Over 60% of Hong Kong investors did not achieve investment objectives, Schroders study finds
The Schroders Global Investor Study 2019 has found that 64% of Hong Kong investors did not achieve their investment objectives over the past five years amidst paying close attention to their investments.
The Schroders Global Investor Study 2019, which surveyed over 25,000 investors around the world – including 500 of them from Hong Kong, has found that 64% of Hong Kong investors did not achieve their investment objectives over the past five years amidst paying close attention to their investments. This is much higher than their Asia (56%) and global (51%) peers who also felt the same. The study’s findings also suggested that Hong Kong investors are prone to making knee-jerk reactions during market volatility.
Control over investments
Hong Kong investors are conscious of and want to be in control of their investments. 74% of them said they are confident that they know how much money they have with each financial provider, which is on par with their Asia counterparts (75%) but lower than their global peers (82%). Like their Asia and global peers, Hong Kong investors on average check their investments 35 times a year – averaging three times a month.
Reactions to market volatility
Despite exerting control over their investments, Hong Kong investors’ short-termism and knee-jerk reactions in times of market volatility could be hampering them from achieving their investment objectives.
As the MSCI World index of global equities fell sharply in the final three months of 2018, a majority (79%) of Hong Kong investors said they made some changes to their portfolio risk profile during that period. Just over a third (32%) took more risk, the majority, 69%, moved into lower risk investments (42%) or cash (27%). This suggests Hong Kong investors may be attempting to time the market. Buying low and selling high is every investor’s goal. However, timing the market precisely is notoriously difficult, if not impossible.
The average investment horizon amongst Hong Kong investors is just over two years (2.1), less than their Asia (2.5) and global (2.6) counterparts. This is significantly less than the five-year investment horizon that most investment advisors and professionals suggest.
Prospects on achieving investment objectives
Hong Kong investors are relatively prudent about future return expectations. They expect over the next five years to make an average annual return of 9.6%, which is more realistic than their Asian (11.5%) and global (10.7%) peers. However, their expectation still exceeded the 6.7% five-year annualised returns generated by global stocks, as measured by the MSCI World Index. This indicates that Hong Kong investors are still over-optimistic on their investments.
With the hopes of achieving their investment objectives, 44% of Hong Kong investors believe multi-asset mutual funds are suitable products, while 39% of them believe buying individual stocks may help them achieve their investment objectives. 78% of Hong Kong investors also increased their investments in income generation strategies (i.e. Investment strategies that specifically aim to provide periodic payouts such as bond interest income or stock dividend income), compared to 12 months ago.
Investment is not just about understanding the dynamics of markets and the investment vehicles that are available. Behavioural biases could impact investment decisions as well. Schroders encourages investors to better understand their investment personality by taking the investIQ test, an online tool that can help them identify their behavioural traits and make better informed investment decisions.
Visit www.schroders.com/en/hk/retirement/resources/gis to find out more about the Schroders Global Investor Study 2019.
*In April 2019, Schroders commissioned Research Plus to conduct an independent online survey of 25,743 people who invest around the globe. The markets included Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Hong Kong, the Netherlands, Spain, the UK and the US. This research defines “investors” as those who will be investing at least €10,000 (or the equivalent) in the next 12 months and who have made changes to their investments within the last 10 years.
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