High-Net-Worth Investors Indicate Steps They Are Taking in Anticipation of Tax Increases Next Year

Fidelity Survey Finds Investors Continue to be Pessimistic on Market Conditions but Are Still Finding Opportunities

BOSTON--(BUSINESS WIRE)-- Fidelity Investments® today announced the results of a survey of customers with at least $250,000 in investable assets on a range of topics that included potential tax increases, sector growth and opportunities in emerging markets. The survey was taken during a recent “Fidelity Viewpoints®: Inside/Out” event in San Francisco on September 6.

The Viewpoints event, which was also broadcast to select Fidelity Investor Centers and via webcast nationwide, is part of a series that was launched in 2010, and is designed to provide investors greater access to market insights from experts both inside and outside Fidelity. Key findings of the poll include:

Investors on Market Conditions

  • Market Gain or Decline – Just 46 percent of high net worth investors think that the market will end the year higher than its current levels, and 30 percent believe it will be down from current levels.
  • Long-Term Return Expectations – Despite market pessimism, these high net worth investors are still expecting positive returns. In fact, when asked about their average long-term annual return, investors say 5.8 percent, versus the annualized S&P 500 return of 1.3 percent1 from the previous five years.
  • Temporary Rally – Only one-third (34 percent) of investors believe the current market rally is sustainable. This lack of confidence in the current rally may be the reason why 54 percent of investors are only partially invested or slowly re-entering the market.

Investors on Taxes

  • Fiscal Cliff Looming – The majority (56 percent) of high net worth investors believe that politicians will postpone a decision on taxes and spending until after the 2013 presidential inauguration and when a new Congress in place. Thirty percent believe a modest short-term compromise will be achieved.
  • Tax Increase Concerns – Potential income tax increases were the most concerning for respondents (35 percent), with capital gains tax increases second (27 percent).
  • Hedging Against Tax Increases – Half of respondents said there are important steps they could take in anticipation of tax increases. The top three steps include converting retirement assets to a Roth IRA (12 percent), accelerating income into 2012 (12 percent) and deferring losses or deductions into 2013 (10 percent).

Investors on Investment Opportunities

  • Large Caps Lead the Way – Forty-five percent of high net worth investors believe that large cap equities offer the greatest potential upside over the next 12 months. This is followed by mid cap equities (29 percent) and small cap equities (26 percent).
  • Sector Growth – For the next 12 months, investor’s top choice (22 percent) for earnings potential is the energy sector. Information technology and health care are tied for the second spot at 19 percent.
  • Beyond Emerging Markets – While one-third (32 percent) of investors are already in the biggest emerging markets (e.g., Brazil, Russia, India, China), only 12 percent are investing in smaller emerging markets like Asia, Africa or Latin America.

“Successful investors keep their eyes focused on their long-term goals, in spite of short-term turmoil,” said John Sweeney, executive vice president of Fidelity Planning and Advisory Services. “By cutting through the day-to-day noise, managing risk and looking for long-term opportunities, our high-net-worth investors are exhibiting just that kind of mindset.”

Investors who are evaluating investment strategies for today’s market conditions can read a new Fidelity Viewpoint® article based on the content shared by the expert panelists at the forum and entitled “Strategies for uncertain times.” Additionally, video highlights from the event are available online.

About the Investing for Income Poll

The Fidelity Investing for Income Poll was conducted September 6, 2012 via a webcast interface provided by On24, (which was also broadcast to select Fidelity Investor Centers and via webcast nationwide). On average, 1,574 attendees responded to each question and the majority has investable assets in excess of $250,000. On24 is not affiliated with Fidelity Investments. The experience of the affluent investors who responded to the Fidelity Investing for Income Poll may not be representative of the experiences of all investors.

About Fidelity Investments

Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $3.7 trillion, including managed assets of $1.6 trillion, as of August 31, 2012. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

Investing involves risk, including risk of loss. The value of your investment will fluctuate over time and you may gain or lose money.

Fidelity, Fidelity Investments, and Fidelity Investments and the Pyramid Design logo are registered service marks of FMR LLC.

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1 Annual return rate calculated from S&P 500 performance from 8/31/2007 to 8/31/2012

Fidelity Investments
Corporate Communications, 617-563-5800

Source: Fidelity Investments