With the ultra-wealthy sitting on a sizable amount of cash, its good news for the markets that more than half now say they’ll buy stocks or mutual funds in the coming year, according to a survey from Spectrem Group..
The study surveyed U.S. households with a net worth between $5 and $25 million, excluding their homes. Their average cash balance, including money market funds, checking, savings, Treasury Bills and CDs, was $659,000 at the end of 2010, 10% of their total investable assets.
“After pulling away from equities during the recession, America's wealthiest investors are looking to jump back into stock investing.” said George H. Walper, Jr., President of Spectrem Group.
A significant percentage of the group – 47% – still believe it’s more important to protect their principal than to grow their investments. However, that number has dropped. In 2009, 75% were focused on preservation.
“It’s not that the ultra wealthy are feeling more optimistic than they were in 2009,” said Catherine McBreen, Spectrem’s managing director, “It’s more that they realize cash is not their only investment option. Despite overall concerns about the economy they are looking for opportunities and are finding stocks to be particularly appealing.”
Fifty-two percent of those surveyed in December say they are more likely to buy stocks than any other investment in 2011. Ninety-two percent currently own individual stocks, with an average investment of $1,435, 000. Cash is the next most likely investment, appealing to 35%. International investments appeal to 33%, and 31% chose bonds as their top option. .
The group is growing more interested in mutual funds. Only sixty-five percent owned U.S. stock mutual funds in 2009, compared to 82% in 2010. Similar increases were seen for municipal bond mutual funds, international mutual funds and exchange-traded funds.
As of Dec. 31, professionally managed accounts made up 24% and mutual funds 15 percent of their investable assets.
Almost all the group own some type of IRA with an average balance of $1 million. Just over half have an employer-sponsored retirement plan with an average balance of just over $908,000. Nearly two-thirds are invested in managed accounts that charged a fixed fee. The average balance is about $1.7 million. Equities account for 47% of the managed account holdings, while 25 percent of assets are allocated to fixed income investments.
Nearly 90% consult an advisor for some aspect of financial planning, but all of the group control a percentage of their assets on their own.
About 18% control a privately held business, 12 percent have an investment in a privately held business and 10% have a professional practice. The average investment in a privately held business is about $2.3 million.