What investors want

The recent survey of 7100 investors in 22 countries by Natixis is of particular interest. It includes 300 Australian investors and provide a glimpse into investor behaviour and beliefs. It seems that most investors are very concerned and recognised the need to invest for retirement but they simply have no idea how to invest to get the returns that they will need.

Investors have unrealistic expectations of the equity markets and:

    • are looking for returns of about 9% over the inflation rate.
    • have little understanding of the issues of volatility
    • do not understand the relationship between risk and return
    • are unduly cautious and risk adverse
    • fifty-one percent of investors did not have financial goals
    • amazingly 63% of investors had no financial plan.

Most investors have little understanding of risk, return and volatility. About 60% of investors worldwide did not seem to understand the role of bonds and equities in asset allocation and were looking for new portfolio strategies which offered better management of risk, with less volatility and better returns: an entirely unrealistic expectation.

Investors are poorly informed about the markets and investing generally. Investors want a double digit return on assets with no volatility and no risk. Many seem to think that the professional fund manager will provide high returns despite the fact that 64% of Australian large-cap managed funds have underperformed the benchmark. Surprisingly investors still seem to believe in the finance professionals despite the fact that many have provided long term underperformance and charged high fees.

Investors want help but it seems that half of global investors think the investment industry in general does not have their interests at heart and they remain suspicious about financial advisors. This is understandable given the scandals associated with financial planning and that major banks in Australia have been involved in egregious activities associated with financial planners.

What investors need are education programs which provide the knowledge and skills, showing them how to invest and how to understand the opportunities that exist. But these are not readily available.

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