Most Singaporeans to immediately divest equities in market downturn

But they may have lost up to 18% of gains by jumping the gun.

Three in five retail investors in Singapore said that they will immediately divest their equities within a week in the event of a market downturn—despite historical data showing that this usually leads to lost gains in the long term.

A study by St. James’s Place Wealth Management Asia found that 60% of Singaporean respondents would divest equities within a week, whilst almost a third (32%) will divest within twenty four hours.

However, this have proven to be a costlier mistake in the long run. SJP Asia’s model found that investors who divested equities within twenty four hours of markets starting to fall on 19 February, and did not re-enter, would have lost around 18% of their investment value compared to those who stayed invested.

With two in five or 41% Singaporeans without any financial plan, SJP Asia noted that a failure to plan is often driving locals to make financial decisions based on emotion rather than fact. As a result, many are falling short in their wealth creation goals, they added.

“Sound financial planning goes beyond just saving to provide a clear pathway for wealth creation over time. Amidst 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,” said Gary Harvey, CEO, SJP Singapore.

Savings-wise, whilst 57% of Singaporeans aspire to commit more than 20% of their annual income to savings, only 44% achieve this.

Furthermore, two in five (40%) are either dissatisfied with their current savings levels or unsure if they have enough.

Of those who do have a financial plan, 14% have not incorporated the cost of inflation.

Amongst reasons cited by Singaporeans for not saving more are the high living costs at 38%; and a lack of discipline with how money is spent, at 37%. Another 28% said that their living costs and income are not balanced.

Wealth=Happiness?
SJP Asia also found that more than four in five Singaporeans, or 83%, believe that being wealthier would make them happier. Almost three quarters (72%) cited a lack of money as a source of stress in their family relationships.

Those with higher personal incomes are more likely to feel strongly that having more wealth would make them happier – with 34% of those with monthly personal incomes of $10,000 or higher strongly believing this, compared with 24% with personal incomes below S$10,000, the study noted.

It’s the same tune in terms of per househoul income, with one third (33%) of those with annual incomes above $250,000 strongly believe having more money will make them happier, compared with 23% of those with incomes below $100,000.

SJP Asia said that these results show that in the pursuit of wealth, 67% of respondents under 40 are prepared to work longer and harder whilst they are young, even at the expense of personal relationships, to build wealth. A vast majority of all Singaporeans—89%— stated that generating alternative sources of income is a priority in the next 12 to 24 months.

On the other hand, despite this, an equal proportion of respondents or 89% also said that having a balanced lifestyle is still more important than a higher income.

This comes to heads with the 77% of Singaporeans surveyed by SJP Asia believing that being wealthier will allow them to have better work-life balance.