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Small investors worry about plunging stock markets

NEW YORK — January's global selloff in stocks has left many small investors more puzzled than panicked, and unsure how to act.

They're holding on for now as prices tumble, but their anxiety is mounting. The number of small investors who say they feel "bearish" soared last week, according to a U.S. survey. Some stock funds have been hit with their biggest withdrawals since 2012.

If more people start selling, it would reverse a new and surprising trend in some of the world's biggest economies: individuals moving back into stocks after years of shunning them.

"I don't know what to do," says Ken Duska, a retiree in Mingo Junction, Ohio, who is sticking with his investment plan for now, though he's not sure that's wise.

Small investors around the world were on edge even before growing signs of a slowdown in China and plunging emerging-market currencies sent stocks sharply lower. They were fearful stocks had climbed too fast, and were overdue for a drop, after soaring by double-digit percentages in countries like the U.S., Japan and France in 2013. In the United States, some stock bulls had been bracing for a drop of 10 percent or more, known on Wall Street as a correction. That hasn't happened in more than two years.

Now, they have more cause to believe one may be at hand.

The Dow Jones industrial average has swooned 5 percent from a recent peak after investors became unnerved by reports of a manufacturing drop in China and economic mismanagement in countries like Argentina that sent the nation's currency plunging.

"The question is, 'Is this all of it, or is there significantly more to come?' " says Greg Sarian, a managing director at the Sarian Group at HighTower, a wealth advisory firm.

Since the 2008-09 financial crisis, small investors have mostly dumped stocks. But recently, buoyed by strengthening economies in the developed world, they have crept back into the markets.

Now, that flood of money might reverse as investors grow more worried.

At the start of the year, more than twice as many U.S. investors said they were bullish on stocks than said they were bearish in a survey by the American Association of Individual Investors. Now, the bears and bulls are neck and neck, with sentiments yo-yoing along with the indexes.

"I've lost . . . maybe $50,000 in the past week, and I'm not happy about it," says Scott Woodall, 44, of Acworth, Ga. "I hate the stock market."

A sign of the times: The price of gold, considered the ultimate "safe" asset by fearful investors, is up 3.3 percent this year after plunging 28 percent in 2013. Investors are also buying U.S. Treasury bonds despite Federal Reserve moves to scale back its purchases of them. The yield on the benchmark 10-year note, which falls when prices rise, has dropped from 3 percent at the start of the year to 2.7 percent.

Small investors worry about plunging stock markets 01/31/14 [Last modified: Friday, January 31, 2014 5:11pm]
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