We Italians are a wonderful people. Financially speaking, then, we are almost unique. We find creative solutions to save rotting banks, squishing like eels through European rules and doing exactly what those rules were intended to avoid (for example a bail-out of a couple of Veneto banks instead of a bail-in), among the astonished looks of the international community.
And we are exceptional in our own way when we have to deal with the economy and savings, as shown by theStandard & Poor's Global Financial Survey, which sees us among the most ignorant in the world on the subject, or the PISA tests, in which our children regularly finish below the OECD average, in the second half of the ranking.
Investor Pulse, the BlackRock investigation
Research has come into my hands lately BlackRock's Investor Pulse, the result of a vast worldwide sample survey which takes stock every year of the habits and attitudes of Italians towards investments: at times I found it hilarious, especially if you cross-reference the results with those from other sources. Read carefully, and maybe a little zigzagging, the data come to outline the face of the average Italian investor: and I – he's stronger than me – see Totò's. Or that of a character by Alberto Sordi.
But judge for yourself: I distilled 10 key traits, not at all politically correct towards the Italians. I hope no one is offended if he feels touched; Needless to say, my aim is to entertain you a bit, indirectly conveying some messages about investment habits which, in their stark truth, would be even more unpleasant.
1) I am very worried – Economic worries afflict Italians: at the top of the ranking we find the taxation (and this explains, among other things, the at times irrational success of PIRs, fueled by real fiscal libido), which especially afflicts the older age groups. Followed by concerns about thehigh cost of living and political uncertainty. And then there is the issue of retirement, which continues to cause great concern at any age.
2) Lost investment opportunities – With the world stock exchanges in full bull market and bonds with the longest upward trend in history, try to guess where the Italians' money was invested? Well, the BlackRock sample data tell us that, from 2015 to today, Italians have reduced the equity and bond portion in their portfolios, instead increasing their liquidity (which was already very high), equal to an average of 62% (yes, sixty-two, you read that right). And this from 2015 to 2016, in a year in which world stock exchanges returned more than 8%, and liquidity had – practically everywhere in developed economies – negative returns in nominal and real terms. Here, in this context, the average Italian was increasingly heavily invested in liquidity. That is: asset allocation completely messed up.
3) Low rates, high confusion – How have Italians reacted to the reduction in interest rates in recent years? According to BlackRock's survey, 31% of us did nothing in particular (maybe someone didn't even notice that interest rates were at historic lows). But 7 out of 10 Italians say they have reacted. Wow! Tough! And how, pray tell? Well, of those 7, the majority say they have saved more and reduced consumption: that is roughly the opposite of what it would be rational to do. In fact, if you earn less on savings, theoretically you should be inclined to consume more. But who knows, there are other factors at play. So I find it amazing that other Italians say they have rushed to repay the debt. Um. Here too, in theory, with low interest rates, the debt (for example the mortgage) should be renegotiated, in order to borrow at lower rates, and perhaps for a larger amount. In short, with the movement of interest rates, the Italians have not hit one.
4) I do not understand anything – It is no wonder that a worried Italian, who in fact has done everything wrong that could have been wrong, feels ill-prepared and scared when it comes to making decisions about his savings. This is not a bad thing: fear is often our friend and saves us. Indeed, investor confidence is on the decline, according to data from Investor Pulse. Not only that, trust has dropped to a 4-year low. After all, Italians don't have the tools to understand – I'm sorry, but it's a fact: the 2014 Global Financial Survey by Standard & Poor's on 140 countries places Italy in last place (sic) in Europe; only 37% of adults are able to answer correctly at least 3 of the 5 questions posed on the basic concepts of economic-financial culture. And look, these are really simple questions. Creepy simple.
5) Horizons of glory – How long to invest? That is: what is the time horizon? In theory (but also in good practice), the planned investment duration is a function of age. Not only that, of course, but also that. Indeed, it is quite obvious that the investment horizon of a 5-year-old differs from that of a XNUMX-year-old. Or not? No, at least for Italians: according to survey data, when asked what is the ideal period to stay invested, the most popular answer was "XNUMX years" for all age groups. Furthermore, a good portion of Italians does not even have a vague idea of the investment horizon. Fantastic.
6) How much does it make me? – This is the classic question of the Italian investor. Too bad that, in addition to almost never making sense, the Italian investor has very vague ideas about what a reasonable answer might be. In fact, according to the BlackRock survey, just under 50% of Italians have an idea of what level of return to expect. The other 50%, however, have unrealistic performance expectations: on average, respondents would be willing to invest in exchange for an 11% annual return. Cool, 11% per annum… Shall I comment? But yeah, comment. I'll just tell you that an internationally diversified stock portfolio returned an average annual 5,1% in real terms from 1900 to 2016, its bond counterpart returned 1,8% and a balanced one (with daring arithmetic) 3,5 .XNUMX%. Add a couple of inflation points and you get an idea of the interstellar distance between expectation and reality.
7) Diversification to whom?!? – BlackRock's survey also explores aspects that can be considered relatively "technical" (regular readers of this blog know very well, however, that they are not so technical, but that it is the ABC of finance, which EVERYONE should know). For example, the idea of risk diversification is investigated. Well, only 28% of Italians have a (suspiciously vague) idea of what “portfolio diversification” is, and only 19% believe it is important. So stay focused, dear fellow Italian citizens, stay focused…
8) Invest for the long term, in liquidity – It is imaginative and disturbing at the same time that 17% of Italians are convinced of investing in the long term – for retirement, to be precise – in liquidity, counting on interest payments. Interests that today are around zero in nominal terms, and instead are abundantly negative in real terms, ie taking inflation into account. Who tells that 17% of Italians?
9) Oh my retirement! – Italians are very worried about retirement, according to the survey. The majority know that they cannot rely solely on the state for a pension that will allow them to live a peaceful old age. They know they will have to work longer hours. And so far, we see the light of reason. But then, Enter Sandman, “Exit, light,
Enter, night“, total darkness arrives: over half of Italians have not yet started investing in view of retirement, using, for example, supplementary pension schemes. A blah blah blah of quaqquaraquà, in short.
10) Think about it – Still on the subject of retirement, be careful, only just over half of Italians (56%) feel personally responsible for their pension future. If this number seems to you to be a reasonable value, you are wrong, it is not, as it is the lowest value in the world. So who should think about retirement according to the Italians? Hold tight, because my favorite data of the whole survey arrives, the symptom of a different intelligence, entirely Italian, a hidden intuition that does not exist in other countries: well, a surprisingly high portion (55%) of Italians has answered that the children or the partner must think about it (and thank goodness that "Mother" was not contemplated as an answer, otherwise I suspect it would have been popular). I don't think I'll surprise you if I tell you that these specific answers are predominantly from men (and the difference between women and men is statistically significant, I've done the math).
I've finished this first Lombrosian picture of the Italian investor – but, I tell you, there are plenty of data in Investor Pulse, so I think it won't end here and I'll still draw heavily on the survey in search of interesting ideas.
One last thing. Don't think that in conducting this sample survey BlackRock came across four random minus habens, who responded even more randomly. No: it is a well-done survey, with a sample of 2.000 Italians (and 28.000 interviewed worldwide). Therefore we must resign ourselves: they are valid, statistically significant data. We are just like that.
