A survey of global investment trends shows retirement savers could be suffering from cognitive dissonance.
Almost nine in 10 U.S. investors expect strong returns from their portfolios in 2015, with a majority expecting a 10 percent return, according to Schroders Global Investment Trends Survey.
Yet those same investors say they expect to allocate as much as 41 percent of their portfolios to low-yielding investments, such as cash.
That disconnect translates to a need for better guidance from advisors, says Carter Sims, head of U.S. intermediary distribution for Schroders, whose North American unit has more than $475 billion in assets under management.
“Given the disconnect between the double-digit returns investors are seeking and their risk appetites, we feel that seeking professional financial advice is of paramount importance in order to navigate the choppy waters ahead and help investors better position themselves for achieving their various goals,” Sims said.
High expectations for this year were based on the average return of 9 percent respondents reported from last year, which the survey said was consistent with market returns globally.
But this year, investors said, on average, they’re only allocating about 22 percent of their portfolios to riskier assets like equities, which have posted record returns since the financial crisis. Fixed-income is expected to account for about 37 percent of assets this year.
Only 22 percent of respondents in the United States said they would make adjustments to their portfolios based on the direction of professional financial advice.
“Expecting double digit returns within the next 12 months, while only placing less than a quarter (21 percent) of their investment portfolio in higher risk assets suggests that investors are not taking a realistic approach to investing,” added Massimo Tosato, executive vice chairman of Schroders.
“It's imperative that investors shape their portfolios to balance the risk profile with the returns they are seeking, and in most cases, we believe that will require a level of professional advice,” he said.
Perhaps the most promising data from the survey: 88 percent said they plan to maintain their savings and investment rates this year; 56 percent said they plan to increase what they invest.
Overall, investors plan an average of a 12 percent increase in savings to their portfolios, with 35 percent of investors reporting at least a 10-year investment horizon.
Most Americans are focusing in income-generating assets, like dividend paying equities.
Schroders also surveyed 220 advisors in the United States, 65 percent of whom expect market volatility to increase demand for their services to increase in 2015.