Schroders: Disconnect between retail investor expectation and reality

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Retail investors are increasingly overconfident about investment returns whilst remaining reluctant to take risks, a recent survey conducted by UK asset manager Schroders highlights.

According to the poll among 20.000 retail investors in 28 countries, 54% of respondents feel confident about investment opportunities for the next year, with the majority expecting and average investment return of 12%.

Consequently, half of those questioned intend to increase the amount they save or invest in the coming 12 months, compared to just 43% of those questioned in 2014 and 38% of those polled in 2013.

According to the survey,  retail investors are looking to place only around 21% of their investment portfolio in higher risk / higher return assets such as equities, with 45% of investors’ funds going to low risk / low return assets such as cash and around a third (35%) being placed in medium risk assets such as bonds.

The data also shows a bias towards short-term investing, with almost half (46%) preferring outcomes within one to two years. Despite this disonnect, less than a quarter of respondents considers to seek professional advice on investment decisions and more than a third of respondents said that they are not planning to adjust their asset allocation.

Massimo Tosato (pictured), executive vice chairman at Schroders comments on the results: “Our survey highlights a clear disconnect globally between retail investors’ return expectations and their attitudes to risk. Expecting double digit returns within the next 12 months, while only placing less than a quarter (21%) of their investment portfolio in higher risk assets suggests that investors are not taking a realistic approach to investing.”

Carlo Trabattoni, head of UK and European Intermediary and the Global Financial Institutions Group at Schroders stresses: “The broad message is that there is an increased desire to invest and we have noticed a growing appetite for equities, but this needs to be translated into a tangible action. We need far more education, from an investor perspective, on how these returns can be achieved.”

“We feel like it is our duty to interact even more with our distributors to increase the educational role, not only with intermediaries, but also with end clients. Currently, only 23% of respondents believe that they need to seek professional advice before making changes to their portfolio, this seems surprisingly low and that is why we think it is important to encourage investors to seek and realise the value of advice” Trabattoni adds.

Mona Dohle
Mona Dohle speaks German and Dutch, she is DACH & Benelux Correspondent for InvestmentEurope. Prior to that, she worked as a journalist in Egypt and Palestine. She started her career as a journalist working for a local German newspaper. Mona graduated with an MSc in Development Studies from SOAS and has completed the CISI Certificate in International Wealth and Investment Management.

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