Australian investors would prefer to do their own investment research, rather than visit a financial planner, but one of the things that worries them most is working out what to invest in.
This contradiction is highlighted in two new investor surveys – the latest Investment Trends Self Managed Super Fund Investor Report and the ASX Australian Investor Study.
According to the ASX study, which was prepared by Deloitte Access Economics, more than 65 per cent of investors do their own investment research. The majority of investors do not see the value in seeking professional financial advice.
More than half of the SMSF trustees surveyed by Investment Trends say they keep track of the performance of their investments using their own spreadsheet. Twenty-five per cent use an online broker website, 21 per cent use their accountant, 15 per cent use their bank’s website and 13 per cent use a financial planner. Only seven per cent use an SMSF administration service provider.
Yet Investment Trends found that the two things that worry SMSF trustees the most are figuring out what to invest in and how to deal with regulatory uncertainty.
Another contradiction is that there is a disconnect between investors’ risk profiles and their return expectations. Deloitte found that the most risk-averse 21 per cent of investors expect returns over 10 per cent a year.
Risk aversion is particularly strong among young investors, who would normally be expected to accept a higher level of risk because of the longer time horizon they have for their investment objectives. Eighty-one per cent of investors under 35 are seeking guaranteed or stable investment returns.
Deloitte says this may be related to the economic environment younger people have grown up in, witnessing the impact of the financial crisis in their formative years.
“Relatively lower financial knowledge and financial experience may also be driving this higher degree of caution,” Deloitte says.
Investment Trends found that about 20 per cent of trustees set an annual performance target for their funds, with an average target return of eight per cent. Seventeen per cent say they aim to beat inflation, 17 per cent say they want to beat other super funds and 12 per cent say they want to match the returns of other super funds.
It says there has been a shift in investment attitudes, with a shift away from the emphasis on value preservation, which prevailed for the past three years.
Trustees say they want to prioritise growth investments in the year ahead. Twenty-two per cent say their goal s to emphasise capital growth – up from 20 per cent a year ago and 19 per cent in the 2015 survey.
Thirty per cent say their goal is to achieve a balance of capital growth and risk management, 33 per cent want to build a sustainable ncome stream and 12 per cent say their priority is to protect their existing assets and income.
Yet another contradiction is that investors tend to be bearish but they prefer the sharemarket to all other investments. When Investment Trends surveyed trustees in March, they reported a 12-month stock market return expectation of just 3.4 per cent.
However, the most popular place for investing is the share market: more than 50 per cent say they will invest in blue chip shares (outside of managed funds) over the coming 12 months; more than 20 per cent say they will invest in high yielding shares; about 20 per cent will invest in exchange traded funds; and around 15 per cent say they will invest n small cap stocks and international shares.
Investment Trends says there is appetite for a wider range of investments than in recent years. This includes infrastructure assets, commercial property trusts and residential property (around 10 per cent).
Diversification is not well understood, Deloitte says. 46 per cent of investors claim to be diversified and hold an average of 2.7 investment products.
Deloitte says it expects to see the strong growth in SMSF number continue. Thirty per cent of Australian adults who do not currently use a self-managed fund are planning to set one up in future. Thirteen per cent say they are planning to set one up within the next 12 months and eight per cent say they will do it within the next couple of years.