Investors find themselves in conflict between thinking the economy is going to be all right and being afraid of the current volatile market, says a UBS Wealth Management Americas survey released Thursday.
According to “The Conflicted Investor,” investors believe in the economic recovery that has occurred since the 2008-2009 crisis, with 79 percent saying it has met or exceeded their expectations and 47 percent saying they wish they had invested more during the rebound.
However, 89 percent have maintained or increased their cash holdings since then, and only 18 percent are now 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, UBS says. Forty-two percent say the recent 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," says Paula Polito, client strategy officer at UBS Wealth Management Americas. "The financial crisis appears to have cast a long shadow on investors."
Those with financial plans have far greater confidence during times of market volatility than those without: 98 percent say their plans keep them on track, and 97 percent agree that their plans help them stay focused on long-term goals, not daily market fluctuations.
More than three quarters (76 percent) 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,” according to the survey.
Wealthy investors have been holding an average of 20 percent of their funds in cash, but they also say they are ready to invest at least a quarter of that if they find the right investment opportunity.
“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 World War II generation. “For instance, more than half of wealthy swing/WW II investors took away that sticking with a ‘buy and hold’ investing strategy is important, but only one in three millennials feels the same way,” says UBS.
The survey included a total of 2,638 participants, with 1,835 having at least $1 million in investable assets. It also included millennials age 21 to 29 with $75,000 in household income or $50,000 in investable assets and those age 30 to 37 who have at least $100,000 in household income or $100,000 in investable assets. Also part of the sampling were Gen Xers age 38 to 49 who have at least $250,000 in investable assets.