Knee-jerk decisions during market volatility could hamper investors from achieving their goals.
Around 64% of Hong Kong investors said that they failed to achieve their investment objectives in the past five years, higher than their Asian (54%) and global (51%) peers, a study by global investment manager Schroders revealed.
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The study found that Hong Kong investors expect an average annual return of 9.6% over the next five years, lower than their Asian (11.5%) and global (10.7%) counterparts. Although they have more realistic expectations, their anticipated returns still exceed the 6.7% five-year annualised returns generated by global stocks as measured by the MSCI World Index, implying over-optimism.
Currently, the average investment horizon amongst Hong Kong investors is just over two years, significantly less than the five-year investment horizon that most investment advisors and professionals suggest.
The survey also found that on average, investors check their transactions 35 times a year or three times a month. However, Schroders noted that their short-term and knee-jerk reactions in times of market volatility could hamper them from achieving their investment objectives.
Almost 8 in 10 Hong Kong investors (79%) made changes to their portfolio risk profile when the MSCI World index of global equities fell sharply in the first quarter of 2018, with 32% taking more risks whilst 69% moved into lower risk investments or cash. These actions reportedly suggests that the investors may be attempting to time the market–an act that is notoriously difficult if not impossible, according to Schroders.