To Singaporeans, investing is like your “favourite” relative. You know, the one whom you dread dealing with every family gathering. Like the grand-auntie who always pinches your cheeks and reminds you how you adorable you looked when you were a baby.
Three decades ago. And then loudly proclaims you aren’t as cute anymore.
Or the uncle with the thinning scalp and smarmy , lopsided grin who always wants a hug, and keeps his hands on your back LONG after you’ve let go of him.
That’s how we Singaporeans seem to treat investments, according to the annual BlackRock Global Investor Pulse Survey. We invest only 21% of our take-home pay, compared to 29% of savings, 24% on mortgage, rent and utilities and 26% on daily expenditure. So why are Singaporeans so adverse to investing?
According to the Survey, BlackRock identified 4 main reasons why Singaporeans aren’t investing more:
- Risk of losing initial investment and no guaranteed return
- Inadequate knowledge about investing
- Complex Investment Solutions
- Higher Cost of Investing
1. Risk of losing initial investment and no guaranteed return
We Singaporeans have made being kiasu a national sport. We’re so afraid of losing! Naturally, these two factors came up tops. We want to see returns but we aren’t willing to risk our initial investment. It’s like trying to learn swimming from online tutorials because you don’t want to get wet.
59% of those surveyed said a guaranteed return from their investments would encourage them to invest more. 42% said knowing that they wouldn’t lose their initial investments would encourage them to invest more.
The only “investments” that guarantee returns as well as avoid risk are long-term fixed deposits. But these give ridiculously low returns. Even six years ago, the best bank interest rates didn’t even reach 1%. These days, you’d be lucky to find one that’s above 0.7%. That means, if you invest $10,000 in a fixed deposit account for a year, the MOST you can get back is only $70.
Well, at least it’s safer than burying your money. Especially if you put up a sign that says “No money buried here!”
The irony of course, is that we Singaporeans are very good at spending money on 4D or Toto, or even in casinos. The odds of getting a return from those “investments” are even lower!
2. Inadequate knowledge about investing
The next factor that would encourage Singaporeans to invest more is to get more adequate knowledge about the various investment products. 40% say that better knowledge about investing would encourage them to invest more.
A beginner investor, when confronted with the various investment options available, is likely to look for advice because they don’t have enough information. Bonds, unit trusts, shares and real estate investment trusts, just to name a few, each work differently to earn you money. Without knowing which is best for you, you might end up jumping on a bandwagon. For example, foreign exchange trading continues to be popular among young people hoping to get rich quick, but the high stress levels due to the volatile nature of the currencies proves it’s not for everyone.
3. Complex Investment Solutions
On the other hand, just having knowledge about investing isn’t enough if the investment mechanism itself is complicated. 32% feel that simpler investment solutions would encourage them to invest. That is why the option of using a Regular Savings Plan to invest in an Exchange Traded Fund is so important for Singaporeans.
A Regular Savings Plan welcomes small-time and beginner investors who may not have large capital traditionally associated with investing. The Exchange Traded Fund allows the investor to diversify his investment and reduce his risk. True, they are not principal-guaranteed, but if you are looking to invest for the long-term, the risk is reduced.
4. Higher Cost of Investing
30% of those surveyed felt that a lower cost associated with investing would encourage them to invest more. The fact of the matter is that commission fees and brokerage fees are there because others are doing most of the legwork for you. However, it only takes a little bit of research to find the lowest commissions or even commission-free trading options. That being said, a little more research will reveal that even those that don’t charge commission find other ways to make money, so be sure to find one that suits your needs.
Do you invest your money? What’s stopping you? Share your concerns about investing with us!