Wise heads reap benefits of doing their research

Retail investors often rush to buy stocks or invest in financial instruments without proper research. Strategists say it is imperative that retail investors know about the products or stocks they are buying. Research by a regional bank proves this point.

DBS Bank (Hong Kong), in its latest Investors' Behaviour and Sentiment Study, which measures investment habits and behaviour, reveals that effective preparation before engaging in investment activities can optimise returns.

The research was conducted with Nielsen on a monthly basis since June 2009. About 30,000 respondents were involved throughout the past 33 months.

About 30 per cent of respondents said they invested last year. This ranged from 27 per cent to 34 per cent over the period, indicating a stronghold of a core group of investors during a period that saw the United States credit rating downgrade by Standard and Poor's and the European debt crisis.

Stocks were the top preference for investment products, selected by 77 per cent of Hong Kong investors from January last year to February this year.

They were trailed by investment funds on 33 per cent, with foreign currencies closely following on 32 per cent. The yuan, which secured the interest of 26 per cent of investors, was a notable mention. Based on data collected in January and February this year, 41 per cent of investors reported a gain from their investment activities during the previous three months.

The average profit recorded was about 10.5 per cent of their invested capital. In contrast, 46 per cent of respondents reported a loss, with an average drop of 15 per cent in capital.