The highlights:
- 92 percent of millionaires have not abandoned the stock market, with 43 percent currently engaged in moderate to heavy buying or selling and 49 percent waiting for the right opportunity to buy or sell (only eight percent have exited the market altogether);
- 20 percent of millionaires who lost value in their investments since 2008 have already seen their investments return to pre-2008 levels, and 90 percent indicated that their investments performed better or about the same as other investors since the beginning of 2008;
- 47 percent say their investment risk tolerance has not changed during the last three years and only one in 10 say they are not willing to take any investment losses in the current investment market;
- in past three years, 47 percent of millionaires made no change in their allocation to equities, 42 percent made no change in their allocation to fixed income, and 47 percent made no change in their allocation to cash; and
- 72 percent said the U.S. stock market performance has a major or moderate impact on their investment strategies.
“The vast majority of millionaire investors have persevered and remained in the market despite the recession, a fragile recovery and continued market volatility,” said Mark Jordahl, president of U.S. Bank Wealth Management Group. “They haven’t overreacted. They’ve maintained a balanced approach to risk and its potential rewards, and while they are guardedly optimistic about the U.S. economy for 2011 and achieving their short-term investment goals1, they say they are confident about achieving their long-term investment goals over the next six to ten years.”
Detailed findings:
Still in the market and looking for opportunities
Although virtually all millionaires (97 percent) say their investments lost value at some point since the beginning of 2008, very few (8 percent) have actually taken their investments out of the market. Many (43 percent) are currently engaged in moderate to heavy buying or selling to take advantage of market opportunities, and nearly half (49 percent) are looking for the right opportunity to buy or sell.
While 20 percent have already seen the value of their investments return to pre-2008 levels, more than half (54 percent) feel it will take up to five years for their investments to get to where they were prior to 2008. More than half (54 percent) are “very confident or confident” in achieving their investment goals over the next six to ten years, with another 37 percent saying they are “somewhat confident.” The vast majority (90 percent) say their investments performed better or about the same as other investors.
Did not panic — took a balanced view on risk
While many millionaires (45 percent) say they have become more conservative with regard to their investment risk tolerance during the past three years, 47 percent say their investment risk tolerance has not changed. A vast majority (93 percent) say worries about their investment performance have not caused them to lose sleep at night.
“A significant percentage of these investors have not changed their risk tolerance, which is different from what one might believe based on the national perception that investors have flocked to cash and fixed income,” said Michael Boardman, president of The Private Client Reserve. “That tells us that they have wisely taken a long view and can keep sharp market movements in perspective. They understand our old adage that managing a portfolio with a long-term view is a more prudent way to manage investments.”
Investments focus on maintaining or growing wealth rather than protecting from losses
Only 10 percent of millionaires said their primary motivation for investing is to protect their wealth by limiting losses. The vast majority (61 percent) are investing to maintain their wealth by seeking a rate of return that outpaces inflation, fees and taxes or to increase their wealth by seeking portfolio growth (29 percent).
“It is encouraging to see investors focused on maintaining purchasing power and growing wealth rather than becoming overly defensive, which can be a natural reaction to investment losses,” Jordahl noted. “We see this as a positive sign that investors understand markets are volatile and are getting advice which allows them to put recent market behavior into proper perspective. Investors who persevere when markets are turbulent will perform better in the long run, in our judgment.”
Personally involved in investment strategies and decisions
The vast majority of millionaires (80 percent) are personally involved in making decisions about their investment portfolios, with 20 percent delegating most or all of their investment decisions to their financial advisor. A majority of millionaires (70 percent) trust their financial advisor to help them grow their investments. Seventy-one percent say they get advice from others about how to invest, but go with their own instincts.
