Investors’ outlook is cautiously optimistic, with nearly half expecting gains in the year ahead despite their concerns over the sluggish economy,
Driving the improved outlook is performance; 44% of investors’ portfolios have risen over the past year (11% by a lot, 33% by a little), whereas 29% reported gains in 2009. On the flip side, only 24% reported a decline in 2010, whereas the portfolios of 51% declined the year before.
For those who have experienced a loss, they do expect to recoup their investments—but not right away. Eighteen percent believe they can recoup the losses in a year, and 34% think it will take three years. Another 34% think it could take five years to 10 years to get back to where they were before the recession. Only 14% do not expect to ever recoup their losses.
Looking ahead to the coming year, nearly half, 47%, expect their portfolio to rise (22% significantly and 25% a little). Thirty-six percent expect their portfolios to remain flat, and 17% think they might decline somewhat. The most optimistic age group are Gen Y’ers (18 to 27), 36% of whom expect significant gains, and Gen X’ers (28 to 43), 28% of whom expect significant gains.
And investors appear to be comfortable with their investment decisions, 24% of whom say they are “better than average,” and 67% of whom say they are “average.”
However, with regards to the economy, the overriding message is: We aren’t out of the woods yet. Seventy-seven percent do not believe the U.S. economy will recover for two years or more, up from 41% in 2009 who said it would be a few years out. Only 19% think the economy will rebound within the next 12 months, and a paltry 4% say it’s already on the mend.
Sixty-eight percent of investors said they are anxious about their financial well-being, and when shown a list of potential factors, the No. 1 issue is the economy, followed by rising healthcare costs, the price of gas, the cost of food, the stock market and not having enough money to pay bills. Tied at No. 7 are the real estate market and trust in their financial institution.
Asked about new behaviors due to the recession, people said they are checking their accounts more frequently and have become more aware about their own personal financial situation. They are also doing more research before making an investment and making sure their portfolio is diversified.
Bearing out fund flows to bonds and fixed income funds, 31% said they are investing their money more conservatively, and 31% are investing less money.
For those with children, 38% of parents are teaching them about responsible money management, and 35% are using actual accounts or educational tools to get the message across.
