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One-third of mid-career investors comfortable with volatility

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Americans’ tolerance for investment risk-taking increased significantly between 2013 and 2014, according to new research.

So reports Hearts & Wallets in its annual “Investor Mindset” study. The report analyzes attitudes and behaviors of investor life stages from age 21 through post-retirement and is drawn from the Hearts & Wallets Quant Panel Database.

The 5,500-U.S. household study shows the rise in comfort for market volatility was most marked among “mid-career investors,” those ages 40-52. When asked whether they’re prepared to take risks with investments by accepting volatility in the hope of securing a higher return, (one-third) 34 percent of mid-career investors expressed a willingness to do. This compares with 24 percent in 2013, a 10-point increase.

Other investor segments, from “emerging” millennials (ages 21-27) to post-retirees (ages 64 and older) also expressed greater comfort for market volatility, the rise in risk tolerance ranging from 1 to 6 points. (See chart below.)

Commenting on “early career investors” (ages 28-39), the report observes that a desire to partake of investment opportunities now outweighs their aversion to potential financial loss.

“A big turnaround for the generation that grew up during the Great Recession is their growing concern about missing out on investment growth versus the risk of losing money in the markets,” the report states. “The concern of younger investors about missing out on investment growth is both in comparison to their own views of several years earlier, and to older investors in 2014.”

More than half of early career investors in their late 20s through (53 percent) say that “possibly missing out on investment growth is a bigger worry to me than the risk of losing money in the short term.” This is a 16 percent rise from 37 percent recorded in 2012.

Also agreeing with this statement:

  • 42 percent of mid-career investors (ages 40-52), up from 37 percent in 2012;
  • 49 percent of emerging investors;
  • 22 percent of pre- and post-retirees, the same proportion recorded in 2012.
  • 37 percent of all households, up from 32 percent in 2012.

Despite investors’ heightened confidence, they are more anxious about their financial future. Only 13 percent feel “confident, comfortable and secure,” down from 19 percent in 2013. One in three investors feels “high” or “moderate” anxiety.

Hearts & Wallets’ Quant Panel serves as the engine for Hearts & Wallets annual reports as well as emerging trend analysis and consists annually of more than 2 million data points from 85 families of savings and investment questions asked during 40-minute interviews of 5,500 U.S. households. The integrated database engine now consists of more than 30,000 U.S. households over five years.