The overwhelming share of investors tracked by the analytics and research firm say they want to protect wealth from market shocks, but such an approach may not be all that smart.

Three-quarters of US investors are determined to protect their wealth rather than chasing market-beating returns – Alpha – even when such a risk-averse approach might not be the smartest long-tern course, a new study claims.

Cerulli Associates says its research has found that investors are particularly concerned about downside protection, possibly ignoring the need to deliver returns to compensate for inevitable market squalls.

"Financial services providers and advisors frequently focus on beating their benchmarks, but investors prefer an emphasis on downside protection by a three-to-one margin," Scott Smith, director of advice relationships at Cerulli Associates, said, 

"Our most recent research suggests that providers must take a proactive stance to help investors become comfortable with the realities of equity market exposure," Smith said. "Balancing downside protection with the growth potential necessary to help investors reach their wealth accumulation goals is one of the most challenging scenarios facing financial services providers," he continued. 

Left to their own devices, investors would tend to skew away from creating portfolios that would provide them with the greatest likelihoods of achieving their accumulation goals. "While there are myriad avenues to educate themselves on the basics of portfolio construction, most investors lack the willingness, confidence, or time to take this on themselves," Smith said. 

"This is simply not an area that most investors are eager to spend substantial time and effort learning. However, this gap between investors' preferences and accepted best practices in long-term portfolio construction leaves providers facing the real threat of disenchanted customers when markets struggle," Smith said. 

The study was taken from US retail investors.

(Editor's note: The findings are from the mass market, but it is not much of a stretch to imagine that the safety-first approach is shared by high net worth individuals in certain respects.)