A survey released today by Legg Mason reveals that almost three-quarters (74%) of affluent U.S. investors believe now is a good time to invest in equities.
Two-thirds report that income investing was a top priority and over half say they are more inclined to increase equity holdings to generate their desired income.
Northstar Research Partners conducted the online survey of 500 investors (people with at least $200,000 of investable assets) over the past six months.
Though respondents placed a high priority on income investing, almost half (48%) said they were generating less income than they had hoped for from their portfolios.
This disconnect may be more a result of investor expectations than portfolio performance, according to Legg Mason.
On average, U.S. investors who use income-generating products said their desired return was 8.5%. But they are receiving on average only 5.9% -- a difference of 2.6%.
The most significant challenge investors said they faced was “having to accept risk to obtain good yields” -- ranked as the leading challenge. However, more than half (51%) said they were willing to take on more risk to achieve greater investment income.
“Investors have to recognize the trade-off," said Matthew Schiffman, a managing director and head of global marketing at Legg Mason Global Asset Management. "If they want higher income, they need to increase their exposure to risk in both fixed income and/or equities; if they prefer a low-risk approach to investing, they may have to reduce their income goals and expectations."
On average, U.S. investors have just 11 percent of their income-producing assets invested internationally. Global uncertainty was cited by 64 percent of respondents as the reason for the small figure.
That said, 60% of respondents said they would be open to investing in international equities, and 53% said the same for fixed income.
“The key will be to manage portfolio risk through careful portfolio construction and diversification across actively managed, income-producing global asset classes,” added Schiffman. “A thoughtful approach to taking more risk can help close the income gap that investors say currently exists.”