Although American investors have grown much more aware of the risks of investing in stocks and have lower expectations for average annual returns, they do still plan to keep them as an integral part of their retirement portfolios, according to a Vanguard  survey conducted in late May.

Ninety percent said it is important to invest in equities in the years leading up to retirement, 70% said they will continue to hold equities in retirement, and only 13% said their retirement had been permanently impaired. Sixty percent said they made no changes to their portfolios during the decline, although 21% reduced equity holdings and 5% sold all equities. Nonetheless, 17% increased their stock exposure.

“Many investors understand the role that equities play in generating portfolio growth to fund several possible decades of retirement and protect against inflation and rising healthcare costs,” said Stephen Utkus, head of the Vanguard Center for Retirement Research.

Respondents who bailed out of equities said they had done so not so much because of market risk but because of fear over a job loss or home foreclosure, as well as how many years they had left before retirement.

“The confluence of important economic factors with the market decline quite logically led to a greater sense of insecurity among some individuals,” said John Ameriks, head of investment counseling and research and Vanguard. “But broadly speaking, the study results suggest that investors continue to believe equities are an important part of their portfolios despite the worst financial crisis in several generations.”

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