High-Net-Worth Investors Share Thoughts on Income-Generating Strategies

Boston, MA - 22 June 2012

With Interest Rates at Historic Lows, Investors Are Looking to Alternative Investments to Generate Higher Return Potential

Fidelity Investments® have announced the results of a poll of customers with at least $250,000 in investable assets on a range of income generation strategies. The poll found they are actively looking for dividend-producing stocks and corporate bonds for higher yields in this low interest rate environment.

The poll was taken during the live “Fidelity Viewpoints® Forum: Investing for Income” in Boston on June 13 where five Fidelity portfolio managers discussed a range of topics including Eurozone implications to the U.S. economy, opportunities in emerging markets, and that they believe many U.S. corporations are currently a quality investment in stocks and bonds.

Key findings of the poll include:

  • Their Next Investing Dollar – While most (44 percent) investors say they would put their next investing dollar in U.S. stocks, 16 percent would put it in investment-grade corporate bonds, nine percent chose high-yield bonds and nine percent chose “under the mattress.”
  • Dividend-Producing Stocks Favored – For the next six months, 54 percent of respondents are most bullish about dividend-producing stocks, followed by investment-grade corporate bonds (15 percent).
  • Macro Economic Issues – Twenty-eight percent cite the Eurozone crisis as their most pressing financial worry, while 27 percent indicate U.S. debt problems and 24 percent cite high unemployment/recession.
  • Tempered Expectations For Fixed Income – Even though fixed-income investments returned roughly seven percent in the last 12 months1 , only 18 percent of high net worth investors think they can achieve or beat those same results over the next 12 months. Nearly one-third (32 percent) think their fixed income returns will drop below four percent and another third (32 percent) expect between four and six percent.
  • Higher Taxes Expected – Eighty-six percent of high net worth investors believe taxes will be higher next year – both on income and on investment income like capital gains and dividends. However, when asked what tax strategy they plan to employ, more than half (52 percent) say they will do nothing differently.

“This group of high-net-worth investors are realists about this low-interest rate environment, but are not resigned to accepting low returns,” said John Sweeney, executive vice president of Fidelity Planning and Advisory Services. “They’re willing to look to alternative products to find yield, but we encourage them not to stretch too far and lose sight of their underlying investment strategy and encounter unnecessary risk.”

Investors who are balancing higher risk and higher yields, can read a new Fidelity Viewpoint® article based on the content shared by the portfolio managers at the forum and entitled “The upside-down world of income investing.”

1 Barclays Aggregate Bond Index had a 7.12% return between June 12, 2011 and June 12, 2012.

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