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Survey Says: Investors Optimistic About '03



Eaton Vance recently published the findings from its fourth- annual investor survey. If those interviewed have any inkling as to what the future may bring, 2003 could be a good year.

In a national survey of 500 U.S. residents ---half with incomes under $100,000 and half with incomes over--- results showed that most believe the stock market will increase in value this year.

Conducted during the last two weeks of December, about two out of three investors interviewed think that the stock market will increase in 2003; 56 percent think it will increase slightly; and nine percent say it will increase a lot. As for the performance of the S & P 500 and NASDAQ, only nine percent think that S & P 500 will decline in value over the year. Most expect NASDAQ will have a positive year too with 18 percent thinking it will fall in value this year.

"We share the optimism expressed by investors polled that the S & P will produce more positive results in 2003, but caution that a diversified approach is one that works well in any type of market environment, " says Duncan W. Richardson, chief equity investment officer of Eaton Vance Management.

Richardson added that after three-years of "brain-rattling volatility", the survey also revealed that investors learned about the dangers of having an overly-concentrated portfolio.

Here are more of the results of this survey that Penny, Schoen & Berland conducted for Eaton Vance Corporation:

· On last year's stock market performance: Nearly half of the investors surveyed , (46 percent), thought that the major cause of the stock market's decline in 2002 was because the market had been artificially overvalued; 25 percent said that the decline was due to the economy and the failure of corporate governance; 14 percent thought the most important cause was September 11th; five percent cited uncompetitive firms falling by the wayside; and three percent, concerns over the possibility of war with Iraq.

· Faith in capitalism: More than seven in 10 investors (72 percent) said that they have about the same amount of faith in capitalism as they had five years ago, when the survey was first conducted, although their faith in corporate America and on Wall Street has declined. Sixty-three percent said they have less faith in the ethical standards of corporate management today than they did five years ago.

Seventy-three percent support stronger regulation of capital markets by the Securities and Exchange Commission.

· Investing in stocks: Recent corporate scandals have taught investors to think twice about holding just one stock in their portfolio. More than nine in 10 investors (94 percent) agreed that it is too risky to have a large percentage exposure to a single stock in their portfolio. And, 61 percent of those owning stocks from their current or former employers are concerned about their outsized exposure to that company's stock. That's a big increase over the response from the 2001 survey when 39 percent of those surveyed were concerned about that kind of investment risk.

Eighty-seven percent said that minimizing risk is important when making investment decisions; 64 percent sited the market's recent down trend as the reason for their reduced appetite for taking risks.

When it comes to portfolio diversification, 42 percent of investors reported that they have increased the diversification of their investments over the past year because of market declines.

· Low mortgage rates: Forty-five percent of those surveyed refinanced their homes in 2002 because mortgage rates were so low. Here's what they did with that money: 30 percent put the money back into their homes; 29 percent paid off credit card and other debts; 21 percent invested the money; and 14 percent put it into a savings account.

· The new year: The No. 1 New Year's resolution of investors for 2003 is to invest more money (28 percent) and reduce credit card debt (24 percent).

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Dian Vujovich is a nationally syndicated mutual fund columnist, author of a number of books including Straight Talk About Mutual Funds (McGraw-Hill), and publisher of this web site.


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