Are young Singapore investors growing their wealth the wrong way?


SINGAPORE: Young investors here have performed poorly in managing their portfolios, according to an OCBC survey, although some online share trading platforms report that they are holding their own compared with older folk.

The OCBC study, which started in 2019, found that investors in their 20s began to underperform compared to their older peers in 2022, with only 36% on track with their investment goals.

In 2023, just 32% of investors in their 20s are on track to achieve their targets.

The top three investments in 2023 for younger people were fixed-income securities and bonds, international equities, including the United States and other markets but not Singapore, and exchange-traded funds (ETFs) that track US, Singapore and other indexes.

That is a slight change from 2022, noted OCBC, when the top three were Singapore shares, ETFs and fixed-income securities and bonds.

Chin Mun Hong, head of market insights at OCBC, said young people performed best in 2019 because they were riding on market optimism in tech stocks and cryptocurrencies.

OCBC found that 75% of these investors were on track with their investment goals at the time.

When markets took a downturn or when there was volatility, which has been the case over the past two years, young investors went off track more than other age groups.

Online and mobile trading platform CMC Invest, which started in Singapore three months ago, is observing similar trends.

Christopher Forbes, the head of CMC Invest Singapore, said males in their 20s fared the worst on his platform.

Investors in their 20s account for 12% of CMC’s client base, while 38% are in their 30s and the remaining 50% are in their 40s or older.

Forbes noted that the younger ones on CMC’s platform tend to pick stocks that are hot or topical, for example, Microsoft and Nvidia, which are linked to the OpenAI theme.

“They invest in high-beta stocks but do not lock in their profits, as they think the shares will go up to infinity,” he said.

High-beta stocks are more volatile and tend to outperform when markets are rising and underperform when markets are falling.

Forbes said young people’s stock investments fell sharply when markets turned lower, but because they did not lock in their losses, they also got burned more badly.

Noting that more than 75%of its clients are under 39, the online brokerage’s chief executive Ian Leong said younger clients have a slight edge over their older age cohort, based on a study it did earlier in 2023.It found that 58% of those between 20 and 39 years old broke even, while 54% of the older clientele did so.

Younger investors on Tiger’s platform were doing better than their peers because they had benefited from gains in US markets.

Leong noted that more than 80% of trades were placed on US stocks and ETFs that track US indices such as the Dow Jones Industrial Average, S&P 500 and Nasdaq 100.Moomoo Singapore, another online trading platform, also has a predominantly younger client base, with nearly half below 35.Chief executive Gavin Chia said investors in their 20s and 30s are the most active on the platform.

Chia said moomoo’s investors trade mostly in US stocks, with Singapore equities a distant second.

Over the past year, 50% of his clients have been profitable.

Moomoo and Tiger Brokers noted that there is a rising trend of young investors starting to trade derivatives like US stock options as they become more savvy.

Options can help them to hedge their investment risks or give them the leverage to amplify their potential upside, Tiger Brokers’ Leong added.

He advised young investors who are not as savvy or just starting out to opt for an ETF if they do not know what stocks to buy.

Forbes added that young investors could “buy a few ETFs to get a diversified portfolio of exchange-listed products”, which will allow them to easily track the ups and downs in the broader markets.

Jean Paul Wong, general manager at FSMOne.com Singapore, said young investors who are still new to the market should also bear in mind not to invest based on what is popular or being hyped.

FSMOne.com is an online “supermarket” with a full suite of investment products such as unit trusts, ETFs, bonds and stocks.

“Sometimes, choosing a so-called boring investment and a boring investment strategy actually can reap very profitable rewards for (young investors),” Wong said.

Dexter Tiah, 33, learnt this lesson the hard way.

Tiah, who works in a Singapore venture capital firm, bought renewable energy stocks amid much hype about two years ago, but the euphoria has since cooled and his stocks are down 50%.

He now allocates his investments into an 80-20 portfolio: 80% in passive funds like the S&P 500 ETF and 20% in stocks.

That 20% represents his “speculative investments”, where he buys into stocks that he believes will do well.

In that way, if he makes a wrong assumption about a stock, Tiah will at most lose out on a small portion of his portfolio, while the bulk of his funds are in the “best and biggest companies” listed in the S&P Index. — The Straits Times/ANN

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