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Investors still expecting high returns despite market falls

Investors still expect unrealistically high rates of return from their investments despite stockmarket falls over the past two years, according to res-earch from Prudential.

Almost one in 10 of the 1,000 investors questioned in late January said they believed a fair annual return on their investments was at least 8 per cent while almost 30 per cent expect returns of around 4 per cent or 5 per cent.

Just one in 20 thought a 2 per cent or 3 per cent return was fair. However, 40 per cent of investors admitted they had no idea what a fair level might be.

The news comes as the Bank of England&#39s base rate stands at 4 per cent and the rate of inflation is around 1 per cent.

The FTSE 100 index has also plummeted over the past two years, falling from 18 per cent growth in 1999 to negative returns of -10.2 per cent in 2000 and -16.2 per cent last year.

Pru claims many investors have failed to register the change, believing conditions to be almost as favourable as in the late 1990s. It says in order to meet their expectations, investors should brush aside the criticism levelled at with-profits bonds and consider acquiring them for their portfolios.

Director of UK intermediaries Tony Kempster says: “Although with-profits investments have received some criticism recently, these findings show that they have an important role to play in meeting the requirements of investors.”

Dennehy Weller managing director Brian Dennehy says: “Investors should not be basing their expectations on historical returns but I do not think that is an argument for with-profits bonds.”

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