Are investors failing to think long-term about their futures?
Boosting retirement saving is the key goal for investors in 2014, yet despite this long-term objective, almost three fifths (61%) of those surveyed say they are looking for satisfactory investment returns within just five years, with just 5% taking a longer-term view of ten years or more.
This mismatch between investors’ goals and the investment decisions that they are making could jeopardise many people’s ability to build the retirement pots they are seeking to achieve.
Key investment goals
The findings come from the Schroder’s Global Investment Trends Report 2014, a survey of 15,749 investors across 23 countries, which reveals that almost half (46%) of those polled are prioritising pensions and retirement planning as a key investment goal for 2014.
In the UK, where radical savings and pension reforms have been announced in the recent Budget, those planning for retirement will have the freedom to invest their pension as they please and have a much larger tax-free savings allowance, supporting the 59% who identify saving for retirement as a priority for them this year. However, the survey also demonstrates that investors are holding a significant proportion of their investments in cash and much less in high-growth assets such as equities, despite improving economic conditions and stock market performance.
Investors polled say they are allocating only around 20% of their portfolios to higher-risk assets (such as equities) while holding around a third (35%) of their portfolio in medium-risk assets, with 44% of their portfolios still held in low-risk asset classes, such as cash.
These investment allocations have remained broadly unchanged from 2013, despite significantly different economic headwinds this year. The report also highlights that many investors are not seeking advice from a professional adviser, with 40% of investors saying they will look for professional financial advice in 2014. When making financial decisions, almost the same proportion (38%) say their previous investment experience will influence them, almost a quarter (24%) decide based on gut instinct, and 14% turn to friends and family for advice.
Asian investors are the most open to placing funds into higher-risk assets, but even here, investors say they intend to allocate only a quarter of their money to assets that provide higher growth potential this year.
Saving more for retirement
Ageing populations, greater life expectancy and the scaling back of government pension arrangements and related tax concessions in a number of countries seem to be focusing the minds of many on the need to save more for retirement. However, achieving your investment goals requires a dynamic and diversified approach to managing portfolios, and the fact that investors’ asset allocations are largely unchanged from last year, despite significant changes in global economic conditions, should be a concern, as should the proportion of investors who are not seeking professional financial advice.
Schroder’s commissioned Research Plus Ltd to conduct an independent survey of 15,749 investors in
23 countries around the world who intend to invest 10,000 (or the equivalent) or more during the next
12 months. The survey was conducted online between 2–24 January 2014 and these individuals represent the views of investors in each country involved in the survey.
Tax rules and legislation can change and the information given here is based on our understanding of law and current HM Revenue & Customs practice. The value of an investment can fall or rise, so you may not receive back the amount you invested.