Our researchers are sharing their findings in a series called IRA Insights. The latest installment appears below, or you can download a copy.PDF

IRA Insights: IRA investors avoiding the panic button

Most Vanguard IRA® investors don’t make drastic portfolio allocation changes
Fewer than 1 in 4 investors who owned Vanguard IRAs continuously from 2007 through September 2015 ever made a change that altered the stock allocation in the IRA by more than 20 percentage points in a single month. Of those who did make a change, fewer than half made more than one change.

Large asset allocation changes are rare
Investors generally stick to their plan
In a typical month, 0.2% of Vanguard IRA investors made a large move out of stocks, although such moves are more frequent after stock market drops. But even in the worst month, clients were only about 1 percentage point more likely to make a major stock sale. Even over the entire period of January 2008 through April 2009—which includes the global financial crisis—only about 1 in 15 Vanguard IRA investors made a large reduction in their stock allocation in any month.

Down markets spur some selling, but not for most investors
Did ‘panic sellers’ learn a lesson?
Investors who sold out in 2008 must have felt relieved at their decision while they watched the market plummet through the financial crisis. But when you time the market, you also have to figure out when to get back in. About 40% of those who sold out of stocks during the crisis never made a large purchase back into stocks. Perhaps the crisis simply made these investors reassess their risk tolerance. However, even the “market timers” never returned to their previous stock allocations.

Getting out, and staying out

Notes:

All investing is subject to risk, including the possible loss of the money you invest. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. For more information about Vanguard funds, visit vanguard.com or call 800-662-2739 to obtain a prospectus, or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.