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Investors bullish on the next six months yet still playing it safe

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Large and small individual investors are notably bullish on the investment climate in the next six months, according to a survey issued today by Citi and conducted by Hart Research Associates.

Looking ahead, 62 per cent of large and small investors, those with investable assets over USD500,000 and USD100,000 respectively, said they are optimistic the investment climate will get better in the next six months, compared to 35 per cent who said it will get worse.

Despite this optimism, investors are continuing to take a cautious approach overall.

By a substantial margin – 57 per cent to 42 per cent – investors with investable assets over USD100,000 described their current strategy as being more focused on maintaining wealth rather than trying to build it.

Among investors, 36 per cent indicate they are moving assets and savings to less risky areas.

Only eight per cent of investors indicated a preference for a high return strategy with high risk, rating their investment strategy as an eight or higher on a scale of one to ten, while 41 per cent rated their strategy as a four or lower, indicating their preference for a lower risk and reward.

The survey also found that only a slim majority of investors believe that the investment climate is better today than it was a year ago.

"Financial markets may be trading far above their levels of one year ago, yet the dramatic impact of the economic downturn on the psyche of the American investor cannot be underestimated," says Deborah Doyle McWhinney, president, Citi Personal Banking and Wealth Management. "With nearly one-third of investors reporting the stress of investing being higher than in years past, it’s understandable that Main Street investors are playing it safe because they are uncertain about their own circumstances."

When all investors were asked to rate whether they thought it was a good time to invest in specific types of investments, no single type reached a 50 per cent threshold deeming it an excellent or good investment at this time. The embattled real estate sector topped the list for both all investors and large investors, with 47 per cent and 50 per cent saying it is an excellent or good time to invest in these opportunities, respectively.

This was followed by mutual fund accounts (40 per cent investors, 41 per cent large investors), individual stocks (37 per cent investors, 43 per cent large investors), municipal bonds (30 per cent investors, 29 per cent large investors), savings, CDs, and money market accounts (27 per cent investors, 22 per cent large investors), and corporate bonds (20 per cent investors, 24 per cent large investors).

The changing face of retirement has evolved even further due to the economic downturn and investment losses. More than a quarter of investors said their financial circumstances are worse off now than they were a year ago. Large investors were even more bearish on their current financial situation, with 33 per cent saying they are financially worse off now, compared to 28 per cent of investors overall.

Only 44 per cent of investors report being confident in their ability to retire in financial security as they had planned, while 36 per cent said they might need to adjust their plans and 16 per cent said they are not confident.

In a related finding, 30 per cent of non-retired investors say they are considering postponing retirement due to declines in their investment portfolio.

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