Survey results: Investors are hoarding cash and expecting more income

The last time we ran the Income Series in September 2022, the world looked a little different.

The RBA cash rate was 2.35% and the commentary at the time centred around how much the investment landscape had changed so dramatically in such a short space of time.

Well, little did we all know that the ensuing 10 months would bring yet another seismic shift in inflation, interest rates, and market expectations.

It is against this backdrop that we invited you, our valued readers, to participate in Livewire’s Income Series survey.

Thank you to everyone who shared their insights and helped to make the survey relevant and vibrant.

Please note that in the coming days we will be releasing the following results from the survey, so make sure to stay tuned:

• The top 10 income funds and ETFs in 2023 as voted by Livewire readers
• Livewire readers’ top 10 dividend stocks (and 10 more that are underappreciated)

2023 Income Series Survey snapshot

• 1002 people surveyed (up from 830 last year)
• Funding Retirement (73.2% - down from 76% last year) and savings (22.7%) were the two main reasons for income investing
• Most participants (46.7%) are still looking to acheive a yield of between 4 - 6% per annum (down from 53.7% last year) to support their lifestyle. But notably, 39.2% of participants are seeking incomes of 7-9%, up from last year's 32.1%.
• Domestic equities remain the most popular asset class for income, with 93% of respondents saying they had exposure. That number has come down in recent years. In 2021, the figure was 97.6% and last year, it was 93.6%.
• Cash, at 54%, has displaced global equities as the second most popular asset class for income generation. In 2021 and 2022, global equities were in second place with 63.2% and 56.1% respectively. This year they garnered 45.8% support.
• 11.1% of participants said they are likely to increase their allocation to term deposits in the next 12 months, half of last year's 22% total.
• 50% of participants said they are likely to increase their allocation to domestic equities in the next 12 months for income, down from prior years

Big concerns for investors in 2023

The same three concerns from last year topped the list this year – although the percentages have changed dramatically.

Last year was as follows:

• Inflation – 55.5% of respondents
• Recession – 51.5% of respondents
• Geopolitical tensions – 51.1% of respondents

Below are this year’s results.

And for anyone wondering if respondents lazily selected the top three as they appeared in the survey, this doesn't seem to be the case. In 2021, the top concerns were overvalued stock bubbles, geopolitics, the global debt burden, along with COVID-19 waves and lockdowns.

Where are you allocating now for income?

Interest in most asset classes for income generation has remained relatively steady in recent years, whilst cash has come roaring up the chart.

Looking ahead

Perhaps the most interesting reading comes from which asset classes investors are looking to allocate more funds to over the next 12 months in order to generate income. 

• Interest in domestic equities is down over the past three years, from 69.3% in 2021, to 68.3% last year, before falling sharply to 50% this year.
• Global equities interest has waned significantly in the past three years. In 2021, the figure was 55.4%. Last year, it was 36.1% and this year, the figure is just 10.6%.
• Other changes: Term deposits 11.1% (down from 22.2% last year), corporate bonds 4.1% (down from 12.7%), government bonds 3.4% (down from 8.4%), private debt 3.3% (down from 11.2%)

New questions

This year we asked two new questions which offer very interesting insights. Interest rate hikes are difficult to swallow for mortgage holders. But for income investors, the rise in rates is not being viewed universally as an additional tailwind.

35% of respondents believe that rising interest rates have been a tailwind for their income strategy while 30.9% said it has not affected their strategy at all. 

Given the dramatically changing environment, we also asked how people’s expectations have changed with regard to how much capital growth investors will be able to generate from their portfolios in the next 12 months.

Whilst the majority have lowered their expectations (44.3%), a large chunk of respondents are either expecting the same returns over the long term (30.8%) or have raised their expectations (10.7%).

  

If you would like to access a report with the entire survey data, you can do so via this link.