Investors mixed on long-term definition

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Eleven per cent of consumers believe a long-term investment horizon is three to five years, according to research released today.

At the other end of the scale, 8 per cent defined long-term as more than 20 years, the research from HSBC Global Asset Management found.

The majority of investors (48 per cent) thought the definition was five to 10 years, followed by 32 per cent who thought it was 10 to 20 years, which HSBC Global Asset Management chief executive Andy Clark says is “reassuring”.

The most financially literate respondents surveyed were over three times more likely than the average to define long term as more than 20 years, with 30 per cent agreeing with this definition.

“As an industry we need to do more to educate clients about the benefits of long-term investing, staying invested, not coming in and out, because there is a tendency when markets go down for people to sell,” Clark says.

People that considered long-term time horizons to be only a couple of years could partake in high-cost behaviours such as regularly moving assets around, Clark says.

Dan Rudd, head of UK wholesale, adds: “There’s been a real generational shift in how people save for their retirement from final salary schemes to Defined Contribution, and it’s clear that people will need to stay in the market for longer as they build up their retirement savings pot. This means being prepared to ‘ride out’ periods of underperformance.

“Investors are naturally keen to review their portfolios to ensure that they perform for them, especially in light of historically low interest rates, but there’s a risk that investors who focus on shorter term performance cash out of the market entirely or churn their portfolios, which increases their overall trading cost.

“What makes a difference to investors is being prepared to look beyond temporary markets dips, taking a long term view, and preparing to be patient.”