Investors across the world are optimistically expecting average annual total returns in excess of 10% over the next five years, despite the uncertainty caused by covid-19, the Schroders Global Investor Study 2020 has found.
Average annual return expectations over the next five years have edged up to 10.9% for investors globally, with investors in the Americas expecting performance of 13.2%, according to the study which has encompassed more than 23,000 investors from 32 locations globally.
In contrast, European investors are expecting lower returns of 9.4% on average over the next five years.
Globally the most optimistic investors were in the USA (15.4%), Indonesia (14.8%) and Argentina (14.6%). At the other end of the scale investors in Japan (6%), Switzerland (7%) and Italy (7.9%) were the least optimistic..
Investors have however lowered their income expectations, with 8.8% expected to be achieved over the coming 12 months, compared with 10.3% a year ago, the study found.
Perhaps reflecting this optimistic theme, only 6% of investors expected the negative economic impact caused by covid-19 to reverberate for more than four years. In fact, only 21% expect the ramifications to go on beyond two years.
The impact of the global pandemic nonetheless caused many investors to make substantial changes to their investment portfolios, with 28% stating they moved significant proportions to lower-risk investments.
A further 25% said they moved some of their portfolio to lower risk investments.
Interestingly, 20% confirmed they took the opportunity to move some of their portfolio to high-risk investments, while 19% said they opted to do nothing and stuck with their investments as they were.
Furthermore, it was older generations who appeared to remain calm amid the market volatility caused by covid-19. Over three-quarters (75%) of those aged 71 or older either moved their portfolio but maintained the same level of risk or opted not to make any changes. This compared to just 23% of millennials.
Rupert Rucker, head of income solutions, Schroders, said: "There is no getting away from the fact the impact of covid-19 on economies, markets and beyond is likely to be substantial over the coming years.
"The pandemic is seen by many as the ultimate black swan event but now more than ever we need to stick to our investment principles. It is easier said than done but we must look through the noise and focus on maintaining well balanced investments over the long term.
:This is even more important when interest rates are so low around the world. And that is our focus at Schroders, to support investors and clients to navigate this ongoing uncertainty to ultimately secure their future prosperity."
The covid-19 crisis has also triggered more focus on savings, with almost half (49%) of investors stating they now think about their investments at least once a week, compared with 35% before the pandemic.
Over two-thirds (66%) of people who describe themselves as having an ‘advanced' or ‘expert' level of investment knowledge, state that their level of worry if their investments drop for a short period of time is either low or non-existent, highlighting their greater experience navigating periods of uncertainty.
At the same time, 48% of advanced investors would look to source their financial advice from an independent financial adviser compared with 30% for beginners. Furthermore, 36% of savers who class themselves as beginners are likely to seek financial advice from friends or family, compared with 27% of advanced investors.
Interestingly, the majority of investors (68%) stated that they themselves should be responsible for ensuring their knowledge of financial matters is sufficient, ahead of financial providers, advisers and schools.
At the same time, 51% of investors said schools should have responsibility for ensuring people's knowledge on personal financial matters. In reality just 40% of investors said they acquired their financial knowledge from school. The same advice gap existed for governments and regulators.
Furthermore, a striking 25% of investors said the number one priority for their disposable income spending was to invest it in their pension, significantly up on 10% three years ago, emphasising that awareness regarding retirement provision has been on the up.
To find out more about Schroders Global Investor Study 2020 and read the full report, please click here.