Australian investors expect an annual return of 8.9 per cent from their investments over the next five years – lower than global expectations of 10.9 per cent, but well above the S&P/ASX 200 index, which delivered 7.8 per cent over the last 10 years.
“Australians’ return expectations have decreased from the unrealistically high level of 10.9 per cent p.a. from the last survey,” said Schroders Australia CEO Chris Durack.
“But overall, against a backdrop of market turbulence, expectations for income and returns are still high.”
The research shows that 80 per cent of people are still basing their predictions on returns they’ve received in the past, with a decade of strong returns inflating expectations to “unrealistic levels”. That belief was actually more concentrated in people who ranked their investment knowledge as “expert” or “advanced” (85 per cent), while only 67 per cent of beginner and rudimentary investors thought past performance informed future performance.
“The next decade is set to deliver returns that likely don’t match the expectations of investors,” Mr Durack said.
Investors also have a rosy view of the COVID-19 recession, with 66 per cent believing the impact will be felt for six months to two years, while only 21 per cent believe the impact will go beyond two years.
“Given this acknowledgement of the ramifications of COVID-19 for the economy, it is surprising that more respondents don’t foresee this affecting the level of return on their investments over the next year,” Schroders said.
The research also reveals that a “significant majority” of people made changes to their portfolio during market volatility in February and March. Over a quarter of people moved significant proportions of their portfolio to lower-risk investments, while a fifth moved some parts to high-risk investments. Australian investors were more likely to stick with their original plans than their global counterparts, with 34 per cent not making any changes to their investment portfolio during the period.
