The Dow’s resurgence this year has convinced many wealthy investors to reinvest their money in equities, but those rich households are still expressing some trepidation about the market’s health.
According to the latest “High Net Worth Advisor Insight” report by the Spectrem Group, 16% of people with more than $500,000 investable assets were convinced to invest in equities when the Dow reached 9,000 in July. An additional 15% had already returned to equities. Approximately 26% will reinvest once the Dow tops 10,000. This would mean that more than 50% of wealthy investors are investing in equities again. However, 11% of these investors said they will never invest in the markets again.
Millionaires still remain cautious despite the Dow’s recovery, although their reluctance to invest appears to be ebbing. The Spectrem Millionaire Investor Index (SMII) rose only four points in July, to -20 from -16. This was an improvement from June, however, when the SMII plummeted a record 18 points. The Spectrum Affluent Investor Index (SAII) gained one point in July, to -19 from -20.
But the number of affluent investors who say they are “not investing” dropped to15% from 22% in June. Among millionaires the improvement is even greater, moving to 9.4% from 21.4%. Millionaires have also increased their likelihood of investing in stocks to 35.2% from 28.2% and stock mutual funds to 41.1% from 33.3%. At the same time, millionaires have indicated their plans to increase their cash and bond investments—a sign that market trepidation remains.
The Spectrem Group has also found that the economic crisis is affecting the way wealthy investors are managing money. Specifically, they are taking greater initiative when it comes to using investment websites to check their balances. They are checking those balances online much more frequently than in the past. Approximately 62% of wealthy investors check their balances weekly, while 21% check them monthly. Another 66% of investors would like to aggregate all of their financial information at one site. Younger households go online to check their investments most frequently.
According to the report, affluent households are also concerned over the impact that the proposed healthcare reform bills be considered by Congress will have on their taxes. In research conducted in late July, 67% of individuals with $500,000 or more investable assets felt that the health bill will have a serious or severe impact on their taxes. Only 8% believe the bill will have no impact on their taxes. Although the Spectrem Group suggests that it “would not be a stretch to infer that many affluent households are reducing their spending until they are certain of the upcoming tax burden they will bear,” it offers no concrete data to support this speculation.