Market Volatility Fear Drives Investment Decisions

By Cyril Tuohy

InsuranceNewsNet

A survey by Allianz Life finds that most Americans say they prefer financial products that limit potential loss over products that offer unlimited potential growth but may also result in unlimited loss.

The Allianz Life Invest Market Perceptions Study of Americans age 25 or older with more than $200,000 in investable assets also found that many Americans have grown tired of volatility.

“It’s clear that, for many investors, the trauma caused by the 2008 financial crisis is still being felt and is dampening their willingness to take on risk with their savings,” said Allianz Life Financial Services president Robert DeChellis.

Many of those surveyed saw their 401(k) and other investments collapse in the financial crisis, though much of the lost wealth has returned with the rebound in the housing and stock markets.

“Although we’ve seen strong equity markets this year, volatility remains a constant concern,” DeChellis said in a statement.

More than eight in 10 (82 percent) Gen X/Gen Y respondents ages 25 to 44 said they believe market volatility will continue, while 80 percent of baby boomers ages 45 to 68 said so. Three in four investors 69 years old or older said markets would remain volatile.

But by staying out of the market, investors are missing a huge opportunity. Trillions of dollars’ worth of assets sits in cash earning puny returns while the S&P 500 posted a 4.7 percent gain in the third quarter. The S&P 500 is up 18.85 percent since the beginning of the year.

When asked which financial product is more attractive, one with a guaranteed 4 percent return that will not lose value or one with an 8 percent return that may lose value, 70 percent of the respondents chose the 4 percent product with guarantees.

Those responses suggest that demand remains strong for the guaranteed income products offered by annuities.

Consumers also said they value a balanced approach for tapping idle cash, the survey found. That’s another sign that investors are averse to volatility. When asked what they would do with $20,000, 63 percent said they would invest in a product “with a balance of protection from loss and growth potential,” the survey found.

The research organization Ipsos conducted The Allianz Life 2013 Investor Market Perceptions Study from July 24 to 29. Ipsos surveyed 1,012 respondents age 25 and over with investable assets of $200,000.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].