Income generation is important to investors and the outlook for such products remains positive as they seek a steady source of income for their financial needs, the study revealed.
The findings show a majority 83% of investors in Hong Kong hold at least one kind of income-generating product with the corresponding figure at 69% for Singapore.
In Singapore, a sizeable 34% of respondents said they are likely to invest in income-generating products over the next year.
“There is still a very big demand for income. Investors are also aware that with the withdrawal of the US from quantitative easing, risks are likely to go up next year. However, investors still want to have income as their overall part of the portfolio,” Sabrina Gan, head of retail distribution for Singapore said.
“The reason stems from demographic change, with lot of investors moving towards middle age or retirement age. The returns we have seen from markets so far have not been like those in the early 2000s. So investors are willing to give away quick gains for certainty in terms of returns.”
In terms of investment avenues, 48% of Hong Kong investors currently hold dividend-bearing stocks and 38% hold government bonds. On similar lines, 33% of the respondents in Singapore have shown preference for dividend-bearing stocks and 20% hold funds investing in dividend paying shares.
With the income generated, 61% in Hong Kong said they would take the income to spend and 39% would re-invest. While in Singapore, 44% said they would re-invest.
“That’s the beauty of income-generating products – they serve different investment needs,” said Julia Lee, head of Hong Kong retail and iShares distribution at BlackRock.
“We see a trend of the younger generation re-investing the income generated from their investments to continue to growth their wealth. On the other hand, older investors [those 55 and above] rely on this income to supplement their everyday expenses.”
The second BlackRock Global Investor Pulse Survey sampled 27,500 individuals in 20 markets, including 1,000 each in Hong Kong and Singapore, on a selection of financial and investment management questions.
Cash at high levels
Despite a relatively balanced portfolio, cash is still dominant, with investors in Hong Kong holding on average 42% of their portfolios in cash, which even they said is too high, indicating that the ideal amount of cash level should be 34%.
In Singapore, investors on an average allocated 46% of their portfolios in cash, while they acknowledged the ideal cash level should be 33%.
“While Singaporeans seek to diversify their investments all over the world, high levels of cash holdings are leaving then exposed to dangers of inflation over time – eroding their future purchasing power,” Gan said.