Retail investors need a reality check
A new survey of 9,100 retail investors in 25 countries from investment bank Natixis finds that many are in need of a "reality check."
Between the lines: The survey showed retail investors feel especially confident in their return expectations, with long-term return expectations rising to 10.9% (above inflation) from 9.8% in 2018. However, a contingent of U.S. financial advisors also surveyed by Natixis in 2018 think an annual return of 6.3% is realistic.
What they said:
- While 62% say they know the difference between active and passive investments, just 69% said index funds, which are designed to track markets and replicate the returns of broad indexes, would give them returns "comparable to the market."
- Only 49% are aware that index funds are generally cheaper than actively managed funds.
- 60% say index funds are less risky, and 64% believe index funds will help minimize losses.
More by the numbers:
- 30% of investors correctly recognize the price of bonds decreases when interest rates rise.
- 9% correctly recognize that rising rates mean the income from bonds in the future increases.
- Just 2% of investors correctly understand both — that when interest rates rise, the price of bonds decrease and income received from bonds issued in the future increases.
Of note: In the U.S., Natixis surveyed 750 investors with a minimum of $100,000 of investable assets.