Investors 'unrealistic' about future income

Investors 'unrealistic' about future income

Investors around the world hold unrealistic expectations about the level of income and long-term returns their investments will produce, according to new research by Schroders.

The 2016 Schroders Global Investor Study, which surveyed 20,000 end investors in 28 countries, found the average level of desired income for investors is 9.1 per cent.

But with many countries' interest rates at historic lows, many investors look set to be disappointed, said Schroders in a statement accompanying the study.

The expectations of Millennials (ie, investors aged under 36) are even more unrealistic, said Schroders – with a minimum desired income level of 10.2 per cent per year (compared with 8.4 per cent for investors older than 36).

Investors are also biased towards short-term investing, with respondents expecting to hold their investments for 3.2 years on average.

While this may work for cash and certain types of bonds, it will often prove too short a time period to counteract the volatility associated with equities

"Less than a fifth (18 per cent) of investors said they held investments for at least five years, and around a third (31 per cent) have a very short-term view, investing for less than a year," said Schroders.

"Again, this trend was pronounced in Millennials who invest for over a year and a half less than investors aged 36+ (2.3 Millennials versus 3.9 years investors aged 36+)."

Younger investors are also more likely to invest for immediate financial requirements, the study found.

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