Over-confidence amongst US retail investors, expecting return of 10%
In addition, almost nine-in-ten (88%) US investors expect to see their investments grow over the next 12 months. Retail investors in the US are expecting a strong average annual return of 10% over this period, despite planning to allocate approximately a sizable portion of their portfolios (41%) to low risk assets, such as cash.
The study, commissioned by Schroders amongst over 20,000 retail investors in 28 countries including 2,000 in the US, shows an increasing appetite for financial investments compared to recent years.
Of those surveyed in the US, almost nine in ten (88%) plan to increase or maintain the amount they save or invest in the coming 12 months, with over half (56%) planning to invest more this year than last year.
On average, investors plan to increase the amount they save or invest by 12% over the next year. Overall, 83% of US investors are looking to generate income from their investments.
Almost nine in ten (85%) retail investors said they made a profit from their investments in the past 12 months, with average gains of 9%, which was consistent with the results seen globally, where 88% made a profit of approximately 10%.
However, despite the high levels of confidence being reported this year and optimistic expectations of double-digit returns in the next 12 months, the Schroders survey reveals a significant disconnect between expected returns and the appetite that investors have for risk, with many favouring lower risk investments.
Typically, retail investors are looking to place only around 22% of their investment portfolio in higher risk / higher return assets such as equities, with 41% of investors' funds going to low risk / low return assets such as cash and around a third (37%) being placed in medium risk assets such as bonds.
Interestingly, US investors surveyed had longer-than-average time horizons, with 35% planning to leave their investment for at least 10 years to gain more profit, compared to a bias towards short-term investing in the rest of the world, with almost half (46%) of those surveyed globally preferring outcomes within one to two years.
Despite this disconnect, less than a quarter (22%) of US retail investors polled will make changes to their investments in the year ahead based on professional financial advice, with 41% intending to invest as they have done in previous years and a third (33%) changing their investments in response to market conditions. ■