The latest quarterly Global Proxy-Melbourne Institute Shareholder Confidence Index showed investor confidence had edged higher, but most of the 1000 respondents were actively rebalancing portfolios.
"This is the first time we've noticed this huge swing," Melbourne Institute professor and research fellow Guay Lim said.
The latest survey was done in the first two weeks of November when jitters were high over Europe's debt problems and slowing economic growth in China, as well as the uncertainty posed by Australia's planned carbon tax and the mining resources rent tax.
The confidence index rose 3.4 per cent after a steep 14.6 per cent drop in August. However, the index remained 22 per cent below its level a year earlier.
Although respondents expected better returns, they were also preparing for increased volatility, leading them to switch out of financial, energy and health companies into industrial stocks, the survey showed.
"That means future investment intentions are being directed away from what are perceived as vulnerable sectors and into defensive stocks," Lim said.
However, fund managers continued to ramp up the actively managed portion of their portfolios, extending a trend that kicked in just after the global financial crisis, Morningstar funds research analysts said in a report.
"The average active share score has been on the upturn since the Australian share market's bottom in March 2009, [with] the most index-aware fund managers appearing to have become willing to take more active positions," the analysts, led by senior fund research analyst Tom Whitelaw, said.
They cautioned there was not necessarily a clear correlation between highly-active investment management and performance, and said a high active share score indicated greater potential for divergence from the benchmark, rather than a guarantee of superior performance.
"Investors selecting fund managers with higher active share scores need to be prepared for significantly greater volatility," the report said.
