Survey: Every twentieth resident of Latvia reports investment in securities

18.06.2008 RIG

According to the survey conducted by the Riga Stock Exchange, last year 5.2% of Latvian residents have invested in various securities with an objective to have extra earnings and make savings.

Indars Aščuks, Deputy Chairman of the Riga Stock Exchange Management Board, has observed: „For the time being, rather few people in Latvia choose securities as an investment object, if compared to developed economies with even centuries-long history of financial and securities markets. Yet, the Latvian securities and financial market has a high potential. With the welfare of Latvian residents improving and awareness of the different investment options increasing, we can expect that in futures people will increase investing in a variety of securities.”

Where exactly does the investor live?
The investors living in Riga and in Kurzeme and Zemgale districts have been equally active investors in various types of securities, thus saving up for future: 23% of the investors live in each of three areas, somewhat less, 17%, live in Vidzeme, and the remaining 14% reside in Latgale.
According to the survey, the people living in Riga have larger appetites for risk and extra earnings than those coming form the districts: 15% of investors from Riga have invested in shares and in investment fund units – instruments bearing a higher risk, but also promising higher returns. The investors from Vidzeme (14%) are only somewhat less willing to invest in shares and investment fund units, followed by those from Kurzeme, Zemgale and Latgale (10% of investors from each).

A youngster or a senior person?
In Latvia, the investors in age group between 25 and 34 have proved to be the most active ones. Last year, 25% of people who have made investment were 25-34 years old; the same percentage in this age group are planning to proceed with investing this year. It should be admitted, though, that last year people between 15 and 54 years of age (building 87% of all investors) have been investing about in equal proportions across a broad spectrum of securities. The explanation is that at this age people are earning money and considering the best investment options that would secure their future income and increase of wealth.

Investment in shares, pension funds, investment fund units or diamonds?
According to the survey results, last year pensions funds, chosen by 64% of investors, turn out to be the most popular investment; 39% of investors have decided that shares will earn them more income, while 19% have bought investment fund units. Debt securities, derivatives and other financial instruments have been rarely selected as investment targets – by less than 5% of investors.

Latvian residents’ investment in 2007 – breakdown by type of security **


**respondents were allowed to choose more than one answer

„Nowadays people are thinking ahead and becoming more and more concerned about their income and quality of life in the second half of their lifetime. This is why pension funds are among the most popular investments, allowing a steady income flow at old age, thus retirement would not result in deterioration of quality of life. The popularity of shares and investment fund units are owing to their high returns, namely, long-term investments promise more earnings, at the same time allowing to set aside money“, Indars Aščuks explains.

Motivation is all that matters
Earning something extra is the main reason why many people in Latvia have made investments last year or planning to do so this year. 56% of respondents who reported on intentions to invest in financial instruments have recognize extra earnings as the main driver for investing in securities. Saving up for future is the second highest motivation not to spend all money but to set something aside for future by investing in securities – 44% of potential investors have identified it as an important factor. 35% of respondents have admitted that it is a possibility to avoid money losing its value, which is an important aspect in the current economic environment in Latvia, with the average inflation rate soaring to next to 20%.

The main drivers of investing in securities**


**respondents were allowed to choose more than one answer

What are the expectations of people who are after easy money?
Only 3.9% of respondents, mostly young people under 24, think that investing in securities is an easy way to become rich. Only 2 respondents with a university degree agreed to this idea.

„Though, overall, shares and other securities have higher returns that more conservative investment instruments, e.g. bank deposits, one cannot call them “easy money”, because certain knowledge and skills are required in order to succeed and make profit. Random picking of shares in alphabetical order is not very likely to bring the investor the expected returns,” Indars Aščuks reminds.

The truth about males and females
The survey suggests that, contrary to the popular stereotypes, there is no much difference in the investment motivation between makes and females. As to males, extra earnings have been reported as the main driver for investing by 41% of male respondents, however, nearly as many respondents, 40.5%, have mentioned saving as an important motivation for investing; the latter was identified as the key factor for investing also by 43% of females.
32% of females report additional earnings as an important factor. According to the survey, mostly it is families with children who are considering investing.

Intentions in 2008
3.4% of respondents intend to invest in securities this year, while 16.9% are still considering investment. Mostly it is the same people who invested in securities last year who are planning to increase their investment. As to the people who are not planning to invest, higher income was reported as the main encouragement (by 47% of respondents). 31% of respondents admitted that overall improvement in economy would encourage them to invest, whereas 16% would invest in securities provided they had more information available, and for 6% advice from banks would serve as an encouragement. The survey results tell that the older the person, the less importance attached to the information availability in order arrive at a decision to invest in securities. For those who intend to invest this year as well, higher income, more favorable economic situation and information availability are of equal importance.

* In late 2007, the Riga Stock Exchange and “Latvijas Fakti”, a market and social research center, conducted a survey about investment habits, behavior and motivation among 1000 respondents in Latvia within age group between 15 and 74.


• There are 83,800 shareholders in Latvia owning shares of companies listed in a Baltic stock exchange.
• As to the type of securities, shares rank as No 2 most popular investment, with pension funds as Top 1.
• Latvian residents, in most cases, make investments in company shares that are listed on the Baltic markets.
• The stock exchanges in the Baltics currently have altogether 98 listings.



CONTACTS:
Aija Brasliņa, Corporate Communications Specialist
Riga Stock Exchange, +371 67212431