March 26, 2013
/PRNewswire/ -- According to a new survey of 500 affluent U.S. investors by
, almost three-quarters (74%) said "now is a good time to be invested in equities" with 52% adding that they are more inclined to use equities to generate investment income.
Combining this optimism with the fact that fully 66% reported that income investing was a "top priority," 40% of respondents reported they were invested in equity income mutual funds, and 25% of those who use income generating investments said they planned to increase their allocation to equity income funds over the next 12 months.
Just 9% said they intend to decrease their equity exposure over the next 12 months; and even less (5%) plan to reduce their fixed income positions. Interestingly, 60% also believed it was a good time to be invested in real estate for income, and 15% intended to increase their allocation to this asset class.
Income Expectation Disconnect Creates Income Divide
Though they place an increasingly higher priority on income investing, almost half (48%) said they were generating less income than they had hoped from their portfolios. Perhaps this is less a function of the market and more a result of their expectations:
On average U.S. investors who use income generating products said their desired return was 8.5% and they are receiving on average 5.9%: a difference of 2.6%.
"Income-oriented investors need to consider strategies that are focused on outcomes. Start by establishing a realistic rate of return based on long-term goals or the need to satisfy liabilities with income," said
, managing director and head of global marketing at Legg Mason Global Asset Management. "Our survey is telling us that income-oriented investors in the U.S. are coming up well short of their goals – almost 3% short – and that number could be significant especially for retired investors who need to live on the income their portfolios generate."
Mr. Schiffman continued: "Investors have to recognize the trade-off: if they want higher income, they need to increase their exposure to risk in both fixed income and equities; if they prefer a low-risk approach to investing, they may have to reduce their income goals and expectations."