Australian investors optimistic about reaching financial goals

Australian investors are optimistic about reaching their financial goals by an overwhelming majority, according to the Franklin Templeton Global Investor Sentiment Survey conducted earlier this year. The online survey was conducted in twenty-two countries, including Australia, China, Hong Kong, India, Japan, Korea, Malaysia, and Singapore in the Asia Pacific region.

ACHIEVING FINANCIAL GOALS BY STAYING THE COURSE
Australian investors plan to stay the course in 2014. Fewer investors are planning to make changes to their investment strategy this year than last year, and they are significantly less likely than other investors in the Asia Pacific region to make changes to their investment strategy in 2014.

Despite making few additions or changes to their portfolios, Australian investors expect their average annual rate of return to be higher in 2014 (8.4%) than it was in 2013 (8.1%), and even higher still over the next 10 years (11.1%).  An overwhelming 82% of investors are optimistic that they will reach their financial goals.

ASSET CLASS PREFERENCES
Approximately two-thirds of Australian investors believe that the local stock market will continue to do well in 2014, and offer the best equity returns over the next 10 years.

Thirty-four per cent of Australian investors plan to increase their investment, or begin investing, in real estate this year. This is in line with the increased optimism surrounding the property market – 70% of investors (compared to 59% in 2013) believe that property will be one of the top three best performing asset classes this year. That number jumps to 75% when considering how it will perform over the next 10 years.

In terms of fixed income, 50% and 46% of investors respectively think that Australia will offer the best fixed income returns in 2014 and over the next 10 years.  This is despite a little over half of investors surveyed expect interest rates to rise in 2014 and the fact that the domestic asset class has been outside the top 20 best performing bond markets globally in the past two calendar years.

“While investors increasingly recognize that it is important to keep an allocation to equities in their portfolio to help achieve their long-term financial goals, there is still some way to go when it comes to educating investors about their fixed income investments,” said Jim McKay, Head of Advisory Services at Franklin Templeton Investments.

“With interest rates in key developed markets at historically low levels, fixed income investors seeking higher yields should be considering a broader range of countries outside of the traditional G3. Many of these offer better economic growth prospects, have increasingly sound government budgets, as well as the potential for higher returns and currency appreciation. For example, select bond markets in Asia, peripheral Europe and Latin America offer compelling value and yet are not on the radar of many local investors,” said Mr. McKay.

TOP CONCERNS ON INVESTING IN GLOBAL DEVELOPED MARKETS
While half of Australian investors do not plan significant changes to their equity and bond investments in 2014, three times as many plan to invest more in both domestic and global equities as in bonds. However, 35% highlight the large fiscal debt in the US as a major concern about investing in the US, while 32% still rank the Eurozone debt crisis as their top concern about investing in Europe.

“Although sentiment amongst investors towards Europe remains cautious and ongoing market volatility might be a cause for concern, we believe markets around the globe will gain momentum and investors can capture a number of opportunities in both equity and bond markets in 2014 by looking beyond their home countries,” Mr. McKay added.

Almost half (46%) of those surveyed say they are likely to seek professional financial advice this year and this may represent a unique opportunity for advisers according to Mr. McKay. 

“Navigating global markets can be complex and investors can benefit from working with a financial adviser to appropriately position their portfolios to meet their investment goals,” said Mr. McKay. “These survey results underscore the importance of investor education, especially among investors who have not experienced as many market cycles.”

More detailed findings from the survey can be found at Investor Sentiment Survey 2014.