Legend has it that Joe Kennedy, JFK's father, decided to sell all his stocks in 1929 because the guy who shined his shoes was beginning to give him stock tips. He took this to be a signal of the mass hysteria that had boosted stock prices into the stratosphere at the time. Bank stocks, for example, sold for 150 times their earnings when, traditionally, they were valued at a factor of 10 times earnings.

The crash occurred later that year, but the real pain wasn't felt until around 1933 as the economy experienced a slow downward grind dragging stock prices with it. Blue chip companies as a whole dropped in value by about 80 percent. Sobering.

Dividends, however, were a different matter. While this income to stockholders had been just fractions of a percent of the inflated share prices back in 1929, it popped up to 10.34 percent on AT&T, for example, thanks to that stock's plunge of 82 percent from its 1929 high. Coke, Sears, IBM, GE and other business icons brought similar rewards to those who just held on. Dividends from most well-known companies averaged about 7 percent of their stock prices.

With the stock market now having risen by more than 200 percent from the bottom hit in March 2009, and a 4-year-old company like Uber being valued at $18 billion, there must be a growing number of latter-day Joe Kennedy types interpreting this as hysteria. Investors as a group have been increasing their hoard of cash. According to an article in The New York Times, the amount of money allocated to cash by investors around the globe has increased from 31 to 40 percent of assets since 2012 -- a whopping increase when we consider that the dollar amount allocated to stocks appreciated by 20 percent last year alone.

In these circumstances, a rise in the cash percentage amounts to paddling upstream.

Apparently, the move to cash is reflected in all age brackets -- not just those getting close to retirement. So, the contention holds that fear is driving the decision. Why else would a young person with even a modicum of financial education not recognize the benefits of long-term stock market participation?

The theory is that people were so scarred by the collapse of financial markets that they are wary of a more catastrophic repeat. But it could be even deeper. The owner of an engineering company pointed out to me that some of his younger employees making good money refuse to make voluntary contributions to the 401(k) plan because they have what amounts to a nihilistic, if not apocalyptic, view of the world -- especially its financial institutions. That was the first time I had ever heard of this mindset, but it could explain why young people are choosing to save money in cash rather than equities -- if they save it at all.

Meanwhile, the rest of us concerned about equity vulnerability might be wise to consider what happens when we invest in mutual funds focused on companies paying high dividends as a percent of their stock prices. If you search for "high dividend yield mutual funds," any engine will take you to those that are cranking out about 3 percent per year. Since mutual funds automatically reinvest dividends in new fund shares, any downdraft in share prices will have dividends buying more fund shares at tomorrow's lower prices.

Looking at history for a moment, the Dow Jones average reached a low of 41 in 1933 and that's the point at which dividends amounted to a 7 percent to 10 percent return. Those dividends, if reinvested, were buying new shares at rock-bottom prices. By 1937, the Dow average reached 194, so not only had the original shares quintupled in value, but a lot more shares had been added to the portfolio by reinvested dividends.

Since history tends to repeat itself, today's high dividend yield funds could generate the same level of rewards for the same fundamental reasons if, or when, we have another plunge. Dollar cost averaging applies to more than just regular inbound 401(k) contributions. The same process works for reinvested dividends as well.

Steve Butler can be reached at 925 956 0505, ext. 228 or sbutler@pensiondynamics.com