Mass affluent investors, those with $100,000 to $1 million in investable assets, are pessimistic about investing, a survey of 596 individual investors and 610 financial advisers by MFS Investment Management found.
Thirty-three percent said protecting principal is their No. 1 investing goal, although 32% said it was growing assets and 30% generating income.
Twenty-eight percent of their portfolios, on average, are in cash, and only 35% are in equities. Only 42% said they are highly confident that their portfolios are properly balanced to meet their long-term goals.
Thirty-two percent of these mass affluent investors describe themselves as protective, 17% as pessimistic and 16% as fearful. On the other hand, 41% said they are hopeful.
Forty-eight percent agreed with the statement, “I’m a saver more than investor,” and 39% said they are novice or beginner investors.
Mass affluent investors are also more pessimistic about retirement, with 59% more concerned than ever about being able to retire when they thought they could, 49% have lowered their expectations of what life will be like in retirement in the past few years.
Forty-four percent have reduced their discretionary spending in the past 12 months, and only 14% have increased discretionary purchases.
Asked what their greatest financial concerns are over the next 12 months, 18% said rising healthcare costs, 15% pointed to the growing federal deficient, and the same number, 15%, said a reduction in Social Security benefits.
“Mass affluent investors are holding significant amounts of cash and are specifically concerned about rising healthcare costs, the federal deficit and reductions in Social Security,” said William Finnegan, senior managing director of U.S. retail marketing at MFS. “Their high cash balances mean they may be overly exposed to the effects of inflation. Plus, this portfolio positioning may increase their risk of not being able to reach their long-term financial goals. The concern going forward is if this group can adequately—and confidently—position itself to meet long-term financial goals based on these current pessimistic sentiments.”
On the positive side, the median household investable assets of the mass affluent are $306,000, and 57% had worked with a financial adviser in the past 12 months. Ninety-five percent own their own homes, with a median home equity of $194,000.
“Mass affluent investors are in better financial shape than they give themselves credit for, with significant assets and strong home equity positions despite a weakened national housing market,” Finnegan said. “They demonstrate a willingness to seek professional investment advice, which can open the door for advisers to deliver the emotional reassurance needed and to engage them about topics important to their long-term financial wellbeing, including risk tolerance assumptions and current portfolio allocations.”
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