarter, with more recent months being pretty muted by comparison.

Responses to “Where do you plan to invest most of your surplus income over the next 6-12 months?” (Multiple answers allowed) Source: Finimize.

And you’re taking a more balanced approach to the AI boom.

A big part of why the S&P 500 was able to surge so much this year – aside from the signs of a more resilient economy – was AI. The buzz about its potential lit a fire under tech stocks involved in the new technology, (hello, Nvidia and Microsoft). And because of the oversized sway that tech giants have on the rest of the market, they pretty much carried the rest of the index as a result.

That fund manager survey showed that investors have been piling into tech stocks in a huge way on the back of the hype. In fact, it found Big Tech was by far the most crowded trade, with the most conviction since 2020. Meanwhile, though, it looks like you’re planning to take a more measured view. Sure, AI is big, but only about half of you actually plan to invest in AI stocks in the next six months, while a third of you think AI is overhyped and are outright avoiding investing in it right now. Analysts are split as well, but the founder of OpenAI – the creator of the offering that opened the AI floodgates, ChatGPT – agrees (at least somewhat) with the leary, saying last month that the tech is “wildly overhyped in the short term”.

But over the long-term, he’s very much bullish and thinks AI’s actually undervalued, with so many potential applications that are yet unknown. There’s no doubt AI has the potential to revolutionize huge swaths of the global economy, but the speed at which it might do that is still a big question mark. And while there’ll undoubtedly be some resistance to its adoption along the way, the reality is that those who successfully adopt the tech are likely to benefit over time.

For those of you who are content to keep plowing your investment cash into the AI theme, the usual Big Tech suspects like Microsoft and Google parent Alphabet are at the top of your list, along with chipmakers like Nvidia, and EV behemoth Tesla.

Responses to “Which AI stocks are you planning on investing in?” (Multiple answers allowed) Source: Finimize.

Of course, predicting which stocks will come out on top in the long term is a tough gig: so if you’re keen on the AI space, you might consider adding a range of companies to your portfolio – from those providing the end AI products to consumers to those that provide the tools and materials needed to make it happen. ETFs could help you do that, like the WisdomTree Artificial Intelligence and Innovation Fund (ticker: WTAI; expense ratio: 0.45%), which invests in firms across the AI value chain, or the iShares Robotics and Artificial Intelligence ETF (IRBO; 0.47%), which invests in over 100 companies, including lots of smaller, international ones.