Investor Confidence Falling

Sunday, December 8th, 2019

Every year the Financial Markets Authority (FMA) surveys the public to measure their level of confidence in New Zealand’s financial markets. The role of the FMA is to promote fair, efficient and transparent financial markets and surveying the public is one of the ways in which they find out how well they doing in this regard. In the latest survey, around 66% of those surveyed said they were confident in New Zealand’s financial markets. This is up from 58% in the 2013 survey, but below the 69% recorded in 2017 and 66% in 2018.

Investor confidence is influenced by many different factors. The reasons given in this year’s survey for not feeling confident were that people feel they don’t know enough, they are uncertain about the cycle of the market and the political climate and they are concerned about global financial insecurity. On the positive side, people are reassured by the current financial climate, our small, stable market, and confidence from good past experiences.

The survey also highlights interesting information about how and where people invest. Around 66% of New Zealanders have a KiwiSaver fund and for 32% of people surveyed, KiwiSaver is their only investment. After KiwiSaver, the most common form of investment is term deposits, held by around 34% of people. Shares, managed funds and residential property are well behind being held by slightly above or below 15% of people.

Understanding of basic investment principles is low, with less than half of people surveyed understanding what diversification means. Only 15% of people were able to correctly identify diversification as investing all your money across different investment choices such as shares, property and cash. There is much work to be done to improve the financial literacy of New Zealand investors. This is particularly important given the global uncertainty ahead.

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