(Zonebourse.com) – The renewed geopolitical tensions in the Middle East have caused a return of volatility to the markets in recent months, accentuating uncertainties around energy prices, inflation and global growth. The new study conducted by Fidelity International reveals that 73% of investors in France say that market fluctuations influence their investment behavior.
These conclusions are part of Fidelity International’s Be Invested Global Study, carried out with more than 13,000 individual investors in Europe and Asia-Pacific, including 1,000 in France.
Conversely, in this study, only 27% say that these fluctuations have no impact on their decisions, remaining faithful to their long-term strategy despite short-term movements.
French investors take a cautious approach: 20% say they temporarily suspend investments during periods of volatility, while 23% seek professional advice before making changes to their portfolio. Furthermore, 6% say they are selling their investments in the most affected sectors.
The results highlight a growing disconnect between individuals’ investment behavior and their performance expectations: although many react cautiously in periods of high market volatility, their long-term return expectations remain high, despite allocations portfolio which do not always seem compatible with these objectives. This observation is found in all the European countries studied.
On average, 36% of European investors’ available assets are held in the form of cash, with around a quarter (24%) held in liquid savings accounts, with the remainder held within investment portfolios. In France, the average total share of cash held by an investor – between savings accounts and investment portfolios – amounts to 38%.
Investors in Europe cite practical reasons for maintaining cash, including building up precautionary savings (44%), the need to have rapid access to short-term funds (13%), waiting for more favorable market conditions (10%) as well as fears of possible losses (13%).
However, this cautious positioning comes with ambitious expectations. European investors are aiming for an average annual return of 7.3% over the next five years (6.3% in France), and 65% say they are confident in their ability to achieve their financial objectives, which reveals a gap between their expectations and the current positioning of their portfolios.
Too much allocation to cash can hamper long-term performance goals
According to Fidelity’s Capital Market Assumptions (CMA), which provide a forward-looking estimate of the long-term returns of different asset classes, a portfolio invested entirely in cash is expected to generate negative real returns once inflation is taken into account. In other words, investors risk seeing their purchasing power decrease over a period of ten years.
More broadly, too large a share of cash in a portfolio can significantly reduce performance, to the point of leaving investors with results potentially nearly 40% lower than their expectations over the same period.
Encouragingly, many investors say they are ready for change. A third (34%) say they would consider moving some of their cash into stocks, and 19% into bonds, particularly if they had better access to advice (18%), more favorable tax incentives (29%), better education on the types of investments to invest in. (19%) and the way of investing (18%), or even if the environment becomes less favorable to cash savings (15%).
In France, the main levers likely to encourage investors to transfer more cash into investments are above all tax-related. Nearly a third of French investors (31%) cite better tax incentives as the main motivating factor, ahead of the possibility of speaking with a financial advisor or investment professional (21%). However, 18% say that no factor would encourage them to change their behavior, a sign that a significant proportion of savers remain attached to the perceived security of liquidity, despite the risk of erosion of purchasing power in the long term.
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