Decoding investor behaviour: Bridging the disconnect between hope and reality

The Legg Mason Global Investment Survey has been taking the pulse of investors worldwide for the past five years. Our goal is to better understand investors' hopes and fears, their financial dreams and realities, as well as what is influencing their behaviour - from the Global Financial Crisis to changing technology.

This year we found investors who are:

  • more optimistic about investment opportunities but still impacted by the long shadow of the Global Financial Crisis;
  • increasingly turning to technology to help them organise their finances and make investment decisions, but who still want to know there is a human behind the machine; and
  • not entirely sure what they need to retire comfortably, but feel that they have not quite met their goals.

This year's survey reached 15,300 investors in 17 countries across Europe, Asia Pacific, Latin America and the US - ensuring samples that are representative of the population of each country.

This programme will explore three key themes, at both the global and country level, over the course of 2017:

  • Perceptions vs Reality,
  • Humans vs Machines and
  • Youth vs Experience.

We aim to provide you with insight into not only investors' motivations, biases and behaviour, but also the fast-changing world which they must navigate.

Perception vs Reality:Is fear driving investor behaviour?

Investing must always be a balance between taking risk to secure your desired return and being cautious to protect your capital. Finding the right balance is tricky - and that place of balance will vary among investors.

But our survey found a worrying gap between investors' perceptions and the reality of their situations - usually underestimating the risk inherent in their investment choices. While this caution seems warranted considering the heavy losses many investors experienced in the Global Financial Crisis, now that markets have recovered investors may be more at risk of not taking advantage of the opportunities that are now on offer and hurting their long-term potential for strong returns.

Here we explore investors' perceptions - the biases that influence them, the forces that shape their behaviour - and the reality of their investment decisions.

What is the extent of influence of the Global Financial Crisis and subsequent recession on your saving and investment decisions?

  • Still strongly influenced
  • Still somewhat influenced
  • Not at all influenced
  • Don't know

Gone but not forgotten

Despite one of the longest bull markets in memory, the Global Financial Crisis and the ensuing Great Recession may have permanently changed investor thinking. Millennials are now investing more like their Depression-era grandparents than their Boomer parents – despite their optimism about the future. What do these changes hold for the future of financial markets worldwide?


Risk is on

After a decade of gloom in which investors mostly wanted to protect capital and invested in low, even negatively yielding bonds, they now seem to have woken up: 37% are planning to take on more risk in their portfolios this year. The investment options they are considering, however, are only a small portion of the global investment universe.


How optimistic are you for your investments over the coming 12 months?(%)


Humans vs Machines:Is technology really the silver bullet?

Technology is changing every aspect of our lives, and how we manage our finances and make investment decisions are not immune to this trend.

The increased use of online resources for information, of apps to help us manage our money and of products that invest our money on the basis of algorithms rather than human judgement are fundamentally changing the world of personal finance and investment.

Our survey found that while investors are increasingly open to relying on technology, they still desire the human touch. They want to know that there is a human behind the machine, guiding its application and providing the customer service that a machine never can.

Here we explore how the combination of humans and machines are working together to create the user experience and investment outcomes that today's investors now expect.

Do you agree with the following statements?

The human touch: Irreplaceable

The charge toward automation of large swaths of the investment business threatens to leave customers cold, with most favouring human interaction for the giving of financial advice and assistance with making critical investment decisions. Though technology for activities such as research and execution is accepted by many, a strong majority still favours purely human – or technology-assisted human interactions. Surprisingly, this is also true of Millennials, despite their reputations as natives of the digital world.


Technology game: EMs 1 – DMs 0

Emerging market investors - led by Asian millennials - are well ahead of the curve in terms of technology use when making or executing investment decisions. Technological empowerment is crucial in a fast-changing world, but so is the need for professional advice, which, according to the survey, will never die.


Do you use websites or apps for these areas of personal finance? (%)


Youth vs Experience:Will millennials be better prepared for retirement?

The Baby Boom generation is thought to have had it all - years of equity and bond market bull runs, getting on the property ladder before prices rocketed, and benefitting from defined benefit pension schemes, guaranteeing them a level of security in retirement.

For Gen Xers and Millennials, the goal of a comfortable retirement seems further out of reach, and secondary to more pressing financial goals such as paying off student debt and owning their own home.

Yet our survey found that far from being in or approaching retirement with life goals met and financial security attained, Baby Boomers say they have many goals unmet and are worried that they will not have the income they need for a comfortable retirement.

Here we explore why Baby Boomers find themselves in this predicament, what they can do to improve their situations and how Gen Xers and Millennials can avoid falling into the same traps.

Thinking about your retirement goals, which have you achieved and which have you yet to achieve? (%)

Not yet achieved Not yet achieved
Already achieved Already achieved
Airplane 0

Travel extensively

Piggy bank 0

Enjoy a good retirement income

Bill 0

Maintain pre-retirement standard of living

Globe 0

Live abroad

Palm tree 0

Have a holiday home

Coins 0

Be debt-free

Cardiogram 0

Have access to good healthcare

Businessman 0

Keep working / I don’t want to retire

Tree 0

Volunteer for good causes and charities

Airplane 0

Travel extensively

How real is the global retirement crisis?

Experts around the world worry that investors are not saving enough for retirement, and may not be taking the risks necessary to close the gap. Are things really that dire? Our survey indicates that savings in DC plans are well behind what investors are likely to need later in life – yet, surprisingly, on track with expectations in all but a handful of countries.


Not so rockin’ retirement

Baby Boomers may have had it all in their youth, but many have yet to achieve basic retirement goals like being debt-free. Younger generations can learn from the Boomer experience, but they also face a much different investment landscape. They must act now, while time is on their side.


Retirement goal: Make sure that I am debt-free


Hong Kong findings

Fewer concerns for the year ahead

Hong Kong respondents have become much less pessimistic about the world’s economies, as well as about their own, since the beginning of 2017. At the start of the year, 60% were concerned about the world’s economies, vs. 43% for the GIS Pulse survey in August.

Percentage of respondents concerned about economies in Hong Kong and the rest of the world, and global political instability, January vs. August 2017

Seeking balance in a global economy

Respondents in Hong Kong have a history of active engagement with global economies, and are some of the world’s most seasoned participants. So it’s little surprise that only 9% of Hong Kong respondents polled in August’s Legg Mason Global Investment Survey Pulse are planning to “do nothing and hope for the best” over the next 12 months.


Moving up the risk spectrum

Hong Kong investors score the second highest in the world for the amount of extra risk they expect to increase in the year ahead. 11% expect to add 'much more risk' and 45% expect to add 'a little more risk'.

Percentage of investors expecting to take on more risk in the coming 12 months

An antidote for pessimism

Higher levels of equity allocations compared to Asian and global averages, coupled with a more aggressive than average approach marks out Hong Kong investors as special. And yet Hong Kongers are pessimistic about investment performance in the year ahead. Could this be due to a lack of risk diversification?



Market Sample size
United States Total: n=900
High net worth: n=275
Europe (UK, France, Spain, Italy, Germany, Switzerland, Belgium, Sweden) Total: n=7,200
High net worth: n=1,371
Asia (Hong Kong, Singapore, Japan, Taiwan, China) Total: n=4,500
High net worth: n=1,230
Latin America (Brazil, Mexico) Total: n=1,800
High net worth: n=260
Australia Total: n=900
High net worth: n=306

This year's survey reached 15,300 investors in 17 countries across Europe, Asia Pacific, Latin America and the US - ensuring samples that are representative of the population of each country. Respondents are aged 18-74, have some income, are employed (unless retired) and are the sole or joint decision-maker for household investment decisions. Fieldwork was conducted through an online panel between January 12th and February 10th 2017. The high net worth criteria in the U.S was set at $225,000+ in investable assets and individual country equivalents were set. Of the total sample, 3442 qualified as high net worth. There was also a fairly even split between the generations: 5,116 Millennials (18-35), 4,898 Gen X (36-52), 4,925 Baby Boomers (53-71).

GIS Pulse 2017 reached 4,595 investors respondents in 7 countries/markets, include United Kingdom, Italy, Germany, Hong Kong, China, Brazil and Australia) - ensuring samples that are representative of the population of each country. Respondents are aged 18-74, have some income, are employed (unless retired) and are the sole or joint decision-maker for household investment decisions. Fieldwork was conducted through an online panel between 9 August and 30 August 2017. The high net worth criteria in the U.S. was set at US$225,000+ in investable assets and individual country equivalents were set. Of the total sample, 1,389 qualified as high net worth. There was also a fairly even split between the generations: 1,618 Millennials (18-35), 1,629 Gen X (36-52), 1,294 Baby Boomers (53-71).

Cicero Research:

The research was conducted by Cicero Research, a leading consultancy firm servicing clients in the financial and professional services sector. Cicero specialises in providing integrated public policy and communications consulting, global thought leadership programs and independent market research. Cicero was established in 2001, and now operates from offices in London and Brussels.


Source: Legg Mason Global Asset Management. This document is for information only and is not intended to provide investment advice. All data, opinions, estimates and other information are provided as of the date of this document and may be subject to change without notice. Where past performance is quoted, such figures are not indicative of future performance. This document does not constitute an offer or solicitation to buy or sell any units or shares in any fund. Investors intending to subscribe for any units or shares of a fund should refer to the Fund’s most current offering document. INVESTMENT INVOLVES RISKS. Please refer to the offering documents for further details, including the risk factors.

Any views expressed are opinions of the respective investment affiliates as of the date of this document and are subject to change based on market and other conditions without notice and may differ from other investment affiliates or of the firm as a whole. These opinions are not intended to be a forecast of future events, a guarantee of future results or investment advice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase or sell securities, and the information provided regarding such individual securities is not a sufficient basis upon which to make an investment decision.

Neither Legg Mason nor any officer or employee of Legg Mason accepts any liability whatsoever for any loss arising from any use of this document or its contents. The information in this document is confidential and proprietary and may not be used other than by the intended user. This document may not be reproduced, distributed or published without prior written permission from Legg Mason.

This document has not been reviewed by the Securities and Futures Commission.

Issuer: Legg Mason Asset Management Hong Kong Limited.