Investors are unlikely to meet their portfolio targets without the aid of a plan that takes into account attitudes to personal risk and performance goals, says a new study.
In fact, the greatest risk investors face is their own lack of financial planning, according to Natixis Global Asset Management.
The firm has carried out a worldwide survey asking wealthy investors about how they structure their portfolios.
The results showed those in the Gulf more willing to take investment risks than investors elsewhere, while nearly three-quarters of those in Europe remained cautious with their money.
Overall, the study showed investors worldwide did not have a structure to their portfolios and relied more on luck than skill in meeting their investment goals.
“The overwhelming result was few have a long term plan,” said the report. “Most want high returns that are unrealistic and do not have the skills or knowledge to build a portfolio that is right for them and which delivers the results they want.”
The study also found that seven out of 10 investors in the United Arab Emirates, Qatar and Kuwait are more willing to take on risk than investors anywhere else in the world, where the An average 50% had the confidence to accept higher risk strategies.
“These investors have aggressive targets that they are probably never going to achieve,” said the firm’s chief executive, John Hailer.
“They need to change the way they think to reflect changes in the markets since the credit crisis. They may feel confident that their portfolios are doing well, but without a long term plan, they will fall short of their expectations as and when the markets change again.”
The research revealed that investors worldwide had an average target return of 9% above inflation.
“Unfortunately this is too high and unrealistic when looking back on how markets have performed over the years. Besides this, because many investors do not want to take risks, they are unlikely to attract these high returns with more conservative portfolios,” said the report.
The firm brands investors as confused and conflicted by wanting high returns but by being unwilling to take the necessary risks to secure them.
The study shows 78% would err on the side of caution if forced to choose between risk and safety over portfolio performance.
Also, 58% had no clear financial goals, more than two-thirds had no financial plan and 80% had no system to follow when making financial decisions.
