Rich investors worry about stock market

June 20, 2014: 3:45 AM ET
wealthy investors
NEW YORK (CNNMoney)

The bull market of the last five years has resulted in extraordinary gains for the wealthy, but some in the 1% aren't sure how much longer the good times can roll.

A comprehensive study of wealthy families by private bank U.S. Trust found that only 40% of high net worth investors feel "bullishly optimistic" about the market. At the same time, 10% said they felt downright pessimistic and 12% described themselves as fearful of losing money.

Jim Quinlan, Chief Market Strategist for U.S. Trust, says a lot of rich people continue to worry about regulation, Washington gridlock, and the lingering effects of the Federal Reserve's unprecedented stimulus program, which has propped up stocks and the housing market but hasn't done much for the rest of the economy.

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"There's a lot of things keeping them from jumping in with both feet," Quinlan claims. He says many investors are more focused on the headlines, as opposed to the true earnings potential of American companies.

At the same time, Quinlan is encouraged by the statistics. He thinks they show that stocks still have room to run once more wealthy investors finally do get back into the market.

In that regard, 42% of those surveyed are pursuing higher returns despite the increased risk they see in the stock market. That's up from just 30% who said the same thing in 2012. Many in the upper class are focused on the long game, with an overwhelming number saying that funding future financial needs takes precedence over short-term financial needs.

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But Quinlan says the rich may also be playing catch-up after sitting on the sidelines for the last few years. The study revealed that wealthy investors who currently hold more than 10% of their portfolio in cash were three times as likely to say they missed out on the market rally.

"These investors have been whipsawed. Five years ago their big nest egg was shrinking dramatically," he says. "Some of these folks may have been lagging behind, now they're coming back."

That puts the ultra-wealthy in a similar category to the rest. Many individual investors sat on the sidelines as the stock market experienced tremendous gains.

What's the trick to getting rich?

But many in the high net worth arena aren't willing to get rich at any cost. One-half claimed the social, political, and environmental impact of companies are important considerations when deciding where to invest. Those with over $10 million in investable assets were most likely to examine such impact, the study found.

Quinlan says clients are often interested in building clean energy portfolios and putting money in companies with women at the helm. Investments related to water and food sustainability and natural resources are also gaining traction.

"In some shape or manner, they want to make the world a better place," Quinlan asserts."It's not phony, they feel very passionate about it."

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