MFS Investing Sentiment Survey: Shift to Cash is Deliberate, Fundamental Change for Investors

Uncertainty, Fear, Access, and Safety Continue to Keep Cash Balances High Despite Long-Term Inflation Risk, Investors Confident in Cash

BOSTON--()--Investors of all ages are turning to cash in what appears to be a deliberate and longer-term fundamental change in investing – and Generation Y is leading the pack – according to the latest findings of the MFS® Investing Sentiment Survey. The research shows investors are driven by fear, leading to a strong desire to protect their assets. Nearly three in five investors cite fear (about volatility or needing money someday) as a reason they hold high or increasing levels of cash. They also want immediate access to their assets and say it will take a meaningful change in either the economy or their personal circumstances to instill enough confidence for them to return to the equity market.

"Investors are in cash for a reason and, regardless of time horizon, conventional investing wisdom no longer applies. The Great Recession of 2008 has had a profound – and longer-lasting – impact on investors' confidence than expected," said William Finnegan, senior managing director of U.S. retail marketing for MFS. "Investors, especially younger ones, would rather keep cash in the bank than chance the stock market."

Results from the MFS Investing Sentiment Survey pertaining to investors use and perception of cash can be broken down into four major themes.

Cash: a deliberate, fundamental shift in investing

  • Investors surveyed had on average 26% of their portfolio in cash, with Generation Y (Gen Y) having the highest cash position, 30%.
  • The typical investor had 12 months' worth of cash on hand, and that cash allocation is increasing for more investors (24%) than it is decreasing (12%).
  • 62% reported that cash was an important part of their investment strategy.

Cash: driven by fear

  • One-quarter said they liquidated a portion of their portfolio in 2010 or 2011 because of market concerns, with 52% of Gen Y having liquidated – more than any other age group.
  • Rising health care costs (78%), growing federal deficit (72%), and increases in taxes and legislative gridlock (both 66%) are the top concerns over the next 12 months.
  • More than one-half (53%) feared a major drop in the stock market over the next year as well, an increase from 47% from MFS' Investing Sentiment Survey results reported earlier this year.

Cash: access and safety

  • One-third viewed cash as a safe alternative in the current market, especially Gen Y investors.
  • One-half agreed with the statement, "Keeping my savings in cash makes me feel more secure."
  • 82% agreed with the statement, "It is very important for me to have instant access to my cash if/when I need it" and on average, 65% of cash was held in banks.

Cash: when will it move back to equity?

  • Only one-quarter of investors have reinvested all or most of the cash they liquidated in the past year and a half, while 35% said they will reinvest in the next 12 months, and 24% said they would not reinvest in the next 12 months.
  • Consistent improvement in economic indicators (55%), leadership on a clear deficit reduction plan (45%), and sustained improvement in the global economy (40%) were the top three factors investors need to feel more comfortable investing in the stock market.
  • However, younger investors, especially Gen Y, need to see an improvement in their personal wealth (Gen Y, 34%; Gen X, 30%) or overall personal situation (Gen Y, 37%; Gen X, 32%) before feeling comfortable investing in the stock market.

"With persistently high unemployment, spotty economic data, and uncertainty in Washington, D.C., no one is going to tell investors they are wrong to have high cash balances. To the contrary, the data confirm that they are confident in their decisions to hold cash and they consider high cash balances to be integral to their investing approach," Finnegan added. "A majority, 64%, agree that they worry about inflation eating into their nest eggs, but it seems investors are willing to trade long-term inflation risk with the safety, security, and low volatility that comes with keeping cash in the bank."

The preceding survey results are from the second series of the MFS Investing Sentiment Survey. MFS issued three reports earlier this year based on its first survey results, detailing the disconnects between financial advisors and their clients in March, the challenges facing both Generation X/Y and Baby Boomers in April, and the pessimism that permeates the mass affluent investor segment in May. MFS plans to issue additional findings from this second series over the next several weeks, highlighting for the first time Generation Y investing sentiment. MFS also plans to conduct and report on a third survey in the fourth quarter.

About the survey

MFS, through Research Collaborative, an independent research firm, sponsored an online survey from May 31 to June 7, 2011, of 974 individual investors with $100,000 or more in household investable assets. All investor respondents make or share in making financial decisions for their households. MFS was not identified as the sponsor of the survey. Generation Y refers to investor respondents between the ages of 18-30. Generation X refers to investor respondents between the ages of 31-45. Baby Boomer or Boomers refers to investor respondents between the ages of 46-64.

About MFS Investment Management

MFS is a premier global money management firm with investment offices in Boston, London, Mexico City, Singapore, Sydney, and Tokyo. The firm’s history dates back to March 21, 1924, and the establishment of the first U.S. “open-end” mutual fund. MFS manages $237.1 billion in assets on behalf of individual and institutional investors worldwide, as of July 31, 2011. Please visit for more information.


MFS Investment Management
John Reilly, 617-954-5305
Dan Flaherty, 617-954-4256

Release Summary

Investors are holding cash, willing to risk inflation for safety. Long term investing for financial goals could be challenged


MFS Investment Management
John Reilly, 617-954-5305
Dan Flaherty, 617-954-4256