Where will wealthy investors be directing their assets in the next few months? Do investors believe they are knowledgeable about investing? What factors influence how they invest?
Fifty four percent of investors feel they are somewhat knowledgeable about investments and 23 percent of investors feel they are very knowledgeable. But how much do investors really know? I would classify myself as fairly knowledgeable. I know about various types of investments, I know that there are sectors, and I know about diversification. But not really. What do I know about the technology sector? Well, Apple seems like a good company. My whole family owns their phones….so technology is good. Health Care is expensive and is in the news all the time….must be a good sector. And Pharmaceuticals? Drugs are expensive. Drug companies seem to make a lot of money so I should probably invest. But is this what other investors think? Do they know any more than I do?
Based on Spectrem’s research with investors from $100,000 of net worth all the way up to $25 million of net worth, it seems that the Technology sector (52%), followed by Health Care (43%) and Pharmaceuticals (37%) are the sectors in which they plan to invest in the next 12 months. Thirty nine percent of investors will buy individuals stocks while 45% will invest in these sectors via mutual funds.
Do the sectors that investors favor vary by wealth level? No. But the level of their confidence in that sector does vary. For example, households with $100,000 to $500,000 of net worth still favor Technology (49%), Health Care (35%) and Pharmaceuticals (30%), just at much lower levels. Not surprisingly, only 31% will purchase stocks and 36% will purchase mutual funds.
One convenient way to view the various investment sectors favored by investors is on a new tool we have at Spectrem called the Investor Profile Tool. I can filter by multiple different investor segments from wealth level, age, gender, and others. So were there any interesting differences between the sectors chosen by various segments?
Yes….and one that is kind of eye opening. When reviewing sector preferences by occupation, I noted that 65% of Senior Corporate Executives favored the Technology sector, and 47% like Healthcare and 42% choose Pharmaceuticals. Those are all higher percentages than typical investors. However, one of the more telling occupations had very different sector preferences. Financial advisors favored Technology at only 43%, Health Care was also at 43% and Pharmaceuticals were at 39%. But the biggest discrepancy from all other investors was that FAs chose the Financial Services sector as number one at 49%. And they may actually be more knowledgeable than the rest of us! Is it time to re-evaluate my investment preferences?
Being able to compare how other investors compare to me can sometimes be discomforting. At the same time, if I were using it with a client, the Investor Profile Tool provides information that can be compared to that client’s own attitudes and portfolio. While each of us has individual needs and preferences, sometimes it’s good to benchmark myself against others.
And maybe we should all reassess the Financials sector?