Individual investors are feeling more confident about stock market returns after the November rally for equities, but many fear that bubbles are forming in key areas of the market. According to Investopedia’s latest individual investor sentiment survey, the share of respondents who were at least somewhat worried about the stock market has fallen by 9 percentage points to its lowest levels since August. Only one in five respondents expects a drop of 10% or more for stocks, and concerns about a recession occurring in the next year have dissipated.

Still, individual investors are mostly playing defense with their investments, preferring to continue playing it safe with money market funds as their investment of choice. That said, Exchange Traded Funds (ETFs) have made a comeback over the past two months, and are investors’ second choice of where to invest now. The money has followed their improved sentiment as ETFs pulled in $110 billion in November, with $77 billion of that going into equity ETFs, according to Morningstar.

Bubbles, Bangles, Bright Shiny Things…

While investors may be feeling more optimistic about risk assets like stocks and crypto, many of them feel that it’s getting bubbly in some sectors of those asset classes. A.I.-related stocks top the list of most frothy, according to more than half of the survey respondents, followed by mega-cap tech stocks and cryptocurrencies such as Bitcoin. Given the 160% rise in the price of Bitcoin year-to-date, and the 230% gain for Nvidia (NVDA), the top performing tech stock in 2023, it’s not a surprise that many investors feel they may have come too far, too fast.

Investors’ Biggest Worries Right Now

Investors have had to climb one wall of worry after another in 2023. Sticky inflation, the Fed’s aggressive raising of interest rates in the first half of the year, geopolitical uncertainty in Ukraine and the Middle East, and bank failures last spring have all been among their top concerns all year. Many of these themes were evident in Investopedia’s top searched terms of 2023. But, since early November, investors have become increasingly worried about the upcoming U.S. presidential election, and the political chaos that may come with it. The election is their top concern right now, and will likely remain a key element of uncertainty in 2024.

What Would You Do with an Extra $10,000?

It’s interesting to know what individual investors are doing with the money they have to invest, but it’s even more interesting to know what they would do if they had extra money. That is a powerful indicator of investors’ confidence in the future. For the past several months, individual investors have been slowly becoming more optimistic about individual stocks and ETFs, and just as the equity market has come off of one its best months in history individual stocks and ETFs now top the list of where they would put that extra $10,000. CDs were the top choice from July to late October, but they are now the third choice by our respondents.

2023 Regrets? Too Few to Mention

As 2023 comes to a close, we asked our readers if they had any investing regrets from the year. As the stock market rallied, the bond market recovered and crypto went back to the moon, there were a lot of opportunities to ride the waves of these asset classes to higher returns. But Investopedia’s readers felt pretty good about their choices this year, with close to 40% saying they have no regrets, and only 24% wishing they had allocated more money to stocks.  Let’s hope that sentiment continues into 2024.

Methodology

This survey was fielded online to Investopedia readers 18+ living in the U.S. from December 5-9 2023. Readers must currently hold and manage investments to qualify.  Participation in the survey is entirely voluntary; sample composition reflects U.S. 18+ reader base. 

• Age: 18-24 4% | 25-39 16% | 40-54 18% | 55-74 53% | 75+ 10%
• Region: South 33% | West 29% | Northeast 17% | Midwest 20%
• Gender: Man 82% | Woman 14% | Nonbinary or an identity not listed  0% | Prefer not to answer 4%
• Race/Ethnicity (multi-select): White 75% | Black or African American 5% | Hispanic, Latino or Latinx/Latine 5% | Asian 4% | Native Hawaiian or Other Pacific Islander 0% | American Indian or Alaska Native 1% | Middle Eastern or North African 1% | Another background  2% | Prefer not to answer 10%