Global Investor Study: High return expectations

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MEDIA RELEASE Investors have high, and arguably difficult to achieve, expectations for their investments despite the low growth, low interest rate environment across global markets, according to the latest Schroders Global Investor Study*. 

Geographically, investors in the Americas had the highest annual return expectations at 12.4% on average, compared with 10.9% for investors in Australia and 9.0% for investors in Europe. These high expectations may indicate why over half of investors globally (51%) stated they had not achieved what they wanted with their investments over the past five years. 

The study – which surveyed over 25,000 investors worldwide in 32 locations – found that around one in six surveyed expected at least a 20% annual return. This is despite major stock markets – such as the S&P and FTSE 100 – all experiencing net falls during the previous year. The average annual return of the S&P 500 since its 1957 inception is less than 8%.   

Furthermore, investors indicated they would like to receive an income of 10.7% on average over the next year from their investments (excluding cash savings and properties) but expect to receive 10.3%. This finding was even more pronounced among Australians, who reported a desired income of 11.5% on average over the next year and expect 11.0%, a significant increase from 2018 (9.6% desired on average over 12 months). In Australia Millennials had higher desired income expectations (12.9%), versus Generation X (10.8%), Baby Boomers (9.2%) and investors aged 71+ (7.7%). 

The study also revealed that 70% of investors globally made immediate changes to the risk profile of their investments during the volatile final three months of 2018. This included, 37% who moved some of their portfolio into lower-risk investments and 36% who opted for higher-risk options. Only 21% of investors kept their investments the same. 

Changes to investment portfolios during Q4 2018 market volatility

Graeme Mather, Schroders’ Head of Distribution, Australia commented: 

“It is clear that investors still have high return expectations that are not in line with the reality of investment markets. It is also clear that more education is needed to ensure investors don’t change asset allocations, and chase market movements, at precisely the time they should not. 

Investors also leaned towards familiarity in their investment allocations, with 31% preferring to invest in their home country and just under a quarter (24%) of the opinion that emerging markets are too risky. 

 “Australians have a high propensity to invest in Australian shares because of the tax advantages provided by the dividend imputation system. But tax considerations alone should not drive investment decisions at the expense of portfolio diversification.” Mr Mather said.

*In April and May 2019, Schroders commissioned Research Plus Ltd to conduct an independent online survey of 25,743 people who invest from 32 locations around the globe, which included Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, the Netherlands, Spain, the UK and the US. This research defines “investors” as those who will be investing at least €10,000 (or currency equivalent) in the next 12 months and who have made changes to their investments within the last 10 years.