Wealthy Investors Are Bullish on the Economy but Their Portfolios Aren't


America's wealthiest investors say they're bullish on the economy over the next six months, but they remain very cautious in their current investing approach, opting for wealth preservation tactics over wealth building strategies.

Results of a Citi Personal Wealth Management survey released Thursday show 62% of large and small investors believe the investment climate will improve over the next six months, while 35% think it will worsen. However, that optimism is countered by 57% of respondents describing their current investment strategy as focused more on maintaining wealth rather than trying to build it.

Not Feeling Better Off

For the survey, Citi classified small investors as individuals with investable assets of more than $100,000 and large investors as those with assets above $500,000. Jonathan Clements, director of financial education at Citi Personal Wealth Management says although these investors are among the most well-off Americans, who still have sizable assets after the financial crisis, "they don't seem to be willing to take a whole lot of risk with their investment portfolio."

The survey finds that even after the S&P 500 has rebounded 80% off its lows in March, 2009, 36% of investors are still moving assets and savings to less risky areas. Only 8% of respondents say they prefer a high return investment strategy with high risk.

More surprisingly, when asked whether they're financially better off than a year ago, only 20% of these investors with substantial assets say they are. This hints at why they believe things are getting better economically but don't act on it financially.

"What we're looking at is not reality, but reality as people perceive it," explains Clements. "They're still shell shocked by what happened to the economy in 2008 and early 2009, and they don't feel good about their finances even though their finances are actually better."

Keen on Real Estate

Clements says many investors are reluctant to take risks with their portfolio because they're still concentrating on paying down debt. He adds that while they may believe the economy will improve in the future, many are still unsure about their individual job situations, which is keeping their risk appetite suppressed.

"If the economy continues to recover and people start to feel more secure about their jobs, it wouldn't be surprising to see them take more risk with their portfolios," he notes. "At that point, we may start to see people putting more money into stocks and stock mutual funds."

Surprisingly, the survey's respondents are most interested in investing in real estate, which has been battered over the last few years. When asked which investment they think it's a good time to get into, 47% selected real estate. Clements says investors have good instincts because property is the only investment category that hasn't seen large advances lately, so it should have room to grow if the economy improves.

If the economy does make further gains, hopefully investors' attitudes will follow.