In a market downturn, 60% of Singaporeans would divest equities within a week, with over half (32%) divesting within 24 hours - despite historical data showing this usually leads to lost gains for retail investors in the long term, according to a new report launched by St James's Place Wealth Management Asia (SJP Asia).
SJP Asia’s inaugural Money Relationship Monitor looks at the relationships of local retail investors with their money, including their approaches to investing, spending, and saving.
With 41% of Singaporeans without any financial plan, it finds that a failure to plan is often driving Singaporeans to make financial decisions based on emotion rather than fact, and many are falling short in their wealth creation goals.
As well as equities, more than one quarter would also divest from cryptocurrency and exchange-traded funds (ETFs) within 24 hours in the event of adverse performance.
In terms of savings, while 57% of Singaporeans aspire to commit more than 20% of their annual income to savings, only 44% achieve this. Two-in-five (40%) are either dissatisfied with their current savings levels or unsure if they have enough. Of those who do have a financial plan, 14% have not incorporated the cost of inflation.
Among other reasons cited by Singaporeans for not saving more, are high living costs at 38% and a lack of discipline with how money is spent at 37%. With 28% saying their living costs and income are not balanced.
Gary Harvey, Chief Executive Officer, SJP Singapore, said: “Sound financial planning goes beyond just saving to provide a clear pathway for wealth creation over time. Amid economic uncertainty, a plan is critical as investors are more likely to act on emotion rather than fact. This behaviour does not always translate to better long-term investment outcomes.
“Our own modelling shows that investors who divested equities within 24 hours of markets starting to fall on 19th February this year, and did not re-enter, would have lost around 18% of their investment value, by comparison, those who stayed invested would have most likely gained.”
Investing Amid Uncertain Times
Outside of cash, the report finds that Singaporeans have the most exposure to equities (67%), insurance (investment-linked policies or ILPs) (57%) and property (56%).
Pre-COVID-19, Singaporeans were most satisfied with the performance of property (84% satisfied) and ETFs (82% satisfied). The most disappointing asset class was cryptocurrency (15% disappointed). Cryptocurrency at 62% and managed funds at 46% are the two asset classes Singaporean investors feel the least confident investing in.
When looking at portfolio management, diversification (19%), liquidity (18%) and risk levels (18%) are the three most important considerations for Singaporean investors, which is reflected in how they intend to adjust their portfolios in the future.
Mr Harvey said: “Investing with consideration is essential, especially in the current economic climate. Our study shows that while most Singaporeans are focused on building balanced financial portfolios, high levels of cash holdings and a failure to plan for inflation, may signal a lack of understanding around managing short versus long term risk. With uncertainty rife, it is important investors seek independent, professional support to grow their financial knowledge.”
Wealth and Happiness – A Balancing Act
The report further finds four in five Singaporeans (83%) believe being wealthier would make them happier, with almost three quarters (72%) citing a lack of money as a source of stress in their family relationships.
Interestingly, those with higher personal incomes are more likely to feel strongly that having more wealth would make them happier – with 34% of those with monthly personal incomes of S$10,000 or higher strongly believing this, compared with 24% with personal incomes below S$10,000.
In terms of households, one third (33%) of those with annual household incomes above S$250,000 strongly believe having more money will make them happier, compared with 23% of those with incomes below S$100,000.
It reveals that in the pursuit of wealth, 67% of respondents under 40 are prepared to work longer and harder while they are young, even at the expense of personal relationships, to build wealth.
For a vast majority of all Singaporeans (89%) generating alternative sources of income is a priority in the next 12 to 24 months.
However, conversely, 89% say having a balanced lifestyle is still more important than a higher income, with 77% believing that being wealthier will allow them to have better work-life balance.
“The perceived trade-offs between wealth and happiness is a classic dilemma. Pursuing financial freedom through salaried income alone can result in cyclical behaviour and many don’t recognise the price they pay by not taking greater control of their finances.
“With proper planning and advice, Singaporeans can invest prudently, diversify income streams, and ensure they are more robustly prepared for the future. Accumulating wealth does not need to come at the expense of a balanced lifestyle, it requires a plan,” said Mr Harvey.
About the Survey
The findings in this survey were analysed and established through a total of 2,064 interviews conducted online in February and March 2020 in Hong Kong (1,019) and Singapore (1,045).
Only respondents between the ages of 25-54 and which held personal investments in stocks, property, shares, funds, etc. were interviewed. All respondents were from households with a minimum annual income of S$70,000 to over S$250,000.
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