How investors shifted holdings and used their accounts during the worst of the market shocks is the subject of analysis released by Vanguard this week.

The pandemic dealt the first half of 2020 the deepest and sharpest economic contraction in modern history. In the weeks following February's highs, US markets plunged by 34 per cent. But few clients panicked out and out, with less than 0.5 per cent of Vanguard’s US investors moving to cash, the firm said in a paper looking at investor behavior during the turmoil.

“We have long professed that time in the markets beats market timing, as selling after a big drop often means missing a big recovery,” said Jean Young, senior research associate with Vanguard investment strategy group and co-author of the paper.

This was largely borne out by the end of May, when markets had bounced back by 36 per cent from their March lows.

“As a result, more than 80 per cent of the small number of Vanguard clients who abandoned equities and moved to cash would have been better off if they had simply stayed the course,” Young said.

Looking at the behavior of 17,000 customers during the volatility, Vanguard found daily traffic up by 10 per cent from its pre-market peak period (January 1 to February 19) to its post-peak between February 20 and the end of March. Traffic was up by 44 per cent across channels in March compared with the same month last year. However, changes in attention varied from week to week, with desktop use dominating customer attention.

Two-thirds of investors used only the desktop channel to access Vanguard online, while about 20 per cent used some combination of desktop and mobile. Only about 15 per cent used mobile only channels during the period.

Comparing pre-peak versus post-peak periods, there was no discernable shift in how investors used the different channels, suggesting that device preferences are fairly baked into their habits no matter what markets throw at them.

Further, the research found that customers performed different activities depending on the channel. For example, investors checked their account homepage on 85 per cent of app visits, compared with 68 per cent coming through the desktop. But visits to check investment options were far more likely to happen on the desktop. Those making a trade were twice as likely to do this on their desktop as their mobile app.

The investment house, which manages around $6.1 trillion globally, said overall that client engagement was up by 38 per cent on the same period last year.

Market volatility spurred activity but directed where?
Fundamentals, such as asset allocation and personal performance, saw very little activity. Less than 1 per cent spent time checking their portfolio allocation -- an important part of investing. Research shows that portfolio asset allocation is responsible for roughly 90 per cent of investment returns. Instead, clients spent most time exploring investment options, looking at detailed balance and holdings, and managing trades, in the range of 45 per cent through the desktop and 29 per cent on mobile browsers.

“Importantly, while market volatility drove an increase in logons and engagement, the vast majority of Vanguard investors—the 95 per cent self-directed defined contribution participants and the 83 per cent of self-directed retail households—did not trade at all between February 19 and May 31," the firm said.