Stocks and bonds have been on a wild ride lately, but so far mainstream investors are staying the course.
The mutual fund company T. Rowe Price in Baltimore, for example, saw account holders migrating away from US stock funds on some days last week, but no all-out retreat.
In Toledo, Ohio, money manager Alan Lancz isn't getting any panicked calls from his well-heeled clients. He helps soothe their concerns with a weekly newsletter to put the ups and downs in perspective.
And in Atlanta, an investment club led by retiree Larry Reno is one of many around the nation that looks upon the recent downdrafts as an opportunity to buy stocks at a better price.
"It's just another bump in the highway on the road to financial success," says Mr. Reno.
In short, most individual investors seem to be doing just what financial advisers say they should do: Focus their long-term goals and don't be ruffled by near-term dips.
It's too soon to say whether the rough ride is over, but Monday was a calmer day for world markets. Stocks rebounded in Asia and Europe following moves Friday by the Federal Reserve to get stalled US credit markets moving again.
To the degree that individual investors ignore the current noise in financial markets – or view it as a time to buy – they are lending some stability to battered share prices. They aren't driving the market's overall direction, analysts say, but so far they have helped to prevent a so-called "correction" from turning into a rout.
In many cases, experts say this stems from a kind of benign neglect, since many small investors have their 401(k) plans on autopilot and don't bother adjusting their holdings based on current news.
"Our investors seem to be staying the course," says Rebecca Cohen, a spokeswoman at the Vanguard Group, which provides mutual fund investments used in both retirement and brokerage accounts.
"There certainly are concerns, [but] mutual fund investors are again proving to be focused on the long term," says Ed Giltenan of the Investment Company Institute, which represents the mutual fund industry. The group saw small levels of fund sales by investors last week, but "nothing drastic," he says.
This doesn't mean that ordinary investors don't perspire and sometimes feel panic as they watch the markets.
Mr. Lancz in Toledo describes a call last week from a retired schoolteacher in California who asked simply: "Should I sell everything?"
She had all of her money invested in stocks, and "she didn't understand the risk she was taking," Lancz says.
He's helped these new clients, like his other ones, find an appropriate balance. If the market is having a good day, he advises, "use the strength today to eliminate or drastically reduce your exposure in higher-risk, more speculative investments" like emerging market funds.
Whether for well-judged reasons or not, investor behavior does adapt to changing circumstances. In 1988 and 2002, during or after market declines, the net new cash flow into US stock mutual funds turned negative for the year, according to the Investment Company Institute. But even after the major stock crash of October 1987, the next six weeks saw only an estimated 5 percent of stock fund owners liquidate shares.
The Dow Jones Industrial Average has fallen about 10 percent from its recent record highs, and then rebounded a bit, thanks to the Federal Reserve's provision of easier credit to banks at its so-called discount window. A decline of 10 percent is generally termed a correction, while a 20 percent drop is termed a bear market.
The market's roller coaster behavior this summer reflects ambivalence in the economy. Unemployment in the US is low, and globally a strong expansion of commerce is in its fifth year. But the US housing market has entered a protracted slump, with many home buyers finding they can't pay off adjustable mortgages that reset from low initial rates.
The housing slump, in recent weeks, has raised concern about the health of mortgage lending companies and the investors (often hedge funds) who loaned them money.
Since many of the investors are overseas, and since the US is the linchpin of the global economy, the tremors have been global in scope. Japan's Nikkei stock index, for example, rose 3 percent Monday after plunging 9 percent last week.
Across the nation, many investors, including those in clubs affiliated with the group BetterInvesting, view the market slide as a chance to buy.
"I think there's a lot of people besides our investment club that are buying these stocks that are on sale," says Carol Crosta, a nurse in Sacramento, Calif., who founded a club eight years ago.
The club's 17 members are bargain hunting now. "Most of us," Ms. Crosta says, "are pretty convinced this is just a normal correction."