With today’s low yields and interest rates at historic lows, traditional sources of income such as bonds and bank account savings have failed to meet investors’ income goals. Investors continue to look for other sources of income -- whether to supplement pensions or paying for a child’s education -- but are they equipped with enough knowledge when choosing?
Schroders has launched incomeIQ, a new online tool designed in partnership with University of Cambridge behavioral scientist and PhD researcher, Joe Gladstone, to help investors determine their unique behavioral biases when making income investment decisions, and improve their income intelligence or ‘incomeIQ’.
Gonzalo Binello, Head of US Intermediary Offshore for Schroders commented:
“Our clients have had a tendency to invest in direct fixed income securities and real estate in order to generate income within their portfolios. This strategy creates a concentration risk and can make the portfolio returns vulnerable to the global interest rate cycle. That is why we stress the importance of a more diversified income oriented strategy going forward. We see continued need and demand for income and at Schroders, we want to ensure that investors are equipped with the knowledge to achieve their goals. The incomeIQ tool and knowledge center offers a hub for investors to explore their unique profile, along with guides, tips and products to help them make more informed decisions to build their income oriented portfolios”.
Is the tendency to look on the bright side always a good thing? Do you buy more when you go to the supermarket hungry? As humans we don’t always make logical or rational decisions. IncomeIQ, which is supported by in depth research on behavioral finance, can help investors understand their individual profile in order to make more informed investment decisions.
Our recent research shows that 88% of investors say they are on average or better than average at making investment decisions. People generally overestimate their investment ability and this ‘over confidence bias’ can cause errors in judgment.
Joe Gladstone, behavioral scientist and PhD researcher, University of Cambridge, England said:
“It is far more common for people to see themselves as above-average investors (41%) than as below average (12%). Psychologists have long found that people are biased to be overconfident about their abilities, resulting in unrealistic perceptions of risk. This overconfidence spills over into investment behavior too. The result is impoverished returns as investors take bad bets because they fail to realize that they are at an informational disadvantage.”
To try the tool and build your incomeIQ you may do so in http://incomeiq.schroders.com/en/americas/adviser/