A greater focus on saving and financial wellbeing are set to be among the lasting legacies of the pandemic even as investor confidence soars, the last Schroders Global Investor Study has found.
The flagship study, which surveyed over 23,000 people from 32 locations globally, found that almost half of investors (46%) will now save more once restrictions have been lifted. Although this sentiment is strongest among investors aged 18-37, this more measured approach also flows through to investors’ retirement outlooks, with 58% of retirees globally now more conservative in terms of spending their savings, while 67% of those yet to retire now want to save more towards their retirement.
Despite the challenges brought by the pandemic, Schroders points out that investor confidence has soared to its highest level since the study began in 2016, with average annual return expectations over the next five years expected to be 11.3%, an increase on 10.9% predicted a year ago.
A focus on financial wellbeing
The study also shows that almost three-quarters (74%) of investors globally have spent more time thinking about their financial wellbeing since the pandemic, with self-purported ‘expert/advanced’ investors the most engaged. Geographically, this change was most pronounced in Asia with investors in Thailand, India and Indonesia sharing this view strongly.
This means that investors globally are now more likely to check their investments at least once a month (82%), compared with 77% of investors in 2019. Besides, over the course of 2020, 32% of investors globally saved more than they had planned to. Unsurprisingly, this was driven by decreased spending on non-essentials, such as eating out, travel and leisure.
In this sense, over a third (38%) of investors in Europe had saved more than planned, followed by those in Asia (28%) and the Americas (27%). Of those who were unable to save as much as planned, 45% globally cited reduced salaries/work income as the key reason, “which reflects the great challenges caused by the pandemic”, says Schroders.
Cause for optimism
The analysis reveals that investors in the USA, Netherlands and the UK are set to be the most likely to increase spending once their respective lockdowns have lifted. At the other end of the scale, the most cautious investors were based in Japan, Sweden and Hong Kong.
Furthermore, investment confidence is being driven by investors who class themselves to be ‘expert/advanced’ with return expectations of 12.8%, compared with 8.9% for self-purported ‘beginner/rudimentary’ investors. In this sense, those in the Americas were the most bullish, expecting annual total returns of 12.5% over the next five years, followed by those in Asia (12.3%) and slightly more cautious investors in Europe (9.7%).
“The pandemic has heightened our sense of uncertainty and challenged our ability to process risk, making many of us feel more anxious and out of control. These sentiments can clearly be seen in the results of our survey, with investors increasingly focused on saving, monitoring retirement contributions and checking their investments more frequently”, commented Stuart Podmore, a behavioural investment insights specialist at Schroders.
In his view, despite the “huge challenges” we have encountered, it is encouraging to see that the pandemic has acted as a catalyst for promoting a stronger focus globally on generic financial planning and wellbeing. “Although this is a global study, we all share common wants and needs, and financial security is a key focus for all of us. At the same time, we need to exert caution over the investment returns we expect over the coming five years, as the outlook shared by many investors – and in particular those who believe themselves to be experts – is exceptionally optimistic”, he added.
Podmore believes that the past 18 months have taught us that “the future remains difficult to predict” and a “measured, consistent and patient” approach to investing, focused on long term objectives and probable outcomes, is likely to stand investors “in better stead”.
For Alba Menéndez
For Meritxell Sedo
For Magdalena Martínez