Investors appear to be heeding Vanguard's passive investing advice. During the steep sell-off in the stock market earlier in February that led to correction mode, Vanguard's customers didn't panic, refraining from trading and acting on emotions. The king of low-cost investing said that, from Feb. 2 through Feb. 9, when stocks were plunging over concerns that the U.S. economy was getting overheated and that the Federal Reserve will have to raise interest rates faster than expected, customers didn't engage in any panic selling. Over the period, Vanguard said that "97% of households didn't trade," reported The Philadelphia Inquirer.
The company said that, on Feb. 5, 1% of Vanguard houses were trading moving 0.3% of assets. That compares with slightly more than 0.1% on a normal trading day. Vanguard did acknowledge that there was an increase in phone calls to customer service and that there was less buying on the sell-off, with investors more skeptical about where stocks are heading.
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The lack of panic also came amid some trouble accessing Vanguard's online trading service during the bloodletting in the stock market. On the day the Dow Jones Industrial Average plummeted more than 1,000 points, investors rushed to check on their investment accounts, with some finding that they couldn't do so on a temporary basis. At the time, a spokeswoman for Vanguard told The Wall Street Journal that some clients were experiencing "sporadic difficulty" accessing accounts on Vanguard.com or via phone but that full access was restored.
Vanguard clients aren't the only ones that didn't panic during the correction. Fidelity Investments told CNBC that customers remained calm and that some used the plummet as a buying opportunity. "From a retail perspective, definitely more buyers than sellers today," Keith Bernhardt, vice president of retirement and college products at Fidelity, told CNBC. "We're not really seeing panic." Bernhardt said investors at Fidelity realize that the markets have had a huge march higher and that some sort of correction was coming. CNBC noted that Fidelity had 26 million customers and $6.2 trillion in assets under management as of the end of June 2017.
One group of investors that seemed to break the cardinal rule of refraining from emotional investing, which typically results in selling low and buying high, are retirement savers. Citing the Alight Solutions' 401(k) index, Bloomberg recently reported that retirement savers, or those who have a 401(k), were jumping into the stock market in January as the Dow Jones Industrial Average set new record highs. But the sentiment changed when stocks began their nosedive, with retirement savers opting to move into cash and fixed income at three times the normal rate in February. On the day the Dow logged its biggest point drop ever, retirement savers continued to move out of stocks at 12 times the normal pace, and even as the market recovered the next day, they were still sellers at a rate that was four times normal activity.