The prolonged global stockmarket gloom that has brought about a global reluctance to invest has now ...
The prolonged global stockmarket gloom that has brought about a global reluctance to invest has now been exacerbated by the conflict in Iraq to the extent that it would be understandable if that reluctance was superceded by a loss of interest in the whole question of investment.
In these days of low inflation and low interest rates in many developed economies, there is now a clear understanding that double-digit investment returns are a thing of the past unless you want to play a high-risk game ' and many investors with a higher risk/reward approach have adjusted their sights firmly downwards after the battering their investments have taken over the past three years.
But because rates are so low, and in many cases not providing a real return, there is an unease among investors which should act as the catalyst to kick-starting investment markets over the coming months. That unrest stems from the perception that money on deposit is not working sufficiently hard ' so the current trade-off between security of capital and growth prospects for deposit savings is not an equation that investors are prepared to accept in the long term.
However, the profusion of guaranteed funds launched over the last few years has largely failed to capitalise on this particular investor unease. There are a number of explanations for this: first, the complexity of guaranteed products has left investors cold ' many are now deeply suspicious after the combination of plunging stockmarkets and investment scandals, and will not trust their money to anything with too much small print.
Second, and related to the above point, investors need to be able to understand what the upside potential of a guaranteed fund is so they can see clearly how they can benefit from any stockmarket recovery in order to obtain the real return they are seeking.
But the real key to giving investors peace of mind is to tailor propositions to the specific requirements of each market, rather than the 'one size fits all' approach often adopted in the offshore market. Recent independent research commissioned by Clerical Medical among consumers in Hong Kong and United Arab Emirates (UAE) has highlighted how the different mindset of investors in each location should lead to significantly different guaranteed propositions.
The research showed that consumers in Hong Kong, who have traditionally been seen as among the most adventurous investors, but have been hit hard still retain a remarkable resilience in terms of their view of the benefits of equity-linked investment.
While not surprisingly 73% of investors interviewed were primarily interested in guaranteed investments, there was a strong drive to have the flexibility to switch easily and quickly into equity-backed vehicles as soon as confidence in stockmarkets returned.
In the UAE, while the research showed that there is a much higher willingness to invest in the near future, and more optimism about investment generally, the propensity to use a guaranteed product is even higher, with 82% of investors looking for capital protection. This reflects the fact that Middle East investors are generally less experienced and there is less of an equity culture in the region, which means there is much less concern about missing out on growth from recovering stockmarkets.
The research also showed the attitude towards charges, fixed interest investment, and valued sources of financial information and advice, all varied widely according to the location of the investor.
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