Stocktake: Survey finds ‘absurd’ investor expectations

Study across 24 countries shows huge gap between client and adviser expectations

The lowest gap was reported in Germany, but even there investor expectations were still more than double what advisers consider to be realistic. File photograph: iStock/Getty

The lowest gap was reported in Germany, but even there investor expectations were still more than double what advisers consider to be realistic. File photograph: iStock/Getty

 

Ordinary investors are optimistic about the prospects for stocks – too optimistic.

A study of 8,550 investors across 24 countries by Natixis Investment Managers shows a huge gap between the expectations of clients and advisers. On average, global investors expect stocks to beat inflation by 14.5 per cent over the long term – almost three times greater than the expectations of financial professionals, who predict inflation-adjusted returns of 5.3 per cent.

In the United States, where Natixis polled 750 investors with at least $100,000 in investable assets, expectations are especially high; investors expect long-term real returns of 17.5 per cent. That is, says Ritholtz Wealth Management’s Ben Carlson, “nothing short of absurd”

However, it’s notable that the expectations gap is a truly global phenomenon. The lowest gap was reported in Germany, but even here investor expectations were still more than double what advisers consider to be realistic (10.7 per cent versus 4.9 per cent).

Natixis suggests investors are suffering from recency bias; having enjoyed excellent returns under difficult circumstances, they assume even better returns under better conditions.

That’s a dangerous assumption. “If these survey numbers are to be believed,” says Carlson, “investors are about to be very disappointed.”

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.