Knowledge of Income Investments Remains Spotty
Growing appreciation of the value of secure income in retirement is generating interest in a broader range of asset classes that seek income, given that interest rates available from traditional fixed income investment remain at historic lows. Yet, the BlackRock survey shows that many investors still have a ways to go in understanding the full scope of available income generators.
Almost two thirds – 63 percent – of investors say they are familiar with income generating investments. However, majorities of investors, both nonretired and retired, did not correctly identify several such investments as income generating, including municipal bonds (34 percent identified these as “income generating”), government bonds (29 percent), money market funds (25 percent), and corporate bonds (25 percent).
Investors were able to most often identify dividend paying stocks as “income generating” (61 percent). Over the next six months, about one quarter of investors (24 percent) say that they will increase their portfolio allocation to dividend producing equities, the investment category most likely to attract new money.“Particularly for those near or in retirement, increased longevity gives investors the ability to ride out market cycles, use a broader range of investments and keep their money working hard for them over time, said Mr. Porcelli. “While it’s a good sign that investors are looking at dividend paying investments, those seeking income would benefit from looking across sectors and geographies worldwide.” Though their knowledge has gaps, investors generally do appreciate that income generation offers benefits at every life stage: 56 percent disagree that these investments are only for retirees and 60 percent agree that they “make me feel safer in the current investing environment.” “The old ways of investing no longer work – and our poll tells us that investors still need plenty of fundamental support and direction in adjusting to a new world,” said Mr. Porcelli. “The good news is that help is available, and new insights and tools are emerging all the time that offer tangible advantage for investors seeking income, inflation-combating growth, and solid investment return in a low-yield, slow-growth world.”
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