The unitary trust is the top dog among capital market products for young people, those aged 18-40, according to the Securities Commission Malaysia (SC) Youth Capital Market Survey: A Malaysian Perspective .
Released on June 30 this year, the survey had a total sample of 1,003 participants nationwide, covering both urban and rural populations. It was conducted by the regulator to better understand youth participation in capital markets, and the findings will be used to guide policy direction for the SC.
The survey showed that 86% of young people prefer to invest in unitary trust funds when it comes to capital market products. These products are popular due to increased awareness and access created by trust consultants and financial planners.
The least popular capital market products are stocks and shares (65%), bonds/sukuk (19%) and private pension schemes (PRS) (14%). Surprisingly, equity crowdfunding (3%), peer-to-peer funding (2%), and exchange-traded funds or ETFs (7%), which are seen as more favored by millennials, are also less preferred.
Based on a questionnaire adopted by the Organization for Economic Co-operation and Development (OECD), the survey classified its respondents into two groups: young people with high financial literacy and those with low financial literacy.
The survey showed that young people with high financial literacy invest more in bonds/sukuk (24%), PRS (17%) and ETFs (9%), compared to those with low financial literacy (at 16%, 13% and 6% respectively). ).
Youth with high financial literacy also invest more in alternative investment asset classes such as equity crowdfunding (5%) and peer-to-peer funding (3%), compared to those with low financial literacy (at 2% for both asset classes).
Regarding non-capital market related products, insurance (79%) is the most popular, followed by Tabung Haji (68%), fixed deposits (60%), property/real estate (51 %), gold (47%) and foreign currencies. currency (47%).
Young people with high financial knowledge invest slightly less in Tabung Haji (65%) than those with low financial knowledge (70%).
However, the survey found that during focus group discussions, young people do not instinctively segment investment products into capital market and non-capital market investments. These products are rather classified in terms of level of risk or seniority.
In general, survey respondents do not have sufficient knowledge of the various capital market products in which they invest. Their superficial understanding of different products is based on basic knowledge, such as trading concepts, which apply more to certain types of products than others. .
“It is important to note that the mechanics behind most investment products were not clearly understood, as those who invested [in them] tend to rely heavily on their wealth advisors or agents [to make decisions]“, says the survey.
Crypto gambling and the YOLO mentality could be detrimental
Unsurprisingly, the survey showed that many young people are drawn to Bitcoin and cryptocurrencies primarily because of their volatile prices, which can actually make or break them in an instant.
“The rapid rise and fall of the market is making young people opt for higher risk investments with higher rewards. Their interest in [such] investment products has slowly increased compared to previous years.
“However, there are concerns about the low level of financial literacy of some of the young investors [who dabble in Bitcoin]which could backfire in their investment journey.
Cryptocurrency speculation aside, the mentality and behavior of young people could also make them financially vulnerable in the long run. For example, the survey highlighted that the You Only Live Once (YOLO) mentality among young people has led them to overspend to impress others, or invest in speculative asset classes for fun.
Young people today are also influenced by the “spend now, save later” culture, which is a form of debt culture. Some people think it’s normal to be in debt and have gotten into the habit of paying with credit cards while accumulating debt.
Young people could also be easily swayed by herd mentality, causing them to blindly invest in meme stocks, such as GameStop Corp, and glove stocks at the height of the pandemic, according to the report. Such a mentality is nicknamed FOMO, or the fear of missing out.
Finally, the report points out that young people of the current generation have less self-control and awareness, which has led them to spend money on unnecessary items to feel good. In other words, they tend to engage in retail therapy.
“Today, many young people overspend on shopping because they see it as a form of entertainment and [to] to please yourself [to make themselves feel better]. Shopping online makes them spend more impulsively,” he said.
Perhaps it is because of this culture that the top priority for most respondents – a total of 69% – is to have enough money set aside for emergency needs.
Their second and third priorities are having enough savings to support their children/family (68%) and pay off existing debts/loans (55%).
Although Malaysia is on track to become a super-aged nation – with 14.2% of the population expected to be elderly by 2030 and that figure will rise to 23.2% by 2050 – the country’s constitution a pension fund is not one of the main priorities of local authorities. youth. Only 27% cite saving and investing for retirement as their top priority.
Offline sources remain the most reliable
A higher level of technological proficiency, alongside the prevalence of the Internet, has made knowledge regarding investments more accessible through mediums such as social media, official websites, and search engine results.
However, the survey highlighted that offline sources of information remain the most trusted among young people, with word of mouth advice from friends, relatives and financial advisers being among the most widespread.
Additionally, most young people found talks and seminars to be the most effective way to spread investment information, followed next by social media.
There is a need to educate young people about the capital market, as many of them have not yet participated in the capital market. The information disseminated to them must be easily accessible and assimilable to prevent them from rejecting it.