An Investor Watch report from UBS Wealth Management Americas (WMA) found that 79% of wealth investors believe that the economy has recovered; based on investments returning to pre-crisis levels, rising home values, and improvements in economic indicators.
Nearly half (47%) wish they had invested more during the rebound.
Emotional scars
However, many investors carry emotional scars from 2008 that have prevented them from fully participating in the recovery.
The majority of wealthy investors (89%) have maintained or increased their cash holdings since the crisis, with only 18% willing to assume more risk for greater returns.
Recent volatility and global events have exacerbated investors’ feelings of uncertainty and made them even less likely to change their behaviour.
Four out of 10 (42%) say the volatility has rekindled memories of the financial crisis, and almost a quarter of investors believe it signals the start of a longer term market decline.
“Even before recent volatility tested their resolve, investors struggled to weigh the economic recovery and its positive effects on their finances against the lingering emotional fallout from 2008 and 2009,” said Paula Polito, client strategy officer, UBS Wealth Management Americas.
“The financial crisis appears to have cast a long shadow on investors.”
The report found that investors with financial plans in place have far greater confidence during times of market volatility than investors without a plan.
Almost all (98%) agree that their plans keep them on track, and 97% agree that their plans help them stay focused on long-term goals, not daily market fluctuations.
The cash conflict
Wealthy investors have been holding significant cash reserves (20% on average) for the past several years, many doing so as a perceived safety precaution. And, while they continue to hold onto their funds, more than half believe having “too much” cash is unwise.
However, that does not mean all wealthy investors are putting their cash to work—quite the opposite. Nearly nine out of 10 (89%) have maintained or increased their cash holdings since the financial crisis, and approximately 40% believe investors can never hold “too much” cash.
Seven years after the financial crisis and the bull market that followed, only 33% see market declines as opportunities to invest.
Millennial regrets
Investor Watch found that as a group, Millennials are more likely to regret selling investments during market declines and not investing more during recovery periods.
“Millennials are arguably more conflicted than other generations when it comes to how they view investing,” said Sameer Aurora, head of client strategy for UBS Wealth Management Americas.
“Almost half say they would take on more risk now, but they’re holding twice as much cash as Baby Boomers. Also, Millennials are unhappiest with how their portfolios are positioned, but they are the least likely to do anything about it.”
Different lessons learned
Additionally, given their relative youth during the financial crisis, Millennials learned different lessons from Gen X, Baby Boomer and members of the Swing/WWII Generation.
More than half of wealthy Swing/WWII investors (57%) took away that sticking with a “buy and hold” investing strategy is important—but only one in three Millennials (33%) feels the same way.
In contrast, while 27% of Millennials say market timing is the most valuable lesson they learned, only 10% of Baby Boomers agree.
Investor Watch found that Millennials express a willingness to take on more risk since the financial crisis (43%)—double that of Gen X (21%), more than three times that of Baby Boomers (12%) and almost five times more than Swing/WWII (9%).
Yet, when asked about cash holdings, Millennials, on average, hold the most cash.
