Malaysians build up financial resources during Covid-19 pandemic: StashAway report

PETALING JAYA: The challenging conditions imposed by the Covid-19 pandemic have moved Malaysians to be better prepared financially, according to StashAway’s Insight report “2021: How investors reacted to Covid-19.”

Following the pandemic, it found that 7% of its Malaysian clients are now saving more than half of their income from 3% before Covid-19 entered the picture, while 21% of the respondents stated they invested 30-50% of their savings compared to 13% who did so previously.

In terms of financial preparation, the fintech player revealed that 47% of its survey respondents think they should have more than six months of expenses in their emergency fund, although only 24% actually have saved up that more than that amount.

Its CEO and co-founder Michele Ferrario (pix) remarked that 2020 was challenging for many industries and will go down in the books as one of the most volatile years in modern history.

“Investors endured unprecedented market volatility and economic uncertainty, brought about by a global pandemic and other events, such as the US general election,” he said in the report.

Ferrario explained that such challenges drove StashAway to educate its clients and on long-term financial planning and investing, especially in times of extreme market volatility.

“We saw similar behavioural biases that we observed in the 2018 market correction. That’s why this year we wanted to reveal how Covid-19 and the 2020 market crash impacted investor behaviour, and how it made them change the way they think about their finances.”

Following the global market crash of March 2020, 9% of investors were more likely to stop contributing to their regular investment plans, while 41% of investors were more likely to withdraw their funds from their investment portfolios.

The report suggested that such reaction to market crash is due to investors wanting to prevent their investments from losing further value as they are more likely to check on their investments and withdraw funds when they think the value of their investments will drop.

StashAway’s survey found impulsive investors who withdrew their investments during the market crash and took no action during their break even point saw a -5.61% average money-weighted returns as opposed to the 10.74% in average money-weighted returns those who continued investing as usual.

In Malaysia, it found that inexperienced investors, who have never traded securities, are 73% more likely to pause their regular deposits in a market crash.

Stashaway also found that those under 30 years old are 7% more likely to pause deposits and 24% more likely to withdraw their funds during the market crash.