Not only have investors lost faith in the stock market, but a substantial number say they will never invest in the stock market again, according to a survey released on Friday by Prudential Financial.
In addition, many respondents said they are more conservative in their investing post-crisis. Meanwhile, 72% reported that they need to think differently about saving and planning for retirement, according to the study, “The Next Chapter: Meeting Investment & Retirement Challenges.”
Not only have investors changed their behaviors in the wake of the crisis, but the whole investment model has changed, many investors believe. Sixty-one percent of the 1,274 Americans who were polled for the online survey through January 5, 2011 believe the principles of investment diversification and asset allocation have changed. Currently, just 37% of the respondents say their portfolios are aggressive, while 46% said so prior to the recession. At the same time, 40% say they have a conservative portfolio today compared with 33% pre-recession.
“These findings are consistent with what we’re seeing in the marketplace,” said Judy Rice, president of Prudential Investments, in a press release. “Mutual fund investors are beginning to behave much more like institutional investors and are just as focused on managing risks as they are on generating good returns. As a result, they are looking to real assets and market neutral and fixed income products to protect against the threat of inflation and market volatility.”
Preservation is critical to investors right now, more so than growth, according to survey results. Seventy-three percent believe their current investments won’t make up for their losses over the past few years. Sixty percent say they are looking for guarantees to protect their financial future.
“Americans clearly recognize the need for new approaches to retirement planning, with almost seven in 10 saying guaranteed lifetime income products are appealing,” said Stephen Pelletier, president of Prudential Annuities. “The findings are consistent with the trend we are seeing toward many investors including annuities in their portfolios to provide a guaranteed floor for their retirement income.”
While seven out of 10 respondents say they are trying to improve their financial situation, many may not achieve their retirement goals, according to Prudential.
Christine Marcks, president of Prudential Retirement, said “one solution may be to include guaranteed income products within workplace retirement plans, which can be structured to provide downside protection as well as the opportunity for growth. Also, despite the fact that we are seeing some positive signs—such as increasing contributions to 401(k)s and other retirement savings vehicles—the lower interest rate environment and more conservative investing will require Americans to save even more if they are to achieve their retirement goals.”