2020 was a turbulent year, and that turbulence included the stock market. Investors saw rapid swings in their portfolios -- often in a matter of weeks.
New and experienced investors had to choose how they would respond to this volatility. Did they buy more stocks? Sell more? Keep money out of the market to avoid the volatility? Or stay the course and not do anything differently?
We wanted to know. To find out, we surveyed 2,000 American investors, including those who had been investing for decades, rookies, and everyone in between.
Read on to learn how investors approached one of the most volatile markets of all time.
Key findings
- The most common action investors took in response to market volatility was buying stocks -- 45% of investors bought shares because of volatility in 2020.
- Investors with 10 years of experience or more were the most likely not to do anything differently in response to market volatility -- 30% of them stayed the course through 2020.
- Women were more likely than men to not change their investing actions because of market volatility, reflecting their generally calmer investing style.
- Preventing financial losses was the most common reason investors sold their stocks, but many people also needed cash, including over 55% of Generation Z investors who sold stocks.
- Investors with 10 years of experience or more were more likely to sell stocks to reinvest in better opportunities or capitalize on a rise in value in 2020.
- 45% of investors thought they made money with their response to market volatility in 2020, but over 20% of new investors aren't sure how they fared.
How volatile was the stock market in 2020?
Market volatility reached an all-time high in 2020 per the CBOE Volatility Index (VIX).
The VIX is a common gauge of stock market volatility. A higher VIX corresponds to a more volatile, unsettled market. Here are the VIX ranges and their levels of volatility, according to the S&P Dow Jones Indices:
- 15 and below: Low; indicates optimism in the market
- 15 to 20: Moderate; indicates a normal market environment
- 20 to 25: Medium to high; indicates growing concern
- 25 to 30: High; indicates turbulence in the market
- 30 and above: Extremely high; indicates extreme turbulence in the market
The VIX skyrocketed as the COVID-19 pandemic grew more serious. It closed at an all-time high of 82.69 on March 16. Although it dropped from there, it was above 20 for the rest of the year with several spikes above 30.
The only recent year on record with similar volatility was 2008, during the height of the Great Recession.
This volatility made investors anxious, with 85% of our respondents saying they experienced some anxiety around the market in 2020. Over half said they were "somewhat" or "very" anxious.
What did investors do in response to market volatility?
Investors were anxious about a highly volatile 2020 stock market, and many of them bought or sold shares in response.
Nearly half of all investors bought stocks, and about a third chose to sell shares or keep money out of the market due to volatility. Just over one in five didn't change their normal investing habits.
Did you take any of the following actions because of market volatility in 2020?
