Invest in stocks for smart retirement: SET chief

The Stock Exchange of Thailand (SET) is encouraging people to invest in stocks as part of their retirement plan, as the returns are higher than from normal savings and provident fund.

Meanwhile, the University of the Thai Chamber of Commerce (UTCC) has revealed seven mistakes most people make in their pension plan.

In her opening speech at the “Smart Goal, Smart Retirement” seminar arranged by the SET and Tisco Asset Management, Kesara Manchusree, president of the SET, said the asset most people around the world invest in for the long-term is stocks. She said Thai stocks have been offering average 17 per cent return on investment annually for the past 10 years, and even more in some years. Gold has been paying out around 9 per cent, government bonds around 4 per cent, and regular savings 2 per cent on average in the same period.

“Investors should understand that they need to make more investment in stocks in their portfolio, as it offers better return on investment than other assets,” she said.

She said only some 14,000 companies out of about 560,000 registered with the Ministry of Commerce provided provident fund to their employees. The great majority of firms (97.5 per cent) in this country do not provide such a scheme.

She revealed that there are around 2.6 million accounts with the 14,000 companies that provided provident fund to employees, but some 10 million people are depending on social security alone, which meant that a huge number of people do not have any form of provident fund.

“Investment for retirement is a long-term plan, so you should ask yourself: ‘Am I too slow to invest for my retirement? Is my investment too little?’ If too slow, it would mean that you have to invest more each year but if you have a long-term plan, you can invest smaller amounts each year and expect a better return on investment when you retire,” she said.

 

High savings

Boonlert Jitmaneeroj, a researcher from the UTCC, said a survey, with a sample size of 825, had revealed that Thai people aged 40-60 do not have a problem when it comes to saving, as the average “deferral rate” of 22 per cent is higher than most countries (US 5 per cent). However, the savings offered a low return on investment simply because people do not make investments with it.

“Having a high savings rate is a new hope and you may think that retirement is no longer a big deal now, but if you carefully look at the data and do some analysis you would see that this new hope is an illusion. You have to ask, out of the 22 per cent average savings rate, what is the return on your investment? If you save a lot but your money does not grow, there is a big chance you will be underfunded when you retire,” he warned. 

He revealed that Thais should be wary of seven “pitfalls” in planning for their retirement – too slow in planning; overconfidence; lack of understanding in planning for the retirement years; underestimating the amount of money you need after retirement; shorter life expectancy that what it should be; savings lower than what is needed; and retiring too soon.

He said people should start planning and saving for their retirement from the time they start working at 25-30 years of age. He said people who invested in provident fund, stocks, long-term equity fund (LTF), retirement mutual fund (RMF), and insurance would have a better chance of excess funding when they retire.

However, the highest return on investment is still stocks, LTF, and RMF. “If you cannot tolerate any risks from investment, you would have lower savings than those who can accept some risk from investment,” he concluded.