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COVID-19’s Impact On 
Investor Sentiment

Betterment examines how the COVID-19 crisis has and will continue to impact investors: their financial security, spending habits and reactions to the market turbulence.

Articles by Betterment Editors
By the Editorial Staff Betterment Resource Center Published Jun. 30, 2020
Published Jun. 30, 2020
5 min read

Betterment examines how the COVID-19 crisis has and will continue to impact investors: their financial security, spending habits and reactions to the market turbulence.

Nobody knows for certain what the world will look like in the aftermath of the COVID-19 pandemic that has claimed and upended so many lives.

One thing that is certain is that the pandemic has already impacted the way people work, live, and assess their finances. As a company founded in the wake of the 2008 financial crisis, we know market turbulence is an inevitable part of a long-term investment strategy. But we also understand that doesn’t mean ups and downs feel any easier and the emotional wear and tear of COVID can make rocky markets all the more challenging to stomach. 

In a new three-part series of reports, Betterment examines how the COVID-19 crisis has and will continue to impact investors: their financial security, spending habits and reactions to the market turbulence. Over the course of the next few months, we’ll be continuing to measure ongoing reactions and sentiment shifts as investors adjust to a changing economic environment.


  • An online survey was conducted with a panel of potential respondents. The recruitment period was April 14 – April 16, 2020
  • A total of 5,005 respondents living in the United States, who are invested in the markets completed the survey.
  • The sample was provided by Market Cube, a research panel company. Panel respondents were invited to take the survey via an email invitation and were incentivized to participate via the panel’s established points program.

Section 1. COVID has reshaped the world as we know it; finances are no exception.

COVID-19 has had an immediate impact on investors’ financial security and confidence. More than half (54%) of all respondents had their income directly impacted as a result of COVID-19 and three-quarters said they are at least somewhat more stressed due to COVID-19 when it comes to their financial position and outlook.

Has your income been directly impacted by COVID-19?

Over a third of investors (34%) indicated they did not come into the COVID-19 pandemic with a sufficient emergency fund (i.e. three-six months of expenses in savings built up). Betterment, and most financial advisors, recommend having at least three months of expenses saved in a fund.

Top income impacts of COVID-19 across all investors

A graph showing how COVID-19 has impacted investors' income.

A good deal of unease around the pandemic stems from the unknown, and the inability to plan for or know what’s next. Most investors reported some form of increased uncertainty in their financial situation: more than half (52%) of respondents believe they’ll need to tap into their long-term savings in a year or less and 43% believe it will take 6 months or longer to recover financially from the financial impacts of the pandemic.

As a direct result of COVID-19, 18% of respondents have stopped saving and 21% have withdrawn from their savings account to cover regular expenses.

On the left-hand side, the statistic says "18% of respondents have stopped savings." One the right-hand side, the statistic says "21% have withdrawn from their savings."

Generational Impact

Pay cuts, furloughs, layoffs, and other income losses disproportionately impacted younger generations.

Two graphs showing the generational impact from covid-19, those who lost their jobs and those who took a pay cut as a result of COVID-19's financial impact.

Section 2. Spending Habits and Stimulus Checks

Investors who expect to receive a federal stimulus check indicated a variety of ways they plan to use that money: 
27% plan to use their stimulus check to cover rent and/or utility bills, 28% plan to use it to pay off debt, and 41% plan to put their stimulus check into a safety net fund.

Betterment’s Take

Traditionally, our advice is to put away any windfall into savings, like an emergency fund (after basic expenses and high interest debt are covered), 41% of investors did exactly that. But the purpose of the stimulus checks was to relieve short-term financial pressures and stimulate the economy through spending. While helpful, a one-time check is not enough to ease fears and create the ‘shot-in-the-arm’ to the economy it’s intended to; the checks may not have reached their desired destination with the 41% of savers and 13% of other investors who stashed their cash for another day.

Top ways investors plan to spend their stimulus check

Six pie charts demonstrating how investors are using their stimulus checks.

Section 3. Investor Reactions To COVID And Recent Market Events

In response to COVID-19’s impact on the market, 20% of investors surveyed report that they took money out of the market. When asked to select all the reasons they took money out of the market, investors were equally likely to select “to cover bills/necessary payments” as they were to select “to keep money safe from further losses,” showing these sell-offs are not primarily need-based, but also fear-based.

Have you taken money out of the market in the last few weeks (March to mid-April)?

A pie chart demonstrating how the majority of people have not taken money out of the market in the past few weeks.

When do you plan to reinvest the money you took out?

There are four percentages. On the upper left-hand side, it says "48th say they will only reivest when the market either is fully corrected or begins to correct." The bottom left-hand statistic says "7% unsure/other," the upper right-hand side says "39% of those that pulled out will reinvest when they're financial secure again," and the last statistic says "6% have no plans to reinvest at all."

Betterment’s Take

While we’re glad to see that the large majority of investors haven’t taken their money out of the market, we’d still like to see that 20% be closer to 0% (the exception being pulling from an invested safety net fund). Historically, downturns tend to have a temporary impact on economies and markets. The average bear market period lasted 1.4 years with an average cumulative loss of -41%, while the average bull market period lasted 9.1 years with an average cumulative return of 476%. Feeling some level of anxiety when the market drops is only natural, but investors who react by pulling money out of the market are doing themselves a disservice in the long-run, costing themselves gains by waiting for the market to recover.

“As a result of the pandemic and financial fallout, 26% of respondents said they will switch financial institutions, or are not sure they will stay at their current institution.”

Section 4. “Once In A Lifetime” The Second Time Around

Nearly half (47%) of the investors we surveyed reported that they were also investing during the crash of 2008, indicating that they are now investing through their second “once in a lifetime” global financial crisis.

With that, we took a look at how investors who have been through a downturn reacted, vs. newer investors.

How investors who went through the 2008 financial crisis reacted to COVID-19, vs. new investors

Six data points showing a comparison of investor behaviour between new investors and those who went through the financial crisis.

Betterment’s Take

You might think investors that have been through a downturn like this before would be less stressed or could better stomach losses; the truth of the matter is this pandemic is unprecedented and we are all in this together. The fact that there are not sizable differences in how veteran and newer investors reacted in regard to their finances shows that we’re all feeling pretty similar and this is new territory for everyone.


Our future reports plan to investigate market reaction trends over time, as COVID-19 and its financial impacts unfold.

We’ll be tracking whether people execute on the savings and investing actions they planned to, or if the financial impact of the virus only digs deeper into emergency funds and retirement accounts.

Whether it’s a breakdown of trust in the market or actual monetary losses, COVID-19’s impact on many investors will not be short lived. It’s only natural to want to react to market dips, but history has shown that investors are rewarded for shouldering market risk. At Betterment, we think this will continue to be the case, even in these uncertain times. Founded in the wake of a major financial crisis, Betterment believes financial institutions should work harder for you. Learn more about our commitment to putting your money to work for you.

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