UBS Wealth Management Americas released its third UBS Investor Watch report, revealing a pragmatic investor embracing the "new normal".
According to a release, the survey of high net worth and affluent investors found 64 percent of investors say their financial situation is "excellent" or "very good", up considerably from six months ago (44 percent). This optimism and confidence is coupled with a pragmatism and a new outlook that redefines risk. The survey found 41 percent of investors define risk as permanent portfolio loss. This is very different from how the financial services industry has historically defined risk – using terms like volatility, standard deviation and other jargon.
"After the 2008 financial crisis, there was much discussion about the 'new normal' – a more reasoned and grounded approach among American investors. Many wondered how long this would last, particularly as investors historically displayed tendencies towards amnesia, forgetting about past losses when markets rebounded. However, based on the latest insights from UBS Investor Watch, it appears that the 'new normal' is here to stay," said
Optimistic, Pragmatic and Avoiding Risk
The survey found the majority (52 percent) of investors feel their finances are better than a year ago, up significantly from 40 percent in January. Despite greater optimism and key indices closing at record levels, investors are not rushing back to the markets: they are content with current and significant cash positions (22 percent on average), and few investors (26 percent) say they plan to reduce the cash they have. Asked about portfolio risk, 70 percent of investors say they are more concerned about avoiding losses than missing out on market gains (30 percent).
Top Concern: Long-term Care
Being able to afford the health care and the support needed in old age remains the top personal concern (31 percent, up from 26 percent in January) for investors of all ages. Interestingly, long- term care remains a greater concern than retirement (16 percent). Asked what was most important to them as they age, 44 percent investors said remaining self-reliant, followed by 38 percent who are focused on preserving their quality of life.
Despite their concerns, a majority of investors are not prepared for managing their long-term care needs. Only 37 percent feel highly prepared regarding their long-term care needs, compared with 64 percent who feel highly prepared with their retirement planning. "While the 'new normal' mindset should help investors deal with this growing issue, long-term care appears to be the next challenge many will need to face," said Pachuta. The survey found that 39 percent of investors aged 25-49 are looking for guidance relating to funding long-term care.
"Good Debt" vs "Bad Debt"
With both individuals and the government needing to reduce debt levels in the wake of the financial crisis, a significant portion of investors have become more averse to borrowing (29 percent). However, most investors are similarly pragmatic in their views on personal borrowing – believing there is "good debt" and "bad debt."
"Good debt" is associated with making a sound investment, such as a mortgage on a primary home, paying for education or short-term borrowing to avoid selling an asset that is expected to appreciate or to avoid realizing a large capital gain. Investors indicate they view "bad debt" to be a sign of living beyond one's means or borrowing for luxuries, such as not paying off a credit card balance, borrowing from friends and family, having a second mortgage on one's home and even having a mortgage on a second or vacation home.
The Gender Difference
Longer lives create unique challenges for women, particularly relating to long-term care, retirement and the future of government provided social services. The survey found that women are more concerned about the future of
Highlights from the
-Paying down the national debt burden: Seven in ten (70 percent) investors feel the tax increases in the "'fiscal cliff" deal were about right or should have been higher, and nearly six in ten (59 percent) expect there will eventually be more tax increases to help address the national debt issue. Surprisingly, older investors are more willing to pay additional taxes to reduce the debt burden for future generations (35 percent agree while 25 percent disagree), likely because they have been less impacted by the recent tax policy changes, while younger investors are less willing (27 percent agree while 34 percent disagree).
-Age and outlook: Investors under 50 are less optimistic about the short-term outlook (40 percent compared with 49 percent for investors over 60) and are less likely to believe the U.S. economy is strengthening (32 percent compared with 43 percent). Younger investors are also more worried about financial markets (32 percent compared with 20 percent), continuing market volatility (34 percent compared with 22 percent) and real estate prices (23 percent compared with 12 percent). Younger investors also feel the impact of the recent tax policy changes and are more worried about future tax increases. Over half (51 percent) of investors under 50 are highly concerned about more tax increases, compared with 39 percent of investors over 60.
UBS Wealth Management Americas provides advice-based relationships through financial advisors who deliver a fully integrated set of products and services specifically designed to address the needs of ultra-high net worth, high net worth and core affluent individuals and families.
((Comments on this story may be sent to email@example.com))
|Copyright:||(c) 2013 ProQuest Information and Learning Company; All Rights Reserved.|