Across all millionaires, investments to short-term holdings and fixed income, rather than equities, are more likely to increase, according to the CNBC survey. The view from millionaire investors does not portend a sustained pulling out of equities. Financial and investment advisors suggested that the increased short-term investments reflect, among other things, wealthy individuals waiting for a better opportunity to buy into the market rather than uber-bearishness.
Doug Boneparth, president of New York City-based Bone Fide Wealth, said investors age 55 and under do need more short-term money, because their lives include more variable expenses, such as children and college, than older investors. However, he thinks having learned the lessons of 2008, these investors do have some dry powder. He also noted that in the rising interest-rate environment, money market accounts now look much more attractive with yields pushing above 2 percent and, in the least, chip away at money that would otherwise go into bonds that are yielding only slightly higher.
Boneparth advises investors to distinguish between cash holdings and investment holdings. “A cash reserve is exclusive of an investment portfolio,” he said. “If $150,000 of a $1 million individual retirement account is in cash, that’s too high, that will drag down returns over time. But I do wonder if it is dry powder. People are waiting,” Boneparth said.
“My sense is that younger investors are more likely to raise cash to compensate for tying up funds in long-term, illiquid investments and to do their own version of market-timing, waiting for stocks to correct and then buying opportunistically,” said Mitch Goldberg, investment advisor and president of Melville, New York-based ClientFirst Strategy.
Younger millionaire investors and the high-net-worth segments are more likely to maintain exposure and plan to increase investments in international stocks and alternative investments.