Recent Investment Survey Provides Interesting Revelations


New research confirms that investors still do not trust financial markets and regulators do not believe they are able to police them. Commenting on a survey done by State Street Center for Applied Research, Wall Street Journal columnist Jason Zweig observes that individual investors’ behavior contradicts their stated goals, and that institutional investors are plunging into complex alternative investments like private equity the risks of which they do not know how to measure (“Would You Buy a Used Stock From This Market?,” Wall Street Journal).

Responses of 40% of individual investors indicate they believe they need to be more aggressive in the next 10 years in order to be prepared for retirement. Yet, Zweig reports, they have 31% of their assets in cash and intend to keep it that way for the next 10 years. Zweig found this contradictory, but it might not be. Zweig’s article did not specify whether investors thought they needed to be more aggressive in their investments. Perhaps they meant they needed to be more aggressive in saving.

The survey also indicates that the higher one’s net worth, the more likely one is to believe that a financial firm is acting in their (the client’s) best interest. On the theory that high net worth people did not get that way by naively giving their hearts away to brokers, Zweig found this odd and suggestive that the “smart money” may not equate to the most money.

The most ominous finding in the survey may be that two-thirds of individual investors with assets between $250,000 and $1 million consider themselves “very advanced.” According to Warren Buffet, who really is “very advanced,” when it comes to investing, understanding how much you do not know is more important than what you do know. The hubris shown by certain survey respondents may be consistent with other studies that concluded that as people age, they become simultaneously less able to make sound financial decisions, yet more confident in their ability to do so.

Page Perry is an Atlanta-based law firm with over 170 years of collective experience maintaining integrity in the investment markets and protecting investor rights.