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Majority Of Individual Investors Bullish, Yet Still Playing It Safe: Citi Survey

Individual investors both large and small are notably bullish on the investment climate in the next six months, according to a survey issued by Citi and conducted by Hart Research Associates, as part of Citi's ongoing effort to better understand changes in the needs of the investors and consumers the company serves.

Looking ahead, 62% of large and small investors, those with investable assets over $500,000 and $100,000 respectively, said they were optimistic the investment climate will get better in the next six months, compared to 35% who said it will get worse.

Citi has noticed that despite this optimism, investors are continuing to take a cautious approach overall. By a substantial margin – 57% to 42% – investors with investable assets over $100,000 described their current strategy as being more focused on maintaining wealth rather than trying to build it.

Among investors, 36% indicate they are moving assets and savings to less risky areas. Only 8% of investors indicated a preference for a high return strategy with high risk (rating their investment strategy as an 8 or higher on a scale of 1-10), while 41% rated their strategy as a ‘4’ or lower, indicating their preference for a lower risk and reward.

The survey found that only a slim majority of investors believe that the investment climate is better today than it was a year ago (50% better to 41% worse for all investors; 52% better to 37% worse for large investors).

When all investors were asked to rate whether they thought it was a good time to invest in specific types of investments, no single type reached a 50% threshold deeming it an excellent or good investment at this time. Notably, the embattled real estate sector – defined as real estate, investment properties or REITs – topped the list for both all investors and large investors, with 47% and 50% saying it is an excellent or good time to invest in these opportunities, respectively.

Real estate sector was followed by mutual fund accounts (40% investors, 41% large investors), individual stocks (37% investors, 43% large investors), municipal bonds (30% investors, 29% large investors), savings, CDs, and money market accounts (27% investors, 22% large investors), and corporate bonds (20% investors, 24% large investors).

The changing face of retirement has evolved even further due to the economic downturn and investment losses. More than a quarter of investors said their financial circumstances are worse off now than they were a year ago. Large investors were even more bearish on their current financial situation, with 33% saying they are financially worse off now, compared to 28% of investors overall.

On financial security, only 44% of investors report being confident in their ability to retire in financial security as they had planned, while 36% said they might need to adjust their plans and 16% said they are not confident.

Regarding postponing retirement, 30% of non-retired investors say they are considering postponing retirement due to declines in their investment portfolio.

On staying busy, nearly 7 in 10 non-retired investors (69%) plan to remain active in retirement, either by volunteering (26%) or by working part-time (43%) after officially retiring. This is little different when looking at large investors (42% work part-time and 24% volunteer).

Deborah McWhinney, president of personal banking and wealth management at Citi, said: “Financial markets may be trading far above their levels of one year ago, yet the dramatic impact of the economic downturn on the psyche of the American investor cannot be underestimated. With nearly one-third of investors reporting the stress of investing being higher than in years past, it’s understandable that main street investors are playing it safe because they are uncertain about their own circumstances.”

Jonathan Clements, director of financial education at personal wealth management at Citi, said: “Real estate may have been badly battered in recent years. Still, it has an enduring appeal for Americans, who find it far easier to grasp the value of a house than the value of a stock or a stock fund.

“If 4 in10 non-retired Americans say they plan to work part-time in retirement, and that turns out to be true, it would mark a new vision for what retirement is all about.”