Australians are optimistic but at the same time are risk averse and happy to stick with local equities.
Australian retail investors are parochial, fiercely independent and cautious, an inaugural survey of investor sentiment has found.
The survey, of 1040 retail investors conducted for Goldman Sachs Asset Management, found that most respondents believe Australia is the world's safest place to invest and plan to stick with local shares and cash or term deposits in 2013.
"Australian investors remain cautiously optimistic, but when it comes to investing they're quite conservative," Jessica Jones, the new head of third-party distribution at GSAM, says.
"I think it's quite clear also that there's quite a narrow focus on certain asset classes, that being term deposits and Australian equities."
Jones says she's been struck by the caution of local investors since moving from London four months ago.
"It's great to see that Australia seems to be much more resilient, but what I've been surprised at in my conversations with clients is that investors are not as optimistic as I would have expected, given the headline news that we see here relative to Europe," she says.
"Things have been very, very good in Australia, with the term deposit rates we've seen. As I quiz people, it seems to be that being a bit further away from the European crisis, that sort of uncertainty breeds more caution."
The survey found that Australian investors have enormous faith in Australia as an investment destination, and expect Australia to be second-fastest growing economy in the next decade, due to its close links to China.
Sixty-eight per cent of respondents named Australia as the safest economy in which to invest - well above the second-placed Switzerland at 12 per cent.
"This kind of home bias, if you call it that, is not really the case in the other markets we've surveyed," Jones says.
Just a third of German respondents picked their home country as the safest it was zero in Italy.
Furthermore, 81 per cent of respondents expect the Australian economy to grow by up to 4 per cent during the 12 months to October. "Nobody's actually really expecting the Australian economy to drop off a cliff," Jones says.
Fifty-nine per cent of investors expect annualised returns from their investments of more than 5 per cent, the survey found.
"If you contrast this to some of the surveys that we've seen in Europe, our recent Italian survey, for instance, only 5 per cent of investors expect a return of more than 5 per cent over the next year. People in Italy would kill for the kinds of returns we're expecting in Australia."
Shares are the investment of choice: 56 per cent of respondents reported they had "above average" investments in Australian equities over the previous 12 months, and 49 per cent expect "above average" returns from shares over the year.
Alongside Australian equities, cash or term deposits dominate investment intentions for 2013.
But with half of the respondents not planning to invest in emerging markets this year and a third unsure, GSAM says investors ignore fixed interest and emerging investments at their peril.
Philip Gardner, the head of GSAM Australia, says in the past 18 years, every time equities have underperformed cash, fixed income has outperformed by a significant margin.
"People haven't learned the lessons that history has provided that fixed income is an important component," he says.
Another finding was that 83 per cent of respondents said they relied on themselves, their friend or family or the media for investment advice. Just 17 per cent said they largely relied on a financial planner or broker.
The survey was conducted in September and October. The interviewees were "active investors" - people who had traded equities or managed funds in the previous 12 months - and earned more than $100,000 a year.