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How Do You Define Investment Success?

glass globe financeThe Natixis 2014 Global Survey of Individual Investors offered some interesting insight into the mindsets of investors in Asia, Europe, Latin America, the Middle East, the United Kingdom, and the United States who participated in the study. There was some good news and some bad news. First, the bad news:

“Investors around the world say they’ll need average returns of 9 percent a year, above inflation, to meet their financial goals, a figure well above the average annual return of the markets over most rolling periods during the past century.”

This is a remarkable expectation. Second, it’s not achievable without taking considerable risk and the vast majority of investors surveyed said, if they had to choose, they would opt for safety of principal over performance potential. In other words, they wouldn’t take the risk necessary to earn such a high potential return. It’s important to set realistic expectations for portfolio returns; expectations that reflect risk tolerance and long-term financial goals.

The good news, at least for U.S. investors, was found when participants were asked to describe the way they defined investment success. Answers overlapped in many regions but only the highest percentage of any region is shown for each statement below:

  • Outperforming my friends/family/colleagues: 9 percent – Middle East
  • Achieving my short-term investment goals: 21 percent – Latin America
  • Outperforming the market: 22 percent – Asia
  • Being on track to achieving my long-term investment goals: 37 percent – United States
  • Not losing principal: 30 percent – Europe
  • Only making gains and no losses: 30 percent – Europe

U.S. investors were more likely to have financial plans than investors in other regions. However, slightly more than one-half of Americans said they had clear financial goals.

* This article first appeared in our weekly email newsletter. To subscribe to the Ruggie Wealth Management Weekly Commentary email sanemone@ruggiewealth.com or call us at  352.343.2700

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