People in Lithuania would like to invest in order to save money for a pension, housing or education, and get additional income besides their main source. But they do not invest and usually hold any money they save themselves or in deposits.
Only a fifth of Lithuanian residents have ever invested, and barely 13 per cent currently invest. Key factors that could encourage investing include not just bigger income, but also better understanding of financial markets. A third of people would begin to invest if they had enough knowledge in this area. Such is the situation revealed by a survey of the investment and saving habits of the country’s residents that was conducted on behalf of INVL Asset Management.
“The results of the survey show that Lithuanian residents aren’t inclined to invest and so usually choose the simplest financial instruments for their savings – deposits and cash. They put little money in the types of financial instruments that historically have provided the best long-term returns, things like mutual funds, shares of publicly listed companies, bonds and so on. In financially advanced countries, on the other hand, about a tenth of financial assets are held in mutual funds,” notes Vaidotas Rūkas, the Head of Funds Management at INVL Asset Management.
According to the company’s survey, a full 80 per cent of respondents have no investment experience. Asked what forms of saving and investing they know about, survey participants most often mentioned deposits (80 per cent), pension funds (72 per cent), real estate funds (69 per cent) and buying shares (63 per cent).
Bank of Lithuania data for the last quarter of 2015 show the country’s residents had a total of nearly 30 billion euros of financial assets (assessing shares and other equity securities, cash and deposits, pension funds, debt securities and loans, life insurance and annuity commitments, and mutual funds), which is more than 10,000 euros per capita. While more than half of these assets comprised equity securities and shares, the majority were shares not listed on an exchange.
The total value of assets entrusted to the management of professional investors at the end of 2015 was 3.4 billion euros, or almost a tenth of all the country’s financial assets and nearly 1,200 euros per resident. More than half of this amount, 2.1 billion euros, comprised pension fund assets. Looking at the total financial portfolio of the country’s households, 7.3 per cent of financial assets were held in pension funds, 2.7 per cent in life insurance or annuity entitlements, and just 1.4 per cent in mutual funds.
“Considering that the capital market was created from scratch a quarter century ago and we’ve achieved such a level of investment over the last 20 years, you have to say we’ve made good progress,” said Vaidotas Rūkas. He said the biggest financial events in the country during this period were also grounds for optimism.
“Take 2013, when more than a million people in the country who were accumulating pensions in second-pillar funds could choose whether to return to the state social insurance fund, give up an additional part of their salary for pension savings, or not change anything. Only 24,000 chose the first option, while more than 350,000 opted to save additionally in second-pillar pension funds. We see that as well-earned trust and also as recognition for a decade of good results,” he said. By the end of 2015, there were 1.21 million residents accumulating in the country’s second-pillar pension funds, of whom 500,000 were accumulating supplementary amounts and another 47,000 were voluntarily further saving in third-pillar pension funds.
On the other hand, the effects of the recent financial crisis can still be felt. “The mutual fund market, which is tiny even by Lithuanian standards, took a hit during the global financial crisis of 2008-2009. After that, people hesitate to additionally invest in riskier equity funds, scared there could be a repeat of that scenario. Short-term fear of losing some assets due to price fluctuations is leading people to choose the simplest financial products, which provide more safety but over the longer term create the least value,” the financial expert noted.
In terms of ways to increase investments, every third respondent (33 per cent) indicated that a better understanding of financial markets was something that would spur them to invest. Among other things that would entice people to invest, 60 per cent mentioned having more income, 22 percent mentioned having a clear objective, 19 per cent said a guaranteed return on investments, and 15 per cent said a bigger overall return on investments in the market.
Asked about investment objectives, survey respondents most often mentioned the desire to accumulate for a pension (50 per cent), 32 per cent mentioned wanting to have additional income besides their main source, 14 per cent said saving to buy a house or flat, and 13 percent said saving for their children’s education.
According to the survey, 15.5 per cent of men said that they invest compared with 10.5 per cent of women. By age groups, people aged 26-35 and those aged 36-45 most often invest, at more than 23 per cent and 17 per cent, respectively. Among those with a higher education, more than 20 per cent invest, and over half of those who invest have more than 500 euros of monthly income per household member. In terms of occupation, more than 60 per cent of top and mid-level managers invest, as do almost 30 per cent of small business owners.
The representative survey of residents’ investment and saving habits was conducted on behalf of INVL Asset Management by the research company Spinter Tyrimai, which interviewed 1,011 Lithuanian residents aged 18 to 75.
Note: This announcement uses Bank of Lithuania statistical data for the end of 2015 (S.14+S.15 Household and NPI serving households, financial assets, excluding trade credits, non-life insurance technical provisions and other receivable amounts).
INVL and Šiaulių bankas merged their retail services as of 1 December 2023.
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INVL and Šiaulių bankas merged their retail services as of 1 December 2023.