Millionaire investors are adjusting their investment strategies in response to the European debt crisis. What changes are they making?
Two-in-five Millionaire investors perceive the European debt crisis as a major factor in the economic problems facing the United States, according to the latest Millionaire Corner research.
The concern – high in comparison to less affluent investors – is prompting Millionaire investors to adjust their investment strategies, according to our July survey. Nearly one-fourth of Millionaire investors (23 percent) say they are avoiding individual stocks and mutual funds with a global exposure, and more than 18 percent say they are avoiding fixed-income products from other countries.
Millionaire investors appear to be significantly more concerned about the effects of the European debt crisis than investors at the other end of the wealth spectrum. The crisis is perceived as significant U.S. economic problem by only 22 percent of investors who have a net worth of less than $100,000, not including primary residence. Not surprisingly, few of these investors are changing their investment strategies in response to the crisis. Nearly 58 percent report that the crisis has had no effect on their financial decision making, a stance shared by only 35 percent of Millionaires.
International investments provide diversification by spreading investment risk over foreign companies and markets, according to the U.S. Securities and Exchange Commission, and they also allow investors to take advantage of growth opportunities in foreign economies, including rapidly expanding emerging markets.
International investing also presents special risks, according to the SEC, including changes in currency rates, sudden drops in market value, political and social instability, lack of liquidity and lack of transparency.
International mutual funds can reduce some of the risks of international investing, according to the SEC, because they allow for greater diversification than most investors can achieve on their own and are managed by professionals with more expertise in international markets. (Wealthy investors traditionally use international mutual funds as a tool for diversification.)
Millionaire Corner research indicates that Millionaire investors are likely to return to international investing once the global economy stabilizes. A small share of Millionaire investors – about 4 percent – has increased their exposure to international products due to high yields and attractive prices.