Tough to make ends meet with CDs and Treasuries; volatility not as frightening when it's SOP
Despite getting burned by the stock market in the financial crisis, several years, some older investors are suddenly — and surprisingly — eager to give it another go.
Retirees, many of whom are struggling to get by on the meager yields generated by bonds and other conservative investments, are beginning to seek out greater returns, advisers said. And this time, these seniors understand that they can't get alpha without taking some risk.
“Some of my most conservative and concerned clients want to get back in the market,” said Scott Bell, chief executive of Gross Domestic Product Inc., which has $50 million in assets under management.
Mr. Bell said that roughly 25% of his clients have weighed the risks against the possibility of better returns and are ready to increase their market exposure.
One reason: Investors of all stripes have become inured to dramatic market swings, he said. “I had very few people I had to talk off the ledge this last downturn,” he noted. “The volatility is working for us.”
Beyond the stock market, some advisers are touting emerging-markets debt as a way to generate better returns. But Mr. Bell said cross-border bonds might be a bridge too far for some investors.
Earlier this week, the Financial Times reported that private-equity groups reported increased investor demand for junk bonds issued in the fourth quarter. The PE firms expect a strong start to the U.S. leveraged-loan market this year.
Certainly, the new appetite for stocks would be a turnabout for investors. Many became increasingly disenchanted with the stock market through the first three quarters of last year, according to MFS Investment Management. The investment manager, which surveyed investors on their risk tolerance and market sentiment, found that concern rose during the first three quarters. In October, only 18% called the U.S. stock market an excellent or very good place to invest, compared to 35% who thought so in February.
What's more, investors who have changed their minds about equities may have to talk their advisers into going along with the program. The 539 investment professionals polled in November for the InvestmentNews 2012 Investment Outlook survey were evenly split between the those who said they will increase their stock allocation this year (43.6%), and those who said they will keep the allocation the same as it was last year (42.7%).
(Bruce Kelly contributed to this report.)
