NEW YORK–(BUSINESS WIRE)–Seventy-four percent (74%) of U.S. investors age 40 years and older are concerned about a stock market correction given the long running bull market. And virtually all investors (97%) said the market at its current levels has risks with 37% saying the risk was significant or mostly risky.
These are some of the major findings of a Global Atlantic Financial Group national study of U.S. investors 40 years of age and older regarding stock market risk and investments. The study was conducted in October and November 2017 by Ebiquity, a global market analytics firm, among 1,005 U.S. investors with investments in the stock market through stocks, ETFs, mutual funds, 401Ks or IRAs.
Even with stock market risk concerns high, about 7 out of 10 investors (69%) said that their investment vehicles are subject to the stock market moving up and down. In fact, fifty-nine percent (59%) of employed investors said that a significant stock market drop would inhibit their ability to retire when they want, while twenty- five (25%) percent of those already in retirement said it would disrupt their retirement.
Asked how the 2008 financial crisis and stock market decline impacted the value of their savings and investment portfolio, about one in 10 (9%) investors reported a loss of more than 50% in value, about a quarter (23%) said a loss between 25 and 50% in value, and a third (34%) said a reduction of 10 to 25% in value. Sixteen percent (16%) or respondent could not recall the change in value.
“Investors felt the pain from the 2008 Financial Crisis, but our study indicates many are not prepared for another significant downturn and the impact it could have on their retirement,” said Paula Nelson, President, Retirement at Global Atlantic Financial Group. “It’s clear that investors need a better strategy to protect themselves from future market corrections and volatility, especially as they enter their peak earning years and prepare for and enter retirement.”
The study provided some rationale as to why investors continue to stay with equity investments as just over half (52%) believe that the stock market can sustain continued growth for the next five years without a downturn of 10% or more, while just less than half (48%) don’t believe this can happen.
According to the Global Atlantic study, the most popular investing strategy is steady income focused investments (34%), followed by protecting/capital preservation investments (26%). The third most popular strategy was growth (24%). Women placed a higher value on both income (43% vs. 34%) and capital preservation/protecting money (30% vs 23%), compared to men. More than one-third (36%) of retirees valued capital preservation/protection versus 19% of those employed.
Forty six percent (46%) of U.S. investors said they found equity investments (stocks, mutual funds, ETFs, options) equally appealing as interest-bearing investments (bonds, CDs, money markets, etc.), while 32% said they prefer equity and 22% prefer interest-bearing products. More women preferred a diversified (combination of equity and interest bearing products) portfolio, compared to men, 52% to 38%.
“While we found a clear preference for more income producing and capital protection type investments, the study found investors were over weighted in the stock market and not prepared for a sizable or prolonged downturn. More importantly, two out of three investors still in the workforce said a significant downturn would disrupt their retirement plans and timing,” stated Nelson.
When asked if you took all your money out of the stock market what would you do with it, forty-four (44%) percent of U.S. investors said purchase interest bearing accounts, while 19% of investor said they would purchase an annuity. Other investments choices when pulling out of the stock market include cash (13%) and gold (9%). Thirty- five percent said they were not sure.
The typical U.S. investor 40 years and over has, on average, $210,051 currently invested in the stock market. Investors currently retired have an average of $236,148 invested in the stock market.
About Global Atlantic
Global Atlantic Financial Group, through its subsidiaries, offers a broad range of retirement, life and reinsurance products designed to help our customers address financial challenges with confidence. A variety of options help Americans customize a strategy to fulfill their protection, accumulation, income, wealth transfer and end-of-life needs. In addition, Global Atlantic offers custom solutions and responsive service for the capital, risk and legacy-business management of life and annuity insurance companies around the world.
Global Atlantic was founded at Goldman Sachs in 2004 and separated as an independent company in 2013. Its success is driven by a unique heritage that combines deep product and distribution knowledge with insightful investment and risk management capabilities, alongside a strong financial foundation of over $50 billion in assets.