Schroders Global Investor Study 2021: Investors turn to riskier investments amid pandemic uncertainty
Over a third of people will allocate more towards high-risk investments, even if most will allocate more to savings or low-risk investments
- Over a third of people will allocate more towards high-risk investments, even if most will allocate more to savings or low-risk investments
- Many people are investing in new, high-risk asset classes for the first time
- High-risk investors are now exhibiting extreme investing behaviours
- Zero or negative interest rates incentivise risky investing for more than half of respondents
People are now turning to high-risk investments amid the pandemic, the Schroders Global Investor Study has found.
The risk-focused findings of Schroders’ flagship retail investment study, which surveyed over 23,000 people from 33 locations globally, found that 37% of people were more willing to allocate to high-risk asset investments and this increased to 44% for the 18-37 age group.
The results indicate that, while many people feel compelled to take on greater risks to compensate for Covid uncertainty and concerns caused by rising inflation, this is even more so the case for younger investors.
Furthermore, half of the 18-37 and 38-50 age groups are also expecting more than 10% returns, a significantly higher proportion than those aged 71+.
Presented with the scenario where interest rates are at zero or negative, 57% of investors aged 18-37 said they would make higher-risk investments in pursuit of returns, while only 17% would be more likely to spend and less likely to save. This is despite 68% of this age group stating that the performance of their investments has an impact on their mental health.
This relationship is less striking when it comes to the 71+ age group with 40% of them being more likely to spend than save in this scenario.
Delving further into this scenario, more than half the respondents (53%) said they would make higher-risk investments in pursuit of returns, while a third (33%) would look to invest in cryptocurrencies.
From a geographic perspective, 59% of investors in Asia were most likely to make higher-risk investments under low interest rate conditions, ahead of those based in the Americas (53%) and Europe (49%).
To pursue these higher returns, many people are now investing in assets they previously perceived as being too risky.
Specifically, new and emerging sectors form part of the top three types of investments that people have made for the first time over the past year. Electric vehicle related stocks are ranked first (24%), biotech or pharma funds are second (23%), while internet and tech stocks, as well as cryptocurrencies, are jointly in third position with 22%.
Investors more open to investing in high-risk assets also have a greater interest in internet and tech stocks, ahead of real estate funds.
Lesley-Ann Morgan, Head of Multi-Asset Strategy at Schroders, said:
“Our research indicates that many people feel they now have to take on more risk in pursuit of returns given the current pandemic. The challenging economic conditions that we have seen over the past year have likely played a part in this. Amid the low interest rate environment, riskier investment choices have unsurprisingly become more compelling, especially for younger investors.
“Investors have also been spurred into looking at a broader range of asset classes.
“Overall, these findings demonstrate that the proportion of investors open to embracing greater risk has increased, but with 63% of people stating that the performance of their investments also has an impact on their mental health, they should ensure that risk is approached judiciously.”
Read the full report on 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.