Investors Shifting to Security


The stock market has often been known to have such huge up and down days that it would rival any rollercoaster.  This volatility can present an opportunity for investors, or it can cause investors to slightly shift their asset allocation or investment portfolio approach. Investors often consider themselves to be either aggressive, conservative, or moderate investors as it relates to their risk tolerance. Additionally, investors typically identify if their portfolio objectives as growth, income, or security. The past few years have seen a shift in the risk tolerance of investors, their portfolio objectives, and their desire to be involved with their investments.

In 2018 a quarter of investors considered themselves to have an aggressive or very aggressive risk tolerance. Fifty-five percent considered themselves to have a moderate risk tolerance, while 19 percent were conservative. Fast forward to now and there is a slight shift. Only 23 percent have an aggressive or very aggressive risk tolerance and 22 percent of investors consider themselves to be conservative in terms of risk tolerance. While this movement is slight, it is the first change in these percentages in quite some time.

Risk tolerance is something that is often discussed when developing a portfolio or starting a relationship with an advisor, as it is something that should be considered throughout any financial transaction. A conservative investor may not only want their investments to be cautious, but they may also want to take a more conservative approach to their estate planning and life insurance. Risk tolerance also feeds into investor’s portfolio objectives.

When investors were asked in 2018 to identify their primary portfolio objective 43 percent of investors indicated growth, while 24 percent had the objective of income and 29 percent the objective of security. When asked the same question recently investors had shifted, with only 36 percent seeking growth, while 37 percent had the objective of security. The same percentage of investors had the portfolio objective of income. This illustrates a shift from growth to security among investors.
Another fundamental shift that has occurred in the past few years is that investors are less likely to want to be involved in the day-to-day management of their investments, and a decline in the percentage of investors that actually enjoy investing. Fifty-eight percent of investors liked being actively involved in the day-to-day management of their investments in 2018, however that percentage dropped to only 43 percent who feel that way currently. The percentage of investors who enjoy investing and don’t want to give it up was 53 percent in 2018, while that percentage is currently only 43 percent.

These shifts to more security and less involvement in investments means that investors may be relying more on financial advisors than before. The same percentage of investors, 58 percent, used an advisor in 2018, but the percentage of investors who rely upon an advisor to make most or all of their financial decisions has increased from 17 percent in 2018, to 23 percent now. Only time will tell if this increased reliance will continue in this direction or if it will stabilize.