“Despite their portfolios’ declines, many affluent investors expect their investments to rebound within the next several years,” writes Jane Kim in today’s Wall Street Journal.

“Meanwhile, they’re investing in more fixed-income products and are regularly speaking with their financial planners, according to a new survey from J.P. Morgan Funds. The telephone survey, conducted in October, polled a random sample of nearly 500 investors, each with at least half a million dollars in investable assets.”

” ‘Despite the fact that 85% of them had seen their portfolios decline, over half said they expect financial markets will improve in 2003,’ said Cindy Gerhard, managing director of J.P. Morgan Fleming Asset Management, a unit of J.P. Morgan Chase & Co.”

“About 37% of those surveyed said they believe it will take two years or fewer for their portfolio to recover from the recent economic downturn they experienced; about 29% of respondents said it would take at least five years.”

“As a result of losing money during the market declines, investors became more conservative. Last year, 44% of respondents increased their investments in fixed-income products, such as tax-free municipal bonds and corporate bonds. More people also looked to managed accounts, with 11% of households adding them to their portfolios last year.”

“At the same time, investors are keeping money on the sidelines, with 57% of respondents saying they’re keeping money out of the markets. If the markets rebound this year, that cash could turn into positive momentum for the market, Ms. Gerhard said.”

“‘With affluent investors holding money back, you’re going to see that money coming back in,’ she said.”

“J.P. Morgan also conducted a separate survey polling about 300 financial advisers with at least $75 million in assets under management. The more successful advisers — those with substantially more than $75 million in assets — tended to have a more ‘sophisticated’ referral network and tended to offer more specialized financial services.”