U.S. Investors are both more patient than investors in other countries and more demanding for returns, according to a new study by Schroders, a global financial services company with $536.7 billion in assets under management.
Schroders’ study found stark differences between U.S. investors and those from other countries. The study included more than 25,000 investors in 32 countries.
U.S. investors hold their investments for an average of 4.2 years, one of the highest country averages along with Canada and Japan, according to the study. The global average is 2.6 years, even though most financial experts recommend holding investments for at least five years, Schroders said.
Forty-three percent of U.S. investors left the risk levels of their portfolios the same during the volatility that hit the market at the end of last year, compared to 30 percent of investors globally who did not change their risk levels.
At the same time, 28 percent of U.S. investors were not fazed by the chaotic political environment of the last few years, compared to only 20 percent globally.
Plus, U.S. investors are more likely to be invested in their home country (37 percent) than the global average of 20 percent, the study said.
“The ebbs and flows of markets are always going to keep investors on their toes but the key is to focus on the long term,” said Charles Prideaux, Schroders’ global head of product and solutions. “Chopping and changing investments particularly during challenging markets is likely to be detrimental for investors’ portfolios and ultimately lead to disappointing investment returns. Instead it is critical to look through the uncertainty.”
However, more than 70 percent of investors globally modified their portfolios in direct response to the instability at the end of 2018: Thirty-seven percent moved into lower-risk investments and 35 percent opted for higher-risk options.
Globally, the millennial generation appeared to be less patient than older generations, holding their investments for an average of 1.9 years compared with the 3.7-year average holding period for baby boomers. Fifty-three percent of millennials agreed that the biggest danger to their investments was not taking enough risk to achieve their investment objectives.
This short-term approach may be fueled by global investors expecting, on average, a 10.7 percent total return in income and growth each year over the next five years, an increase from the 9.9 percent stated a year ago, Schroders speculated. One in six surveyed expected at least a 20 percent annual return. This contrasts with major stock markets such as the S&P and FTSE 100 all experiencing net falls during 2018. The average annual return of the S&P 500 since its 1957 inception is less than 8 percent, the study said.