Singaporean retail investors’ attitudes towards market instability is a cause of concern because they are likely to disrupt their long-term financial planning, St James’s Place has found, as reported by FSA‘s sister publication, International Adviser.
In its latest Money Relationship Monitor report, SJP Asia discovered that as many as 60% of retail clients would divest equities within a week of a market downturn and 32% said they would do so within 24 hours.
While this would have a great impact on their financial lives, 41% of respondents revealed they have no financial planning whatsoever.
SJP Asia warned that the failure to plan is driving Singaporeans to make decisions about their financial lives based on emotions rather than facts, which is also making it harder for retail clients to meet their wealth creation goals.
Most people (57%) in Singapore said they aspire to commit more than 20% of their annual income to savings, but only 44% said they managed to achieve this.
Two-in-five are dissatisfied with the current savings levels or are unsure if they are enough.
But for those who actually have a financial plan in place, 14% have not taken into consideration the cost of inflation.
The top reasons that are keeping Singaporeans from saving more are high living costs (38%), lack of discipline when it comes to spending money (37%), and a lack of balance between costs and income (28%).
Gary Harvey, chief executive at 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 twenty four hours of markets starting to fall on 19 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.”
Wealth and happiness
SJP Asia is urging Singaporeans to rethink their approach to financial planning especially because 83% admitted that being wealthier would make them happier and 72% referred to a lack of money as a source of stress within their family.
Additionally, nearly nine in 10 (89%) have prioritised generating alternative sources of income within the next 12 to 24 months.
A recent study on investor behaviour between Hong Kongers and Singaporeans revealed that the latter group is more concerned with wealth creation, whereas people in Hong Kong are more likely to prioritise preservation of wealth
Harvey added: “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.”
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