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Wealthy still confident in share market

Ahead of the September 14 federal election, a survey of Australians with a minimum net worth of $500,000 has been undertaken to establish the confidence held by the wealthy regarding the share market. The survey, by research group Hall & Partners Open Mind, was conducted in light of political uncertainty, continuous ripples still emerging from the global financial crisis and weak consumer sentiment.

Over the last 12 months, Australians have enjoyed significant gains on the local share market – particularly when compared to the measly interest rates being offered on term deposits or savings accounts. In that time, the S&P/ASX 200 (ASX: XJO) (Index: ^AXJO) has gained an incredible 22.7%, driven predominantly by Australia’s blue chip stocks such as Telstra (ASX: TLS), Woolworths (ASX: WOW) and Wesfarmers (ASX: WES) as well as the big four banks.

With the index having made such substantial gains in such a short period of time, it would seem reasonable for some investors to pull out of the share market and lock in profits.

The survey however, in which there were a total of 202 respondents, indicated that investors with a high net worth remain confident in the local economy. Whilst 43% of the respondents expressed their concerns regarding the direction of Australia (and a further 8% classed themselves as ‘scared as hell’), a convincing 59% still directly own shares, according to The Australian.

Although the survey was conducted prior to the most recent fortnight where shares were smashed and the index fell by roughly 5%, there is still a clear indication that the wealthy investors wish to remain in the stock market.

The large portion of high net-worth investors who own shares can be compared to results released by the Australian Securities Exchange (ASX: ASX) last month, where it was reported that only 38% of adult Australians have a direct ownership in shares.

Alex Moffat, director of broker Joseph Palmer & Sons, stated that his wealthier clients were continuously taking their money out of cash investments to purchase shares due to the low interest rates. Meanwhile, there have been increasing signs of interest from high net worth foreign investors in the local stock market as the Australian dollar begins to depreciate. Whilst some experts are predicting the dollar could fall to as low as US 60 cents, even more interest should be sparked.

The survey also shows that property is popular amongst the high net worth investors, with 54% of the respondents owning investment properties

Foolish takeaway

The confidence held by the nation’s wealthier investors should, in turn, give confidence to everyday investors. It’s a fact, corrections do happen and the index is very likely to retreat given the massive gains we’ve seen recently, however, by investing in quality well-run businesses, investors still position themselves to see healthy gains in the long-term.

Think it’s time to get involved? The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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