The reports of my death are greatly exaggerated — Mark Twain

Stocks may be feeling a lot like Mark Twain once felt — discounted prematurely!

The financial media would have you believe that retail investors have been running, not walking, away from stocks. However, a massive, new study of U.S. investors shows the cold, hard facts say otherwise.

A recent Vanguard study sheds light on how individual investors are approaching stocks.  Vanguard reviewed the retirement accounts of 3 million Americans.  As of 2011, the average individual investors had an asset allocation that consists of

• 65% in stocks
• 17% in cash
• 10% in bonds
• 10% in balance funds
  (these add up to >100% because of rounding in the components)

Retirement savers have two-thirds of their money riding on stocks.  This allocation has declined only 8 percentage points since peaking in 2007.

Moreover, 71% of new contributions are going to purchase additional stocks, up 1% from 2010 and 3% from 2009.

What has changed significantly is how investors are purchasing their stocks.  Purchases directly through diversified stock funds is only 38% of contributions — down sharply from 51% in 2007.  However, stocks purchased via target-date funds are up.

So investors may be thinking they have been selling stocks but they continue to invest in them indirectly.

To quote Jason Zweig:
the public’s infatuation with stock funds isn’t dead. It’s alive and well, but it’s going in by the back door.