Investors Lean into Volatility to Trap Year-End Gains

Despite the past 18 months of uncertainty, including recent concerns over the spread of the omicron variant and creeping inflation, investors have yet to dampen their enthusiasm, particularly for risky plays. 

That’s according to our most recent survey of Investopedia’s daily newsletter subscribers. We’ve been surveying our readers about their investing sentiment since February of 2020, and while the early days of the pandemic caused historic spikes in anxiety and volatility, most respondents to our surveys—active U.S. investors—have generally remained bullish and opportunistic amid the commotion. 

Investors Bought The Dip

Our latest survey results reveal that 23% of survey respondents said they added more money into their portfolios in recent weeks, while 36% said they’re making more frequent adjustments to their holdings. Another 17% said they are choosing “riskier” investments, and a full one-third of our readers now own some form of cryptocurrency.

All of those metrics are at least seven percentage points higher than our last survey in October and November, showing investor appetites for market opportunities are only growing, despite swirling concerns about COVID-19 and the economy. 

Among the cryptocurrencies they’ve been buying, Bitcoin and Ethereum top the list, despite the fact that 35% of our readers consider Bitcoin to be the biggest bubble among financial assets. 

Feeling the Fear

Investors’ bullishness belies the fear that many are feeling about current economic and market conditions. More than half of respondents say the stock market is overvalued, while 30% expect a significant drop in the next three months. 41% of our readers said they are ‘somewhat worried’ about recent market events.

Our survey ran from November 18 to December 8, 2021, and over the course of those three weeks, the Nasdaq and Dow Jones Industrials both declined more than 4% before recouping most of those losses, while the S&P 500 fell 2.5%, before climbing back to record highs last week.

Topping their list of concerns is inflation, which dominated other worries listed in our survey. Continued supply-chain constraints were also high on the list of investors’ biggest worries, followed by the spread of new COVID-19 variants and rising interest rates.

Bubbles, Anyone?

When asked to pinpoint a current bubble, Bitcoin topped our readers’ list. Bitcoin and other major cryptocurrencies have experienced significant price drops from recent highs, yet our readers still consider Bitcoin the frothiest. U.S. residential real estate and stocks were considered to be the second and third-largest bubbles, followed by Dogecoin, NFTs, and other cryptocurrencies.

Regrets? We’ve had a Few…

As the year came to a close, we asked readers for their biggest regrets of 2021. Winning by a landslide, the top choice was “invested too little,” with nearly one-third of our readers regretting not putting more in the market. 

Meanwhile, 16% said they regret not investing in crypto. With Ethereum rising 466%, and Bitcoin rising 70% on the year so far, it’s easy to see why. But, to own cryptocurrency is to embrace volatility and steep drops. Bitcoin experienced three bear markets in 2021, where the price fell 20% or more. However, it also hit several new all-time highs throughout the year.

Muted Expectations for 2022

Despite their recent and renewed bullishness, our readers don’t have great expectations for 2022 stock market returns. Around 40% of our readers expect gains of 1-10% for the year, while only 13% expect gains of more than 10%. Over 30% of our readers expect the stock market to end 2022 flat or even below current levels.