Concerns over the global economy have dampened enthusiasm among Millionaire investors for foreign investment, a new Spectrem Group wealth level study finds. Six-in-ten respondents with a net worth between $1 million and $4.9 million (not including primary residence) indicate they have no interest in investing outside the United States.
Of those indicating an interest in international investment, the highest percentage of Millionaires (19 percent) said they would be most willing to invest in Europe. China is on the radar of 15 percent of investors, while 12 percent said they are most likely to invest in Canada.
Less than 10 percent said they are most likely to invest in:
- United Kingdom (9 percent)
- Australia, Brazil, India, Japan (8 percent each)
- Korea (6 percent)
A mere 1 percent indicated an inclination to invest in Russia.
Among the primary reasons Americans invest internationally are diversification as well as growth potential in emerging markets, according to the Securities and Exchange Commission. There is risk in any type of investment, but international investing poses unique risk challenges to the investor, including changes in currency exchange rates, volatility in foreign markets and political, economic and social events. Last August, for example, Affluent investors indicated in a Millionaire Corner survey that international developments were the news stories most impacting their economic outlook. At the time, there was renewed Russian aggression against Ukraine, attacks and counterattacks by Hamas and Israel shattering cease fire agreements and ISIS’ incursions into Iraq.
Wealth is a factor in willingness to invest internationally. Roughly three-fourths of non-Millionaires with a net worth of at least $100,000 expressed no interest in investing outside of the U.S., compared with less than half (44 percent) of Ultra High Net Worth households with a net worth of at least $5 million.
Overall interest in investing in Europe has grown seven percentage points in the past three years, according to Spectrem Group research. Meanwhile, intention to invest in China and Brazil has dropped six percentage points and two percentage points, respectively.
Across age groups, Millennial Millionaire respondents under the age of 35 express the most interest in investing in Australia (14 percent), Japan (18 percent) and China (28 percent). The highest percentage of those looking to invest in Brazil (18 percent) and Europe (27 percent) are Gen Xers ages 36-44.
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