Head vs. heart: Eight out of 10 investors
believe the economic recovery has met or exceeded expectations, but
remain hesitant to invest as a result of the financial
crisis
Millennials more conflicted on investing
than other generations; Say, "Market timing is everything."
UBS Wealth Management Americas (WMA) today released its
quarterly UBS Investor Watch report, "The conflicted investor,"
which surveyed wealthy investors before and after the recent market
volatility and geopolitical turmoil. The findings reveal a struggle
between investors' rational perspective and the emotional impact of
the financial crisis. On one hand, investors believe in the
economic recovery—79% say it has met or exceeded their
expectations—and nearly half (47%) wish they had invested more
during the rebound. On the other hand, many investors still carry
emotional scars from 2008 that have kept them from fully
participating in the recovery.
For example, the majority of investors (89%) have maintained or
increased their cash holdings since the crisis, while only 18% are
willing to assume more risk for greater returns. Recent volatility
and global events have exacerbated investors' feelings of
uncertainty and made them even less likely to change their
behavior. Forty-two percent say the volatility has rekindled
memories of the financial crisis, and almost a quarter of investors
believe it signals the start of a longer term market decline.
"Even before recent volatility tested their
resolve, investors struggled to weigh the economic recovery and its
positive effects on their finances against the lingering emotional
fallout from 2008 and 2009," said Paula Polito, Client Strategy
Officer, UBS Wealth Management Americas. "The financial crisis
appears to have cast a long shadow on investors."
Investors with financial plans in place have far greater
confidence during times of market volatility than investors without
a plan. A full 98% agree that their plans keep them on track, and
97% agree that their plans help them stay focused on long-term
goals, not daily market fluctuations.
Uncertainty from geopolitical events and domestic
politics
Wealthy investors disagree about how long the volatility that
started in 2016 will last: most (77%) expect it to be temporary,
while nearly a quarter (23%) think it signifies that the U.S. is on
the verge of a longer-term market decline. Contributing heavily to
this debate are diverse geopolitical events affecting markets, as
well as the large volume of information causing broad confusion.
Investor Watch revealed that 85% of wealthy investors believe the
volatility is driven by so many factors it is too difficult to
predict where markets are headed.
More than three quarters (76%) think the myriad global concerns
affecting markets make it challenging to understand the whole
financial picture. Eighty-one percent feel that global terrorism is
part of the “new normal.” Eight out of 10 (80%) are worried about
the outcome of the 2016 U.S. Presidential election, and three
quarters (76%) are concerned about the size of the country’s debt
load.
The cash conflict
Wealthy investors have been holding significant cash reserves
(20% on average) for the last several years, many doing so as a
perceived safety precaution. And, while they continue to hold onto
their funds, more than half believe having “too much” cash is
unwise. They say they are ready to invest a quarter of their cash
when they come across the right investment opportunity. Only 14%
indicated they would advise the next generation to maintain a large
cash allocation.
However, that does not mean all wealthy investors are putting
their cash to work—quite the opposite. Nearly nine out of 10 (89%)
have maintained or increased their cash holdings since the
financial crisis, and approximately 40% believe investors can never
hold “too much” cash. Seven years after the financial crisis and
the bull market that followed, only 33% see market declines as
opportunities to invest.
Millennial regrets
Investor Watch found that as a group, Millennials are more
likely to regret selling investments during market declines (52%
vs. 23% of Gen X and 14% of Baby Boomers) and not investing more
during recovery periods (68% vs. 52% of Gen X and 44% of Baby
Boomers).
“Millennials are arguably more conflicted than
other generations when it comes to how they view investing,” says
Sameer Aurora, Head of Client Strategy for UBS Wealth Management
Americas. "Almost half say they would take on more risk now, but
they’re holding twice as much cash as Baby Boomers. Also,
Millennials are unhappiest with how their portfolios are
positioned, but they are the least likely to do anything about
it.”
Additionally, given their relative youth during the financial
crisis, Millennials learned different lessons than Gen Xers, Baby
Boomers and members of the Swing/WWII Generation. For instance,
more than half of wealthy Swing/WWII investors (57%) took away that
sticking with a ‘buy and hold’ investing strategy is important—but
only one in three Millennials (33%) feels the same way. By
contrast, while 27% of Millennials say market timing is the most
valuable lesson they learned, only 10% of Baby Boomers agree.
Investor Watch found that Millennials express a willingness to
take on more risk since the financial crisis (43%)—double that of
Gen X (21%), more than three times that of Baby Boomers (12%) and
almost five times more than Swing/WWII (9%). Yet, when asked about
cash holdings, Millennials, on average, hold the most cash: 41% vs.
28% for Gen Xers, 20% for Baby Boomers and 19% for Swing/WWII
Generation.
Additional key findings:
- Since the crisis, wealthy investors
overall have tempered their return expectations, with only 17%
aiming to outperform the market
- 68% of Millennials regret not investing
more in the stock market as it was recovering vs. 52% of Gen Xers,
44% of Baby Boomers and 45% of Swing/WWII generation members
- Millennials are the least happy with
how their portfolios are positioned (15%) compared to Gen X (32%),
Baby Boomers (50%) and Swing/WWII generations (56%).
We invite you to read the full report or visit
www.ubs.com/investorwatch
About UBS Investor Watch
UBS Wealth Management Americas surveys U.S. investors on a
quarterly basis to keep a pulse on their needs, goals and concerns.
After identifying several emerging trends in the survey data, UBS
decided in 2012 to create the UBS Investor Watch to track, analyze
and report the sentiments of affluent and high net worth
investors.
Methodology
For this 14th edition of UBS Investor Watch, 2,638 affluent and
high net worth investors responded to our survey from December 16 –
28, 2015. The core sample of 1,835 investors have at least $1
million in investable assets, including 494 with at least $5
million. With 91 survey respondents, we conducted qualitative
follow-up interviews. This UBS Investor Watch also includes an
oversample for younger generations:
- 584 Millennials: Respondents ages 21 –
29 who have at least $75,000 in household income or $50,000 in
investable assets; respondents ages 30 – 37 who have at least
$100,000 in household income or $100,000 in investable assets
- 533 Gen X: Respondents ages 38 – 49 who
have at least $250,000 in investable assets
In light of the market volatility that began 2016, a follow-up
survey was conducted from January 24 – 25, 2016, with an additional
500 investors with at least $1 million in investable assets.
Notes to editors
About UBS Wealth Management Americas
Wealth Management Americas is one of the leading wealth managers
in the Americas in terms of financial advisor productivity and
invested assets. It provides advice-based solutions and banking
services through financial advisors who deliver a fully integrated
set of products and services specifically designed to address the
needs of ultra-high net worth and high net worth individuals and
families. It includes the domestic U.S. and Canadian business as
well as the international business booked in the U.S.
About UBS
UBS is committed to providing private, institutional and
corporate clients worldwide, as well as retail clients in
Switzerland, with superior financial advice and solutions while
generating attractive and sustainable returns for shareholders. Its
strategy centers on its Wealth Management and Wealth Management
Americas businesses and its leading universal bank in Switzerland,
complemented by its UBS Asset Management business and its
Investment Bank. These businesses share three key characteristics:
they benefit from a strong competitive position in their targeted
markets, are capital-efficient, and offer a superior structural
growth and profitability outlook. UBS's strategy builds on the
strengths of all of its businesses and focuses its efforts on areas
in which it excels, while seeking to capitalize on the compelling
growth prospects in the businesses and regions in which it
operates. Capital strength is the foundation of its success.
UBS is present in all major financial centers worldwide. It has
offices in more than 50 countries, with about 35% of its employees
working in the Americas, 36% in Switzerland, 17% in the rest of
Europe, the Middle East and Africa and 12% in Asia Pacific. UBS
Group AG employs about 60,000 people around the world. Its shares
are listed on the SIX Swiss Exchange and the New York Stock
Exchange (NYSE).
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