SINGAPOREANS are the second-most risk averse investors among 25 countries and territories covered by a new survey - preferring products yielding a safe or guaranteed return.
The annual Consumer Attitudes to Saving survey conducted by British insurer Aviva, which polled more than 28,500 investors worldwide, found Hong Kongers were the only investors more risk averse than Singaporeans.
Investors here and in Hong Kong also have short investment horizons, which could explain why structured products - with fixed returns over three to five years - had been so popular.
Yesterday, Mr Shaun Meadows, chief executive of Aviva in Singapore, Hong Kong and the Middle East, attributed the low-risk approach of investors here to their lack of financial confidence.
The survey found that more than half of the 1,000 Singaporeans polled, or 51 per cent, felt they do not have the information needed to make well-informed decisions on their personal finance.
And most typically turn to their family and friends for financial advice.
'Singaporeans feel poorly informed to make sound financial decisions, which might have led to a prevalent risk averse mindset,' said Mr Meadows.
Word-of-mouth is an important factor in helping guide decisions, with close to half of the respondents saying that recommendations by friends, family and colleagues who save or invest with the firm is most important when choosing a financial services provider.
Nearly seven out of 10 respondents here would recommend a financial services firm or product they like.
The survey was conducted early this year, before the outcry over failed investment products linked to collapsed US investment bank Lehman Brothers.
Mr Meadows said the controversy would likely reinforce investors' distrust of financial institutions.
He added that the current difficulties in the financial markets have not helped to build consumer confidence over where they can get reliable information.
The survey also found that Singaporeans have among the shortest time horizons for investments, behind Hong Kong and mainland China, with 66 per cent of respondents saying their preferred financial time scale was within the next five years.
The lack of affordability was cited by respondents as the biggest barrier to saving and investing more money. This is followed by the risk of losing savings or investments, low interest rates or potential growth and lack of good advice.
Now in its fifth year, the report also identified gaps in Singaporeans' retirement planning, reinforcing the need to better inform and help people save and invest for their retirement.
On a positive note, more than two-thirds of respondents here, or 68 per cent, are taking steps now to ensure that they have an adequate level of income for retirement. Still, 61 per cent are worried that they will not have enough money set aside for their golden years.
Generally, Singaporeans are open to working past the age of 62.
Investors here are second to Hong Kongers in wanting to work after retirement age. More than six out of 10 Singapore respondents, or 62 per cent, would like to work, either full time or part time, after the usual retirement age.
'All these clearly highlight the need for financial services firms to inform Singaporeans to raise levels of retirement planning to reduce anxiety about the lack of financial knowledge and insufficient levels of saving,' Mr Meadows pointed out.
This article was first published in The Straits Times on December 4, 2008.
The results from the survey are interesting indeed. The main findings are that Singaporeans have a short investment horizon of around 3 to 5 years, close to half of them felt they do not have the information needed to make well-informed decisions on their personal finance and depend on word-of-mouth as a guide for making decisions regarding personal finance.
3 to 5 years is not a short investment horizon in my opinion, at least not in the conventional sense. Usually, an investment horizon which is long is around one to two decades. A investment horizon of 3 to 5 years is sufficient enough for anyone to achieve a good return on his capital by investing in a bear market and exiting when the market recovers or is near a peak.
One should find an independent financial adviser for guidance in making financial and investment decisions if he or she do not wish to spend time in reading and picking up relevant financial analysis skills instead of relying on word-of-mouth from people they know. It is the equivalent of asking your friend to construct a building when he or she is not trained in civil engineering. Perhaps, this can also explain on why are there so many people who choose to invest in structured products when the yield for such products are rather poor. The authorities should make an effort to protect the public from poor investment products when close to half of them do not possess enough knowledge to make sound financial decisions.
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