South African investors have a fairly positive outlook on expected rates of return for this year (12.4%) and over the next 10 years (16.9%) and are highly optimistic about reaching their financial goals (87%), according to the 2014 Franklin Templeton Global Investor Sentiment Survey.
Real estate, stocks and precious metals topped the list of asset classes that investors expect to perform best in the year ahead. Over half (55%) of investors believe stocks will be among the top-performing asset classes this year, up from 50% in 2013. Precious metals fell out of favour with some investors this year, dropping from 53% to 39%, while investors’ outlook for real estate stayed fairly consistent year-over-year. Investors in South Africa have a positive stock market outlook for 2014, with about two-thirds of investors expecting the market to be up in 2014.
The survey also shows that South African investors think real estate will perform best in 2014, followed by precious metals and stocks. Non-metal commodities are expected to perform well over the next 10 years. South African investors are also looking to increase exposure in emerging market equities, real estate as well as precious metals in their portfolio.
Beyond borders
Globally, two-thirds of investors believe the best equity and fixed income opportunities will be found outside their home countries this year, echoing findings from Franklin Templeton’s 2013 survey.
Investors in South Africa and Italy showed the greatest interest in investing abroad, with 85% believing the best opportunities exist beyond their borders. At the other end of the spectrum, investors in the US were the least keen on investing abroad this year, with over 60% believing the best investment opportunities will be found within the US.
Conservatism
Five years after the onset of the 2008-2009 market downturn, investors continue to show signs of risk aversion, despite an optimistic outlook for the future.
Globally, stocks, the US dollar and alternatives topped investors’ lists of the asset classes they believe will carry the most risk this year. The riskiest asset class expectations for South African investors this year include government securities, the US Dollar, stocks and precious metals.
Globally, 52% of investors are planning to become more conservative with their strategies this year, taking on less risk with the potential of earning lower returns. While some South African investors are being cautious, with 45% planning to be conservative in their investment approach in 2014, almost an equal number are planning to be aggressive.
“In the long term, the greatest risk investors run is remaining too risk-averse for too long. Building portfolios based on short-term phenomena, not long-term realities, could put them in danger of falling well-short of their goals. A smart approach to managing investment risk is not to categorically avoid risks but to ensure that risks taken are intended, understood and appropriately compensated with an eye on achieving longer-term investment goals,” says Jo-Anne Bailey, Country Manager: Africa, Franklin Templeton Investments.