Inflation as the biggest threat to investors' portfolios?

Inflation is the biggest threat to portfolios, as indicated by individual investors in the study eToro.

• Out of all 12 countries surveyed, Polish retail investors fear inflation-related risks the most.
• The study shows an increase in demand among individual investors for precious metals, energy and real estate.
• Most respondents (53%) believe that their investments will improve in the next 12 months.

Retail investors believe rising inflation is currently the biggest threat to their investment portfolios, according to a new study by an investment platform eToro.

Fear of inflation

eToro has launched its regular report Individual Investor Pulse *, which is based on a survey of 6 retail investors in 000 countries. This report shows that rising costs of goods and services noticeably affect investors' portfolios. Traditional methods of hedging finances against inflation, such as real estate, are a popular choice (12% of respondents), and 22% of respondents. respondents believe that precious metals such as gold, is the best offer from the raw materials market for the next 12 months. However, the majority of the respondents' investment portfolios consisted of stocks (62%), bonds (39%) and cash (28%).

While globally 25 percent. of all surveyed individual investors invested in cryptocurrencies, the demand for them was the highest in Poland and amounted to 44 percent. Globally, investors in the 18-34 age group most often placed their funds in cryptocurrencies - as much as 46 percent. of them claim that their portfolio contained these assets.

Polish investors are most concerned about inflation - 55% of those polled are worried about it, while globally it is 38%. Inflation worries investors from the US (51%) and Germany (48%) to a lesser extent than we do. Globally, men (42%) perceive rising inflation as a greater threat than women (34%), but both sexes are equally concerned about the risks posed by the state of the global economy to their investments.

Recommendations and media as the basis for investment decisions

When it comes to portfolio management and investment decision making, personal recommendations (37%) were the main source of information for investors, followed by the media (37%) and self-research via Google (34%). Women were more likely to seek advice from friends and family (43%), while men preferred the media (40%) or Google (35%) as their primary point of reference.

Ben Laidler, eToro's Global Markets Strategist, commented on the results of the study:

“The data shows that individual investors have their portfolios balanced - in the traditional 60:40 ratio, equities to bonds. They hold cash and focus on fundamental investing principles such as diversification to spread risk - which is the golden rule when the markets are unpredictable, as has been the case in the past few months. They also reach out for help - nobody knows the magic formula of investing, and expanding your knowledge by talking about investing or conducting your own research is the key to being a better investor ”.

In terms of the markets themselves, two in five individual investors (40%) believe that global markets are in a bubble phase as stock prices hit new highs. This conclusion just came at a time when many major stock indices such as S & P 500 in Usa, dax 30 in Germany i CAC 40 in France, at or near record levels.

Only 15 percent. of the 6 surveyed investors believe the markets are of adequate or undervalued value, while 000 percent. neither agrees nor agrees with such a claim, which perhaps signals widespread uncertainty about future market performance.

However, despite differing views on whether the market is overheated, few believe that another crash is on the horizon. According to eToro's data, only one in four (27%) of respondents believe there is likely to be a significant drop in stock prices. Investors in Poland are more concerned about the impending crash - 39 percent. of those surveyed believe that such a slump will take place in the next three months. Poland is followed by investors from France (36%), Romania (35%), Spain and the Czech Republic (30% each), the USA (29%), Great Britain (26%), Italy and Australia (both 25%). %), Germany (22%), Denmark (17%) and the Netherlands (15%).

Ben Laidler adds:

“This is probably the clearest signal that individual investors believe that stock prices are too high. However, as history has shown us, this does not necessarily mean that there will be a new crash on the horizon. It's worth remembering that while valuations are high, stocks are now cheap compared to bonds, and the fact that only one in four investors thinks another correction is due before the end of the year suggests that many are willing to continue paying current valuations - at least for now. The global economy is at a strange moment right now. Perhaps this is the first time in history that central banks around the world are delighted to allow for a short period of inflation pumping to get their economies out of a pandemic. This creates an incentive for investors to keep investing their money in stocks that have proven to be the only long-term assets that are capable of consistently generating returns above inflation.

Even when central banks start to raise interest rates, I do not expect equities to be affected. Instead, I think we will see individual investors move from growth stocks to cyclical stocks - something that has been happening to some extent already recently. On the positive side, more than half of investors (53%) believe that their investments will improve in the next 12 months, revealing a bullish appetite for the bull market, even though the world is not entirely sure what will happen next as we continue to look for getting out of the long shadow of the COVID-19 pandemic ”.