Friday, September 16, 2016

S’pore investors have unrealistic expectations of returns: Schroders

September 15, 2016

SINGAPORE — Singapore investors are unrealistic in their expectations of investment returns, with this over-optimism particularly pronounced among millennials than those approaching their 40s, asset management firm Schroders found in a Global Investor Survey.

The average investor in Singapore, according to the survey, expects a minimum return of 9.2 per cent per year. This is in stark contrast to the current average stock market yield of 3.8 per cent. Millennials were the most optimistic, expecting a 9.6 per cent return on their investment per year, compared with 8.9 per cent for investors aged 36 and above.

[Even the GIC is projecting lower returns over the next 10 years. Their latest report is a 4% return. And these are full-time investors with time to analyse data and trends. And the best they can do is 4%. Of course they will have critics who sneer at their "low performance". These critics are precisely the "CPF bloggers" type who think that they can get 9.2% returns per year.]

“In today’s low interest rate environment, Singapore investors’ return projections are extremely high. In order to minimise income shortfall, investors need to actively consider their investment needs and align their risk-adjusted return profile in light of current market conditions,” said Ms Susan Soh, country head of Schroders Singapore.

Highlighting that an average investor in Singapore only starts saving for retirement at 31.5 years, while setting aside only 14.9 per cent of their annual income, Ms Soh said: “It is also important for investors to plan their investments realistically with their financial goals in mind. This may mean that some investors will not have accumulated sufficient funds to support their desired retirement lifestyle.”

The study, which surveyed 20,000 end investors in 28 countries, also found that investors in Singapore have a short-term investment view and a high level of confidence in their investment knowledge. Investors stay invested for 3.06 years on average, the survey found, against the minimum of five years usually recommended by asset managers. Millennials were even more short term-oriented, holding their investments for an average of 2.61 years, compared with 3.47 years for their older counterparts.

“We also encourage investors to think long term when they invest. We believe a realistic risk-adjusted return can be achieved when investors stay invested for at least five years. Any period shorter will often prove insufficient to counteract the volatility associated with various investment types, such as equities,” she added.

The survey also found that Singapore investors’ self-belief is high, with 55 per cent describing themselves as having a higher-than-average understanding of investments.

Despite the high confidence in their investment knowledge, there is still an appetite to learn more, with almost all, or 95 per cent of investors, believing they need to improve their investment understanding.

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On investing for the long term: 

Why if you don't have to time to study the stock market, leaving your money in CPF may be the best option.

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