Despite increasing political tensions around the world and concerns about the Fed curbing quantitative easing, millionaires are optimistic about investments over the next year, a new survey by Legg Mason shows.

Despite rising political tensions around the world and concerns about the Fed pulling back from its quantitative easing program, millionaires are optimistic about investments over the next year, with nearly half planning to increase their allocation to equities in the next 12 months, according to a new survey by global asset management firm Legg Mason.

The Legg Mason Global Income Survey was conducted among 4,320 affluent investors with a minimum of $200,000 in assets from 20 countries, including 2,164 individuals with over $1 million in total assets.

The survey found that more than eight in ten (83.2 per cent) millionaires are optimistic about investments over the next year, with nearly half (45 per cent) planning to increase their allocation to equities - well above the 33.7 per cent of investors below $1 million who said the same.

According to the survey, the average asset allocation of global millionaires is 25 per cent cash, 21.5 per cent equities, 19.6 per cent fixed income, 18.7 per cent investment real estate, 9.1 per cent non-traditional and 6.1 per cent other.

"Our survey found a level of optimism shared by investors around the world that is very encouraging. The fact that more said they are adding equities, and they believe domestic stocks present the best opportunity, says their optimism could translate into a change in investment behavior that may play out in the equities market,” said Matthew Schiffman, managing director and head of global marketing at Legg Mason Global Asset Management. 

The report revealed that millionaires are far more likely to invest outside of their home country than those with fewer assets, with 88.7 per cent of global millionaires saying they invest outside of their country, compared to 74.6 per cent of investors with less than $1 million.

Among those millionaires who do invest internationally - or who are likely to do so - the the US (53.7 per cent) was seen as the country with the best investment opportunities over the next 12 months. This was followed by emerging markets (45.3 per cent), China (44.6 per cent) and Europe (ex UK) (37.8 per cent).

The survey also showed that millionaires are more focused on growing their assets than protecting them. When asked to identify their primary goals of investing, for example, 70.9 per cent of millionaires said they were looking to grow their wealth; 60.5 per cent said their goal was protecting their wealth; 55.4 per cent wanted to maintain their current style for later in life; and 53.3 per cent said their goal was to provide for their retirement.

When it comes to retirement, 45 per cent of millionaires around the world said they were only "somewhat" confident in their "ability to retire at the age they want to," while 18.6 cent said they were not confident and just over a third (36.5 per cent) said they were very confident.  

Asked to define the decisions they made that have had "the most positive impact on investing success," 43.9 per cent of millionaires pointed towards developing a financial plan. This was followed by investing in products other than stocks and bonds (35.4 per cent); taking cash off the sidelines and investing it (34.8 per cent); changing spending habits to save or invest more (32.2 per cent); and taking a more global approach to investing (29.3 per cent).

Income gap

The survey found that the "income gap" that millionaires are experiencing is smaller than that of investors around the world with fewer than $1 million in assets, as a result of receiving greater income from their portfolios.

The average rate of return millionaires seek to achieve from income-producing investments is 9.6 per cent, close to the 9.5 per cent for those with less than $1 million in assets.

However, millionaires reported the actual rate of return they receive is 7 per cent, compared to 5.8 per cent for those with fewer assets, resulting in an income gap for millionaires of 2.6 per cent, compared to 3.7 per cent for investors with fewer assets.