Research explores how declines impact future confidence, as well as role of advisors in providing peace of mind
Investments & Wealth Institute has released the findings of a new survey, which examined the attitudes, sentiments, and possible actions of advised investors during a market downturn.
Drawing from a survey of 751 U.S. investors conducted between March 10 and March 26, 2020, the research showed that investors were very optimistic toward the future in spite of the market decline.
Half of investors reported expectations of positive returns in their portfolios over the 12-month period ending in March next year, including 25% who expected increases between 1% and 9%, and another 25% expecting increases of 10% or more. Twenty-eight per cent of respondents anticipated declines, with 12% foreseeing a 1%-9% loss, 10% prepared to lose between 10% and 19%, and 20% bracing for declines of 20% or greater.
Expectations of successfully achieving retirement objectives were relatively robust. When the investors were asked whether they believed they would still achieve their retirement goals given a range of market-downturn scenarios, most said “yes” given a mild market decline of less than 10% (77% of respondents) and a moderate decline between 10% and 19% (59% of respondents).
Even given a scenario of significant market decline between 20% and 49%, there was an even split between those who believe they’ll still reach their retirement goals (37%) and those who didn’t believe it (37%), with the remaining respondents saying they don’t know.
The survey also asked investors what they would do if the market were to decline by certain amounts over a period of up to two years. The most popular response by far was to “wait it out”, which almost one third said they would do even in a severe decline of 50% or more. They also reported a mildly greater inclination to leave their advisor, with 10% saying they’d do so in a severe decline.
As for whether they have a clear plan of action to take in their portfolios during market declines or disruptions, 49% said their advisor has proactively shared an action plan with them, and another 26% said their advisor shared an action plan when asked. But there appears to be a gap in clarity, as only two thirds of respondents reported feeling that they have a clear plan of action in place.
And among those who had a plan, 36% said it had a significant impact on their peace of mind, while 52% reported some positive impact. As for those who had no plan in place, 10% said it had a negative impact, 48% said it would have some negative impact, and 42% reported no impact at all.
