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UK investors showing caution on risk and income taken from portfolios

10 December 2018

UK investors are more cautious than their European counterparts when it comes to taking income and risk, new research from Schroders has shown.

The minimum level of income UK investors would like to receive from their investments is 8.6%, compared to a higher global average of 10.1%. In line with this more conservative approach, only 15% of UK investors’ portfolios are allocated to high risk investments, compared to the European and global averages of 17% and 19% respectively.

Schroders’ Global Investor Study 2018 also found that 46% of UK investors’ portfolios are in low risk investments compared with 45% for Europeans and 44% globally.

The global investment manager said the conservative trend was likely to continue for the long-term, with more than half (52%) of their portfolios expected to be allocated towards low-risk investments in 10 years’ time, compared with 48% for both European and global investors.

Reflecting the more conservative nature of UK investors, the results of the survey showed that those in the UK were also much more likely to stick with investments following a drop in the stock markets. As many as 42% said they would do nothing in the aftermath of a tumble, significantly higher than the 33% of investors globally and 37% in Europe.

Cash was also found to be more popular among UK investors, with just under a third of portfolios (29%) invested in this asset, compared with the European and global average of 25%. However, over a fifth (22%) of UK investors said they believed their investment portfolios are well diversified, compared with just 15% of investors across Europe and 19% globally.

Overall, investors globally who classified themselves as ‘advanced/ expert’ were shown to be embracing greater levels of risk, with 24% of their portfolios allocated to high-risk assets, with those in Asia proving to be most adventurous.

Rupert Rucker, head of income solutions, Schroders, said the findings were “interesting”, but difficult to know whether the more cautious approach of UK investors was inherent or as a result of broader economic and geopolitic uncertainty caused by events such as Brexit.

He commented: “As a rule, to achieve greater income, you may need to take greater risk and it is interesting to see that investors who classify themselves as advanced or expert are more likely to take on more. However, we think investors will need to remain invested for longer than they are used to.

“It is one way that short-term declines in capital values can be restored and income earned. Either way, investors of all skill-sets might want to consider how much additional risk they are willing to take to achieve what they want.”

Professional Paraplanner