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Mindset of a Millionaire

Those investors with more than $1 million in investible assets tend to view themselves as more risk tolerant than others. This higher risk tolerance seems to influence multiple aspects of investment preferences and behavior. Some of our key findings include:

REPORT: Mindset of a Millionaire

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Millennial Mentality

In some ways, the Millennials we surveyed expressed predictable attitudes. For instance, although they were just as likely to expect market volatility, youthful optimism translated to far more confidence in the investment landscape ahead. Nearly three-quarters expected the U.S. economy and stock market to improve, compared to just over 40% of older investors.

Yet in other ways, Millennials defied investment convention. For example, they were equally likely to invest for income as for growth—a surprising perspective for investors in prime working years with decades until retirement.

REPORT: Millennial Mentality

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Opportunities for Advisors

Speak up, your clients are listening

The best case for educating clients is that advisors can truly make a difference. Based on our survey, we gained a clearer picture of the role an advisor should play, and evidence that when it comes to advice, investors are all ears.

As advisors attempt to guide clients and keep them focused on their long-term goals, they may need to ask themselves if they share the same understanding of a few key investing concepts:

What does it mean to be diversified?

Nearly 50% of investors believe owning a broad range of stocks will provide adequate diversification for a portfolio. As an advisor, it is important to help clients understand that diversification extends beyond simply investing in a broad range of stocks—low correlation is the key to diversification and investors should rely on a variety of asset classes and investment strategies.

Hedge strategies may provide an alternative path to diversification. Approximately one third of advised investors owning alternatives understood that they are good for minimizing downside risk. However, nearly two-thirds of all respondents expressed a lack of understanding about alternative investing—and only 10% said they feel highly confident in selecting alternatives on their own.

Learn more about common investor misperceptions about alternative investments >>

What does it mean to be a long-term investor?

On average, investors define a long-term investment as nine years but to many investors, long-term investment is less than five years (21% for all investors). In addition, one quarter of all respondents indicated they would need access to a significant portion of their investments within the next five years. This seems consistent with other third-party studies, which show that mutual fund retention rates range between four to five years for equities—and even shorter for bonds.2 When establishing an investment plan with a client, it is important to make sure you are on the same page with regard to investment horizon.

Learn more about the average long-term investor and the perils of performance chasing >>

What are the differences between active and passive investments? 3

Passive investments are a buy and hold strategy which often track a predetermined index. Active investments allow the manager to make investment decisions based on skill and expertise. By providing the manager with greater portfolio flexibility, investments can be positioned to reflect opportunities within the market.

Our survey revealed investors may have some misconceptions about passive investments specific to the following:


Many investors perceive passive investing as synonymous with safety. However, as demonstrated by August’s market decline, investing in an index is tantamount to assuming the risk of the market.


Approximately a third of investors regard passive investments as inherently low cost; however, trading costs aren’t the only expense to consider. While listed fees may be low, the opportunity cost of investing in passives is quite high. By choosing passive vehicles, investors are essentially saying goodbye to any potential for excess returns.

Index Tracking

By investing in a passive index tracker, investors are relying on the quality of the index to determine their investments rather than the quality of the individual securities. In some markets, this practice can add unintended risk.

Survey results show investors with advisors are more likely to recognize the value of actively-managed funds.

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Investment Solutions

Investors seeking wealth preservation should consider funds which favor high-quality securities and value investments.

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Investors seeking diversification should look beyond traditional investments. By expanding their search beyond the U.S. borders, investors can tap into a world of opportunities.

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Investors in search of income should turn to Funds investing in higher-yielding securities such as growth stocks, high yield fixed-income and REITs.

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Investors seeking growth should consider investing in strategies which provide exposure to assets with a strong track record of performance. Private equity has outperformed stocks, bonds and REITs over the past 10 years. A fast growing asset class offering a large universe of investment opportunity, private equity assets under management have increased more than 330% since 2003.4

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Tax management may be one of the most reliable ways to impact total return for investors, but it is also often overlooked. Only 3% of investors chose managing taxes as their top investment goal, demonstrating a need for advisors educate their clients on how to they keep more of what they earn. For more information on tax-aware investing, visit www.amgfunds.com/taxes.

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