NEW YORK - Edward Shook can't resist a bull market.
He rode the one in the late 1990s - but lost $350,000 in the dot-com collapse. Shaken but optimistic, he bought into the bull market that followed - and lost another $350,000 from his portfolio's peak when stocks fell to a 12-year low early in 2009.
Now the 65-year-old roofing contractor from Raleigh, N.C., says he's "getting smart for a change." Even though the Standard & Poor's 500 has climbed 68 percent since March, Shook is largely leaving the stock market to the professionals. He has sold shares and bought bonds instead, with no regrets, he said.
Millions of Americans are steering the same course. After being key players in bull runs of the past, individual investors have stopped buying and are selling. The question for the new year: If the small investor - the man on the street - doesn't jump back in, will stocks continue to defy gravity?
So far, the market's comeback is due almost entirely to buying by professional investment managers at hedge funds, pension funds, banks, and other institutions.
"We've never seen this before - such a huge rally, and the little guy is out," says Vincent Deluard, a strategist for TrimTabs Investment Research, a Sausalito, Calif., firm that tracks mutual-fund flows to get a sense of what individual investors are doing.
Mutual funds are a good proxy for such investors because more than three-quarters of fund assets are held by individuals, both directly and through retirement plans.
Small investors yanked a net $14 billion from stock mutual funds last year through mid-December. That's on top of a net $245 billion withdrawn in 2008, according to TrimTabs. Net means the bottom line after additions to the funds and subtractions are tallied.
The firm says most of $592 billion taken out of money-market mutual funds last year has gone into bond and bond-hybrid funds instead.
Some market optimists say ordinary folks are likely to start buying again soon, given the encouraging economic news lately. Others are not so sure and fear that if investors drag their feet much longer, the market's rally could stall.
According to the Federal Reserve, individuals held 80 percent of the $19 trillion in stock in U.S. companies, at the end of September. That means they can have a big effect on the market whether they own the stock directly or through mutual funds.
There's also a third view, a decidedly bearish one that is sure to delight anyone who's ever felt taken by a pushy broker or an optimistic analyst report or cheerleading by financial journalists: Maybe, just maybe, the little guy is right to be shunning the market now, and it's the experts who are wrong.
"People have been lured into two bubbles seven years apart, and for a lot of them it's over," said David Rosenberg, chief economist at the Toronto money manager Gluskin Sheff.
Bears say a pullback, combined with a new distaste for stocks, could drag returns down for years and change the way we see stocks: They may be seen more as vehicles for throwing off dividends as current income, as they were valued in the past, than as a route to riches through gains in stock prices.
If Main Street is correct in anticipating this, it will be a rare flash of prescience.
In the year after the October 1987 crash, investors pulled $20 billion out of stock funds, missing a big snapback in prices, according to data from TrimTabs. Then they made the opposite mistake, putting $22 billion into the market in the year before the start of the early '90s recession and market drop.
Burned by the 2000 dot-com bust, they pulled $81 billion from stock funds in the last six months of 2002, according to TrimTabs. The S&P 500 returned 29 percent the next year.
"The typical investor gets it dramatically, persistently wrong," said Larry Swedroe, director of research at Buckingham Asset Management in Clayton, Mo. "He buys high and sells low - and that's a dumb strategy."