Schroders Global Investor Study 2019: Majority of investors changed portfolios during 2018 market volatility
The majority of investors globally made immediate changes to the risk profile of their investments during the volatile final three months of 2018, Schroders Global Investor Study 2019* has identified.
The study - which surveyed over 25,000 people in 32 countries – found that 70% of investors modified their portfolios in direct response to the instability. These included, 37% who moved into lower-risk investments and 35% who opted for higher-risk options. Only 21% of people kept their investments the same.
Investors on average hold their investments for 2.6 years, a little over half the recommended five-year investment period, the study found. Geographically, investors in Japan, the USA, and Canada were the most patient with holding periods of at least four years, compared with 1.3 years for Argentinians, the least patient.
Millennials[1] appeared to be less patient than older generations, holding their investments for an average of 1.9 years compared to the 3.7-year average holding period for baby boomers[2]. Some 53% of millennials agreed that the biggest danger to their investments was not taking enough risk to achieve their investment objectives.
This short-term approach may be fueled by global investors expecting, on average, a 10.7% total return (income and growth) per year over the next five years, an increase on the 9.9% stated a year ago.
One in six surveyed expected at least a 20% annual return. This contrasts with major stock markets such as the S&P and FTSE 100 all experiencing net falls during 2018. The average annual return of the S&P 500 since its 1957 inception is less than 8%.
Geographically, investors in the Americas had the highest return expectations at 12.4% compared with 9.0% for investors in Europe. These high expectations may indicate why over half of investors (51%) stated they had not achieved what they wanted with their investments over the past five years.
Indeed, some 10% of investors believed they should have remained invested for longer.
Charles Prideaux, Schroders’ Global Head of Product and Solutions, commented:
“The ebbs and flows of markets are always going to keep investors on their toes but the key is to focus on the long term. Chopping and changing investments particularly during challenging markets is likely to be detrimental for investors’ portfolios and ultimately lead to disappointing investment returns.
“Instead it is critical to look through the uncertainty: our goal at Schroders is therefore to deliver investment solutions that reflect investors’ needs through time and which also suit their risk appetites.”
Investors also leaned towards familiarity in their investment allocations, with 31% preferring to invest in their home country and just under a quarter (24%) of the opinion that emerging markets are too risky. Exactly half (50%) of investors in India preferred to invest the majority of their portfolios in India.
Investors globally also appeared to have a limited grasp of their investments, with nearly a fifth (18%) only having a rough idea of how much money they have with various financial providers. Only 44% of investors are very confident that they are up to date with how much money they have invested across their providers.
Just 33% of investors in Asia felt very confident about this, the lowest region globally.
*In April 2019, Schroders commissioned Research Plus Ltd to conduct an independent online survey of 25,743 people who invest from 32 countries around the globe. The countries included Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, the Netherlands, Spain, the UK and the US. This research defines “people” as those who will be investing at least €10,000 (or the equivalent) in the next 12 months and who have made changes to their investments within the last 10 years.
Download the full report below.
[1] Aged 18-37 years
[2] Aged 51-70 years
For further information, please contact:
Catherine Johnson of Prosek at 347-486-6335, cjohnson@prosek.com
Jennifer Manser of Schroders at 212-632-2947, jennifer.manser@schroders.com
The views and opinions contained herein are those of Schroders' investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.'s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.