Investors Choose Guarantees Over Growth

Market volatility has made investors skittish, according to the 2015 Market Perceptions Study from Allianz Life Insurance Company of North America. Eighty-one percent would prefer a product with a guaranteed 4% return to one with an 8% return that is vulnerable to market downturns. This is up from 78% who expressed this preference in 2014, when Allianz Life first started this study.

Asked if they would invest if they had extra cash, 37% said “fear of market uncertainty” would prevent them from doing so. While this is down slightly from 40% in 2014, it is still the major impediment keeping people from investing, followed by “lack of reliable financial guidance” (23%) and “today’s low interest rates” (21%).

Just over one-third, 34%, say they believe the market is “too volatile and too risky” for their investment style. Only 18% say they think “the stock market is a necessary place to invest money for the long term, even though it can be nerve-wracking at times.” Another 25% say they believe that “with a balanced approach, the stock market is a smart place to invest a portion of one’s assets,” and 23% said they are “comfortable with the stock market for the long term.”

Nearly two-thirds, 62%, expect the market will continue to be uncertain, similar to the 64% who expressed this sentiment in 2014. Not surprisingly, 79% think it is important to have a guaranteed source of income in retirement, in line with the 80% who said so in 2014. Only 26% are comfortable with current market conditions and are ready to invest now, down from 28% in 2014.

“Whether it’s a hangover from the market crash of 2008 or the various bumps in the road we’ve experienced along the way, the majority of Americans are simply not comfortable with any type of market volatility and are looking for ways to mitigate exposure while still building up their retirement nest eggs,” says Katie Libbe, vice president of consumer insights for Allianz Life. “Persistent desire for guarantees in this market environment tells a compelling story that, regardless of how the market actually performs, Americans want some type of protection against losses in their retirement savings strategy.”

Asked what they would do if they had extra cash to purchase a financial product, 36% said they would seek out a product that offers a balance of potential growth and some level of protection. Twenty-two percent said they would put extra cash into a product with modest growth potential, 21% said they would put the cash into a savings account earning little or no interest, 13% said they would wait for the market to correct before investing the money, and only 9% said they would seek out a product with high growth potential and no protection from loss.

Ipsos conducted the study for Allianz Life among 797 adults on October 21 and 22.