Affluent investors, concerned about market volatility and wary of investment risk, are stepping back from high risk investments.
Affluent investors, concerned about market volatility and wary of investment risk, are stepping back from high risk investments, according to surveys conducted by Spectrem’s Millionaire Corner.
An October survey of how Affluent investors intend to invest in the coming month saw a retreat to the sidelines and shift toward protection. This was no doubt influenced by the 16-day government shutdown and debt-ceiling debate which put the country’s credit rating at further risk. A significantly higher group of Affluent investors than the previous month said they would not be investing.
Financial advisors do not seem to be pushing high risk investments at this time to their Millionaire clients. Only 17 percent of Millionaires surveyed by Spectrem’s Millionaire Corner said that their advisor had given them opportunities to invest in hedge funds, which are generally perceived to be a higher risk investment. A hedge fund, which tends to be unregulated, is an aggressively managed portfolio designed to generate high returns, and restricted to accredited investors with a net worth of more than $1 million and who must earn a minimum amount of money annually. These investors also tend to be more sophisticated in their financial knowledge.
Not surprisingly, advisors are more likely to recommend high risk investments to their younger clients. Among Millionaires surveyed who are under 45 years-old, nearly one-third (31 percent) said their advisor have given them opportunities to invest in hedge funds. Seniors over 65 were least likely to have received these opportunities.
While the highest percentage of financial advisors is telling their Millionaire clients to invest in stocks (29 percent), they are also advising to proceed with caution in other investment areas. Only 10 percent of Millionaires report being told to consider high risk investments. More than twice as many (23 percent) report being told to develop a more conservative portfolio. Nineteen percent are being advised to hold their investments in something safe until the economy gets better.
Age, again, is a factor in risk management advice, with seniors most likely to be told to develop a more conservative portfolio and to hold their investments in safer vehicles. Only six percent of those over 65 report being told to invest in more high risk investments.
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.