Investing is prioritised over property and savings

Investors are prioritising further investment over buying property, paying down debt or putting the money in savings accounts, a major new study has found.   Globally, 23% of investors, asked about their plans for their disposable income in the next year, said putting money into markets was a top priority. Only 13% said investing in or buying a property was most important, while 9% wanted to pay off debt.

Schroders Global Investor Study (GIS) 2017, which surveyed more than 22,000 people from around the globe who invest, found the propensity to invest in markets was strongest in Asia and lowest in the Americas and Europe.

What investors are doing with disposable income

Sheila Nicoll OBE, Head of Public Policy at Schroders, said: “Every country has different financial issues but one common theme is that people don’t tend to put away enough money to ensure a secure financial future.

“It is, therefore, encouraging that those who have started investing see the benefits and nearly 40% of investors globally have made either further investing or saving a priority in the next year. An additional 10% have also made their pension a main focus. In contrast, only 11% are prioritising luxury spending.

“If people can make regular saving and investing a habit, it will ultimately make it far easier for them to realise their financial goals.”

The study also found 13% of people prioritised buying or investing in property. This figure was broadly the same across continents. Among millennials, 16% made property their top priority, compared to just 11% among older generations.

There was greater disparity between continents when it came to debt. In the Americas, 11% of people made paying down debt (including mortgages) a priority compared to 9% in Europe and 5% in Asia.

The propensity to make investments a priority showed even greater geographical variance.

Who makes investment a priority?

People in Asia were most likely to prioritise investing in markets:

• 32% prioritised investing, compared to 20% of Europeans and 19% for investors in the Americas.

This pattern was also reflected in results for countries.

The table below shows the countries where people were most inclined to make investing a top priority for the next year. Asian countries are clustered around the top. Western countries, in contrast, are crowded around the bottom, bar the notable inclusion of South Korea at the foot of the table.

The countries that prioritise investing ... and those that don't

In Europe, the highest commitment to investing was in Sweden (29%) followed by Italy (26%) and Portugal (23%).

When it came to prioritising debt, Canada came top globally (18%) followed by South Africa (17%), the Netherlands (16%) and Australia (14%). Chinese investors were least likely to consider clearing debt – only 2% said it was important.

• See the full results from the Schroders Global Investor Study 2017 [hyperlink]

Spending on big-ticket luxuries was of greatest importance in Austria, where 21% of people named it as a top priority. Australia and the UK were in joint second place on this measure, with 17% of respondents making luxury spending a priority. It was of least importance in Taiwan and Indonesia where only 2% and 4%, respectively, made it their primary concern.

Saving remains popular

Given interest rates are so low in most developed countries, and with inflation climbing, the study found a surprising degree of loyalty to saving accounts. By having cash in a bank account, savers are often losing money in real terms.

The commitment to saving was highest in Portugal (29%) and Russia (24%).

We also compared this figure for each country against the proportion planning to invest in markets.

Despite the higher historic returns offered by investments, investors in many countries regarded deposit accounts as the best home for their spare cash in the next year.

Saving was more popular in Portugal, at 29% versus 23% for investment, in Russia, at 24% compared to 18%, and also in France (21% versus 16%).

In Asia, South Koreans also preferred to put money in the bank, at 19% v 12%. Even in the US, which has a strong investing culture, it was at 16% versus 17%.

Prioritisation of saving vs investing

The Schroders Global Investor Study, which surveyed people planning to invest at least €10,000 (or the local currency equivalent) in the next 12 months and who have made changes to their investments within the last 10 years, covers a whole range of investor attitudes and expectations which can be found at schroders.com/gis

It sits alongside Schroders InvestIQ, a new test that aims to improve the abilities of investors.

What is the investIQ test?

Do you make decisions based on logic and reason? The truth is our mind plays tricks on us more often than we realise. It makes us believe we’re thinking analytically, when we may be acting instinctively. So what feels like an informed decision, is actually clouded by behavioural biases.

The same thing happens when we’re making important choices – like how to invest our money.

At the heart of investIQ is a short test developed by behavioural scientists that helps you understand your investment personality. In less than 8 minutes, you’ll get a detailed report outlining which behavioural traits influence you the most, and how best to deal with them.

Take the investIQ test in less than eight minutes. Go to Schroders.com/investIQ