The FINANCIAL — Parallel with a rising stock market, a new national poll1 shows that investors with at least $100,000 in investable assets are optimistic about the prospects for their portfolios, growth of the U.S. and global economies, and their ability to reach their financial goals.
86% expect their investment portfolio to be “better” or “the same” at year-end and an equal number believe their financial well-being will be the same or better, according to Morgan Stanley.
Investors are most bullish about their state economies (77% same or better), followed by the global economy (72%) and U.S. economy (66%).
83% are confident they will achieve their long-term financial goals, and 80% of those not yet retired are confident they are on track in their planning.
Concerns range from U.S. budget and trade deficits to increased foreign conflicts, terrorism and future inflation
When asked about their concerns, a majority of 88% cited the U.S. budget deficit, closely followed by increased foreign conflicts (87%), U.S. economic prospects (86%), the trade
deficit (83%), high inflation within the next five years (80%), a downgrade of U.S. sovereign debt (80%), and terrorism (79%).
Asset allocation favors equities with sizeable commitment to fixed-income and cash; In favor: Gold, U.S. dividend stocks and broad index vehicles; Out of favor: Treasuries, home state munis;
Equities, including stocks, mutual funds and ETFs, make-up the single largest percentage of investors’ portfolios at 41%. However, fixed income investments (20%) and cash (22%) represent a comparable percentage when taken together. “Other” investments, including commodities and alternatives, round-out allocation at 17%.
Asked to identify “good” investment prospects for 2013, investors cite gold (48%) followed by dividend bearing stocks (46%), S&P 500 index funds (45%) and mutual funds and ETFs, (41%), including those tied to the Dow Jones Industrial Average.
As “bad” investment prospects, investors identify Treasuries (only 26% saying “good” investment) and various kinds of municipal bonds in their home states (22% “good”), likely reflecting the current low interest rates paid by these instruments.
Investors also named international stocks and mutual funds as a “bad” or “neutral” investment prospect (26% bad, 46% neutral), probably indicating a perception of higher risk.
Countries identified as “good” places to invest are: U.S. (56%), Brazil (43%), China (39%), India (37%), but less so Japan (32%), and not Russia (12%), and the Middle East (7%).
Those not investing internationally could miss an upside opportunity, according to Morgan Stanley Wealth Management’s Global Investment Committee. On March 8, the committee recommended a shift toward international equities, including Japan, Europe and emerging markets, stating: “The U.S. has led the global recovery, but now other equity markets appear to offer similar or more upside while providing greater diversification.”
Capital Preservation remains an important concern — 55% of investors say capital preservation is more important now than three years ago, while 41% say its importance is unchanged.
Capital preservation is particularly important for investors with $500,000 to $1 million in assets, with 64% citing it as a concern (vs. 57% of millionaires).
Real estate viewed as a mixed bag — Amid signs of a national housing recovery, only 4 in 10 investors sense improvement in their local housing market (price appreciation averaging 10%).
38% say prices are flat, and 20% see a price decrease.
However, 74% say the timing is good to buy a primary residence, and over one out of three believes real estate will be the best performing asset class over the next three years.
More than half (56%) have seen no foreclosure problems close to home.
Millionaires are different — Investors with household assets of $1 million or more, who make up a third of poll respondents, are more likely to see improvement in their portfolios from 2012 (68% vs. 45% in lower asset group) and, predictably, are less likely to be concerned about “having enough money to cover the unexpected” (25% vs. 57% for total sample).
Millionaires are more concerned about low interest rates on fixed income investments (82% vs. 72% overall), and estate tax increases (48% vs. 39%).
Millionaires are more bullish on real estate, with 54% rating it a good investment vs. 44% for lower net worth investors, and 52% say it’s a good time to buy a second home.
Affording quality healthcare worries even millionaire households, with 68% citing it as a concern (vs. 77% of the lower-asset group).
Financial advice in high demand — Investors want financial advice – specifically, communication and analysis. 78% of investors use one or more financial advisors, and more women than men seek advice (83% vs. 73%).
87% want clear communication on how assets can contribute to a retirement income stream.
86% want both analysis of the economy and potential portfolio impacts, and guidance on asset allocation.
85% want guidance on federal tax changes and 82% want both downside portfolio protection and new investment ideas.
75% want help to stick to a financial plan.
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