- The Straits Times
When securities markets fall, younger Singaporeans are far jumpier than older ones and will quickly pull out, leading them to miss out on significant gains, a new report by robo-investor Stashaway has found.
In its Insights 2020 report, published on Wednesday (Jan 15), the company analysed the behaviour of over 92,000 local users aged 18 to 88 during a market fall of 19.8 per cent in December 2018.
The firm said most of its users were from the financial services, tech, government, and consulting industries.
It found that younger investors (which it defined as its 42,620 users under 30 years old) were three times more likely to withdraw, and 60 per cent more likely to stop their investments during market corrections, compared to older investors.
In contrast, older investors who had already weathered several market corrections tended to be more systematic in maintaining regular investments, meaning they benefited from price recoveries, said Stashaway founder Michele Ferrario.
“In a chaotic market environment… inexperienced investors focus on the losses they incur instead of the fact that lose prices represent buying opportunities they didn’t have before,” the company said in its report.
Ferrario added that younger investors were often inexperienced and tended to be fearful of volatility, resulting in them buying securities at high prices and selling them cheaply in reaction to market movements.
They also tended to have lower financial literacy, resulting in a panicked reaction when markets dipped.
The Stashaway head recommended younger investors aim for a more systematic investment approach to counter their emotional response.