29 May 2020
Posted in Insurance
High-income households willing to take on riskier post-COVID-19 investments, says GlobalData
High-income households are willing to take on more investment risk in order to recoup losses from the stock market collapse, once it rebounds after COVID-19 ceases, says GlobalData, a leading data and analytics company.
High-income households are much more willing to take on additional investment risk as a result of COVID-19, according to GlobalData’s 2020 UK Life & Pensions Survey. Almost one third (32%) of respondents with a household income of at least £150,000 (US$185175.90) per year are more willing to take on increased investment risk due to COVID-19. This proportion steadily falls with decreasing income.
High-income households are more likely to have suffered significant losses on their investments as they are more likely to hold riskier assets like equities and equity-based investments. On the other hand, low-income households are more likely to hold their wealth in safe-haven assets like deposits, limiting their exposure to the stock market crash. This explains the high proportion of low-income households whose risk appetite has remained unchanged.
Yasha Kuruvilla, Insurance Analyst at GlobalData, comments: “High-income households have the luxury of having greater disposable income that they can afford to lose, allowing them to invest in riskier assets like equities and equity-based investments. These investments should rebound once countries reopen and business as usual resumes.
However, the FTSE100 had rebounded 15.2% from March 23, 2020 – its lowest point since the pandemic began.
Kuruvilla concludes: “Therefore, high-income households are incentivized to hold risker assets due to COVID-19. These assets are likely to provide greater returns and help high-income households recover some of the losses they suffered during the crash.”