Harvey Jones discovers that in recent months private investors have been taking some tentative steps back into the stock market.
Private investors have long been notorious for entering and exiting the stock market at the worst possible times.
They hover on the fringes during the early stages of a bull run, nervously wondering whether it is going to last, and only muster the confidence to pile in after the real profits have been bagged.
They get their timing wrong on the way out as well, selling up when markets are nearing bottom, and neatly crystallising their paper losses. Then markets recover, and exactly the same cycle repeats itself.
It is called the herd mentality, and time and time again private investors have surrendered themselves like lambs to the slaughter.
But is this beginning to change?
To boldly go
As the FTSE 100 sinks ever lower, private investors are apparently defying the gloom by returning to the stock market, according to a new report from Capita Registrars.
Weary of flogging off their ravaged equity portfolios, they are boldly taking advantage of low prices to top up their holdings.
Private investors bought £170m of shares in December and January, which includes the quite Christmas period. Since last autumn, they have slipped £800m into the stock market.
Some may be regretting their decision, given the latest market kerfuffle, but even if markets do fall further they have still been buying shares at much more attractive valuations than 12 or 18 months ago.
It also suggests that the message is finally getting out that the best time to invest is when shares are cheap, not when they're expensive.
Construction time again
The research shows that private investors are also shifting away from defensive stocks into cyclical stocks such as precious metals, which are likely to benefit from any upturn in the economy.
They have also been buying back into industrial stocks, particularly infrastructure and construction-related companies. With construction share values having halved since September 2007, they are hunting for bargains.
Again, this suggest private investors are looking to the future, rather than living in the past.
Although they aren't brave or foolhardy enough to drive back into financial stocks, which they continue to shun.
Of course the danger is that private investors have jumped the gun on the stock market revival. Capita's figures were produced before the latest lurch downwards, so for all we know, they may by piling back into defensive stocks, their nerves conclusively shredded.
Or abandoning markets altogether.
Drip, drip, drip
Let's hope they're not doing that. Stock markets may be facing renewed turmoil, and could have further to fall, but they will rise again.
It is at moments like these that the herd mentality asserts itself, and turns into a stampede, crushing the last shred of investor optimism underfoot.
And then when everybody has conclusively lost hope, the recovery begins, and fortunes are made.
Not what I'm crazy enough to suggest you pump a fat lump sum into the stock market right now. I'm hardly in the mood, having thrown a few thousand pounds into a FTSE 100 iShares exchange traded fund two weeks ago, thinking the FTSE at 3,850 was unrepeatable good value, only to discover that it soon became even better value!
But I do think that now is an absolutely ace time to start dripping small, regular amounts back into equities.
Particularly with savings rates record lows, while average dividend yields float above 5%.
You are never going to correctly call the bottom of the market, but investing little and often during these dark days could pay off handsomely when the sun rises on the global economy again.
As the saying goes, it's always darkest before the dawn.
Break away from the herd
Despite Capita's encouraging news, the herd mentality is likely to prove difficult to break. That £800m of new money is a fraction of the £13.5bn private investors have pulled out of equities over the last three years.
The sad truth is that most private investors will never break away from the pack. But that doesn't mean you shouldn't.
You need strong nerves to go against the herd, especially now, but investing little and often should make the return to equities a lot less daunting -- and ultimately rewarding.
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