The latest research into investor behaviour has revealed capital protection as opposed to capital growth is the priority for many individuals based on a predominantly pessimistic view about the Australian share market.
The Investment Trends “Investor Product Needs Report” showed the main objective of investors over the coming year is the protection of capital, that is, assets and income from market falls, with 15 per cent of respondents expressing this sentiment as opposed to 11 per cent in 2018.
Survey participants showed a similar attitude toward the goal of maximising the capital gain from their investments, with 21 per cent confirming this was still important to them in 2020, down from 26 per cent last year.
“More investors are prioritising capital preservation and generating a stable income stream. To effectively achieve these priorities, many realise they need a diversified portfolio, which has led to the rising adoption of managed investment products,” Investment Trends senior analyst King Loong Choi said.
The aforementioned objectives of those surveyed reflect their pessimistic outlook regarding the expected performance of the Australian share market, with the average investor anticipating a 1.9 per cent rise in the All Ordinaries Index in 2020, despite an 11 per cent gain in the index in 2019.
“Australians have gradually revised their outlook for domestic stocks downwards. Their 12-month forward-looking expectations for the All Ordinaries failed to rise above 2 per cent throughout 2019, even falling into negative territory in August 2019. This comes in stark contrast to the 2 to 4 per cent levels typically observed between 2014 and 2018,” Choi said.
“Global macroeconomic and geopolitical tensions continue to weigh heavily on investors and their bearish sentiment has prompted many to adopt a more defensive stance in their asset allocation.”
The report also found responsible investing has become more important to investors, with 30 per cent of people surveyed saying they consider environmental, social and governance (ESG) factors when making an investment choice. Another 14 per cent of participants said they intended to include these criteria in choosing where to invest in the future, with 19 per cent admitting they wanted to learn more about the subject.
“There is strong appetite for investments that demonstrate good ESG standards among Australians young and old. Older, wealthier investors place greater importance in good corporate governance standards when selecting investments, while the younger generation are more likely to be attracted to companies that demonstrate ethical, social and environmental values,” Choi noted.
The Investment Trends “Investor Product Needs Report” analysed responses from 7933 Australian investors from a survey concluded in September 2019.