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Older, Experienced Investors Upbeat in June

Older, Experienced Investors Upbeat in June

by Raksha Arora

Various economic confidence measures indicated an uplift in the mood of the American public and investors alike during June. The Conference Board's Consumer Confidence Index reached a two-year high in June, while the UBS/Â鶹´«Ã½AV Index of Investor Optimism hit a four-month peak of 95 in the same month.

Optimism in personal investment situations led the charge in June, rather than optimism about the country's overall economic situation. However, more Americans were optimistic about the overall economic situation in June than had been so since February. An array of factors -- from the continued hiring increases by firms to higher corporate profit reports -- may be influencing this renewed sense of optimism. In the past, younger and less experienced investors have tended to be highly responsive to shifting market conditions. Was that the case last month? 

Older, More Experienced, and a Tad More Optimistic

According to the June UBS/Â鶹´«Ã½AV Investor Optimism survey*, 61% of investors overall are optimistic about achieving their investment targets over the next 12 months, compared with 55% who felt that way in May.

But at least according to the June numbers, older investors and those with more experience investing in the markets appear to be slightly more bullish than younger investors and those with less experience. Two-thirds (66%) of investors aged 50 and older are optimistic about achieving their one-year investment targets, as are two-thirds (67%) of investors with more than 20 years of investing experience. On the other hand, 56% of investors under age 50 and 59% of those with 20 years or less of investing experience express this same level of confidence.

When the question is framed differently to reflect the longer-term investment horizon, however, there is no discernable difference: About 7 in 10 investors -- regardless of age or investing experience -- are optimistic that they will achieve their investment goals over the next five years. 

Just as they are optimistic about their own investment portfolios, older investors are currently slightly more bullish than their junior counterparts about the stock market in general, with 57% saying they are "very" or "somewhat" optimistic about the performance of the stock market over the next 12 months. Among their younger counterparts, 50% express some degree of optimism.

Do Expected Returns Improve With Age?

Despite their more positive assessments of their investment portfolios, older and more experienced investors do not expect substantially greater returns than those who are younger and less experienced. (It's important to note that this analysis compares very broad categories of age and experience level; it may be that investors with minimal experience -- say, five years or less -- respond differently, but the low number of such investors in the current study precludes such an analysis.)

Â鶹´«Ã½AV asked respondents to estimate their expected rate of return on their portfolios in the next year. Thirty percent of investors 50 and older expected returns of 10% or more, compared with 37% of investors under 50 -- a slight difference. The percentages of investors with more than 20 years of experience and 20 years of experience or less who expect at least a 10% return were virtually equal -- 34% and 32%, respectively.

Bottom Line

Prior analysis of UBS/Â鶹´«Ã½AV investor data has indicated that the youngest investors tend to overreact, either positively or negatively, to current economic events when reporting their optimism about investment prospects. But the numbers from June indicate that older, more seasoned investors are currently predicting a brighter outlook for the equity markets. And if the older investors are indeed wiser, the stock market may be in for better days.

*Results for the total dataset are based on telephone interviews with 802 investors, aged 18 and older, conducted June 1-16, 2004. For results based on the total sample of investors, one can say with 95% confidence that the margin of sampling error is ±4 percentage points.


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