Investors Optimistic About Long-Term

The i nvestor pull back, but not out, of the market is illustrated by a slight decline in US investors overall (68% in 2001 to64% in 2003) contrasted with a 20%-drop in ownership of US stock mutualfunds (39% in 2001 to 31% in 2003), according to AllianceBernstien’s Investor Outlook Survey.

There is also an increasedexpectation that the market will go down slightly or significantly (25% in2001 to 33% in 2003).  Yet, 43% of investors in 2003 stillexpectshort-term growth and nearly eight out of 10 (78%) believe the stockmarketoffers good long-term investment opportunities.

Despite this strong long-term perspective, the broad base of investors,particularly those who have little experience or are self-directed, arenottaking practical steps to manage their portfolios in line with theirmarketexpectations.  Nearly six out of 10 (59%) investors do not plan to take anyaction in response to how they think the market will act andmorethan half (53%) did not review or adjust their portfolios over the pastyear.

Not surprisingly, the overwhelming majority (86%) ofexperienced investors with advisors took at least one step, such asinvesting new money to take advantage of a buying opportunity (55%),rebalancing their portfolios (49%) or conducting a formal portfolio review(51%) –  the last step compared with only 2% of experienced investorswithoutadvisors.

Investment Techniques

Further, a low number of investors are familiar with most techniques used in preparing and balancing a portfolio and anevensmaller number actually use them.  Overall, investors reported that theyaremost familiar with diversification (58%), followed by growth investing(44%), portfolio rebalancing (40%) and asset allocation (34%), versus auseof 48%, 39%, 31% and 22%, respectively.  Conversely, the majorityof advised investors (experienced investors who use a financial advisor)aresomewhat or very familiar with most investment techniques and use them intheir investments, such as diversification (87% vs. 80% use) and growthinvesting (79% vs. 73% use).

Looking at the investment strategy of diversifying internationally, thestudy found that advised investors are more than three times as likely(41%)as the general public (12%) to invest in international stock mutual funds.

The most common explanations for the low number are lack of familiarity  (56%), the perception that they are too risky (16%) and the patrioticfeeling of investing in only US stocks (16%).  Interestingly, for investors that do invest globally, international stock mutual fundsrepresent 14% of their portfolios.

Harris Interactive conducted the Investor Outlook Survey forAllianceBernstein.  The primary objective of this survey was to obtaininformation about investors’ background, current investinghabits,use of investment techniques and expectations for the future investmentmarket.  This nationally representative online survey was conductedbetweenMarch 14 and March 18 among 3,295 adults aged 18 and older, of which 2,124reported that they currently have investments, which accounts for 64% ofthegeneral population.