Buoyant Investors Head into New Year

With a positive attitude and optimistic plans for financial health, investors also say finances will be unaffected by a new baby, caring for aging parents and rising interest rates.

New data released by Hartford Funds shows high levels of investor optimism going into 2016, despite major life changes potentially throwing finances off-kilter. The survey also shines a light on investor expectations about which events will most likely affect their finances.

The results underscore the importance of context in financial planning, according to John Diehl, senior vice president of strategic markets at Hartford Funds. “Investors’ confidence should be tied directly to tracking against their goals and having a strong understanding of how life can throw financial curveballs,” Diehl says. “Taking a more human-centric approach to investing helps advisers and investors see the big picture when it comes to life and finances.”

U.S. investors are optimistic about their financial health and plan to take action in 2016. Nearly half (44%) anticipate their overall financial situation will improve, and 54% say they are very or somewhat confident about their investments. Only 14% anticipate their financial situation will worsen.

Investors under age 60 are highly likely to take specific actions to improve their finances. Ninety-one percent of investors between the ages of 18 and 44, and 89% between the ages of 45 to 59, plan on doing one of the following to be more financially stable: pay down debt, review and adjust investments, spend less, save more or downsize their life.

While less likely than their younger counterparts to take a specific action to improve their finances, a full 69% of respondents 60 and older still plan to make a change. Older respondents were most likely to say they will review and adjust investments compared with those under 60, who identified paying down debt as their first move toward financial stability.

NEXT: Significant life events judged unlikely to affect finances

This year presented major personal milestones for a noteworthy number of investors, and 39% expect to experience a significant life event in 2016. Nearly one-fifth of Americans expect to be dealing with an aging parent. Eighteen percent of respondents under the age of 45 expect a parent or child to move into their home. Despite the financial implications of these and other life events, more than half (53%) of investors don’t expect major personal events to impact their finances.

“Nearly all major life events have financial implications,” says Bill McManus, director of strategic markets, Hartford Funds. “It’s easier to plan for and reach those financial goals when we can anticipate events, such as sending a child to college. However, it’s just as important to plan for the unexpected. Advisers have a real opportunity to provide strategic direction when there’s no clear roadmap for the unknown.”

Interest rates rank relatively far down on the list of factors investors believe will most impact their investments, despite being front and center for the market. In fact, about 30% of investors expect events around the world that affect the global economy to have the largest effect on their finances. Fewer than half that number—14%—expect interest rates to have the biggest impact on their finances in 2016. A quarter of respondents pointed to stock market volatility, while 18% cited economic growth and 13% expect the presidential election to have the biggest impact on their finances next year.

Day to day and even month to month, Diehl says, a variety of events can affect a portfolio, making it challenging to take emotions out of the investment equation—but remaining objective is critical, so that the headlines do not drive an investment strategy. “The key is to remain focused on progress against achieving financial goals,” he advises.

ORC International surveyed 778 U.S. investors from November 12 to 18. Investors are defined as adults age 18 and older, with investable assets of at least $100,000.