Bangkok--17 Aug--SET
A recently-released study has found that investing 20% of savings in solid, low-risk stocks yields more than 3 times the return that could be expected from bank deposits. The Stock Exchange of Thailand (SET)’s Research and Information Division unveiled its research into returns derived from having some savings invested in other securities, e.g. stocks, bonds and debentures, while maintaining the major proportion in fixed-interest accounts.
The study, “Choosing better investment options for more returns” (SET Note No. 6/2549), confirmed that Thais tend to maintain a relatively high level of bank-based savings, at 19% of their liquid capital, compared with Americans, at only 1%, reflecting the US view that, although a low-risk investment, savings account returns are too low for retirement. Over the past 30 years, bank savings offered a compound annual growth rate of only 7% p.a., while stocks provided up to 12% p.a., SET Senior Vice-President Sethaput Suthiwart-Narueput, Ph.D., announced.
“If the public restrict their investment to bank accounts, they miss out on higher returns available from other financial instruments. However, if they invest in financial instruments alone, they are exposed to higher risk. But, if they invest part of their money in stocks, bonds, or debentures, they can enjoy greater returns at low risk, because of the remainder of their savings remains with the banks. Overall returns and risk levels will vary according to the proportion of savings individuals allocate to each option”, said Mr. Sethaput.
Using a fixed-interest account of THB 1 million as a case study, the authors assumed that THB 20,000 had been invested in five big-cap stocks every month for one year, from the beginning to end of 2004, totaling THB 240,000. Then, if a person held those stocks until the end of the Q2/2006, the total return on this portfolio, at fairly low risk, would have been almost 12%, or around 3 times the interest earned from the bank deposit alone. Moreover, his/her monthly returns on this portfolio never dropped below 3%.
The study also raised several other cases, illustrating that savers have a wide range of investment options adaptable to individual circumstances. For example, if they are not interested in stocks, they can always use government or private bonds, which offer different levels of returns and risks. The allocation and the weight given to each type of investment depend on an investor’s ability to absorb risk. Thus, if they are risk-averse, but seek returns higher than the bank provides, they can keep most of their money with the banks, and invest the remainder in other instruments.
For more information, please contact the Corporate Communications Dept.:
Ladawan Kantawong Tel: 0-2229-2036 / Kulvida Jintakawong Tel: 0-2229-2037 /
Nattaporn Boonprapa Tel: 0-2229-2049 / Watsamon Saowakhonsathien Tel: 0-2229-2797