Investor worries about the economy and investing increased as 2011 progressed, and they and their advisors need to rethink their views of their financial situations, according to a survey by MFS Investment Management.
MFS, a worldwide money management firm, says investor worries have continued to grow, according to the survey conducted three times during 2011.
"As we have noted in past findings, the blow to investors' psyches from the Great Recession is longer-lasting than many financial advisors may have expected," says William Finnegan, senior managing director and head of U.S. retail marketing for MFS. "As we begin 2012, investors and their financial advisors need to reconsider their asset allocation, assess their true risk tolerance, separate out fear, and re-think their overall approach to investing for their long-term goals."
In the latest survey from October, 29% of those surveyed say they will never feel comfortable investing in the stock market again, compared to 27% June and 26% in February.
Similarly, 31% reported in the latest survey that the amount of risk they are willing to take decreased. That compares to 26% in both earlier questionnaires.
The survey included 929 investors with $100,000 or more in investable assets and 644 licensed financial advisors who sell at least $500,000 in mutual funds a year.
The survey participants' opinions of different investment vehicles declined in the October survey, with only 18% feeling domestic stocks and mutual funds were excellent or very good investments, compared to 35% at the beginning of the year and 30% in mid-year.
Likewise, those who feel international stocks are an excellent or very good investment fell from 22% to 14% from the beginning of the year to the end. Government and corporate bonds, real estate, bank CDs, savings and money market accounts took similar hits.
Participants were asked about their major concerns for the upcoming year at each of the three points in 2011 and the percent worried about the issues increased in every case as the year progressed. Legislative gridlock in Washington, weakness in the global economy and another major drop in the stock market jumped in concern the most, while such issues as rising health care costs and increasing taxes also increased.
"The challenge for investors and advisors is finding a middle ground, where they can feel comfortable investing, while coping with the immediate emotional concerns of today's economic challenges," Finnegan says.