Investors’ Appetite for Risk is on the Decline


American investors’ confidence and risk tolerance remain low despite the stock market rebound. The 2008 global financial crisis, the dot com bubble burst before that, and a volatile stock market dominated by hedge funds and computerized trading appears to have permanently reset the risk parameters of most older investors. According to a recent study (the AIG Retirement Re-Set Study), the vast majority (80%) of those age 55 and older are more cautious investors seeking lower but safer, more predictable returns.

Sixty-seven percent (67%) of the survey respondents reportedly preferred investments that are guaranteed not to lose value more than investments with lesser loss protection and guaranteed income for life (62%), guaranteed rising income (58%), products that provide a death or disability benefit (50%), and investments with higher risk and higher potential returns (19%) (“Pre-retirees looking for return of principal ? not return on principal”).

Over 50% of the respondents said they feel less financially secure than they did a year ago. Many are willing to work longer (if they can) or accept a less expensive retirement lifestyle in order to be in a better position to accept lower but safer returns.

Page Perry is an Atlanta-based law firm with over 150 years of collective experience maintaining integrity in the investment markets and protecting investor rights.