Young people matter. With older generations increasingly reaching retirement age, millennials and Gen Z are becoming increasingly important to the economy. They are now the largest generational cohorts, with the power to influence consumer and market trends over the next decade. But these younger generations face challenges, including digitalization and a fast-changing job market.
Given the sheer size and potential of millennials and Gen Z, the Institute for Capital Market Research Malaysia (ICMR) recently conducted a nationwide study to understand better their issues, challenges, and behaviours regarding personal finance and investing. This article looks closely at ICMR’s research data and what it tells us about the next generation of Malaysian investors.
Not All Young Investors Are Alike
As with any generation, young investors are not a monolithic group – their individual needs and preferences differ due to various factors, from life stage to upbringing to income. ICMR’s survey, distributed to 1,500 respondents, found that millennials and Gen Z Malaysians can be categorized into three groups, each with unique characteristics.
22% of respondents formed Group A, comprised of those not investing in investment products. Meanwhile, Group B, making up 33% of respondents, only invests in Amanah Saham Nasional Berhad (ASNB) funds and/or unit trusts. The remaining 45% making up Group C, invests in various other investment products not limited to just ASNB and unit trusts.
Although millennials and Gen Z investors generally share attitudinal and cultural similarities that separate them from older generations – there are also distinct demographic and behavioural differences between the three groups of young investors identified by ICMR. These differences can be understood in demographics and income, financial literacy and risk tolerance, and income allocation.
Demographics And Income
Regarding demographics, there are more females in Group A and B, whereas 60% of Group C are males. A higher proportion from the East Coast does not invest (Group A), while Group C has a higher proportion from the Central region. Moreover, although Malays comprise only 58% of total respondents, they form the majority of those who do not invest (63%).
More notably, there are differences in household income levels between all three groups. While 69% of Group A earn less than RM5,000 in monthly household income, 56% of Group B earn between RM3,000 – RM7,000. Meanwhile, respondents who fall under Group C were found to have significantly higher incomes, with 31% having household incomes above RM10,000.
Nonetheless, in-depth responses of individuals via qualitative interviews with ICMR suggest that the level of disposable income matters more than earned income. Some interviewees felt they could start investing while making RM3,000 a month, while others only felt comfortable after earning RM7,000 a month. But all interviewees agreed that they are more likely to invest if their disposable income increases.
“I recently changed jobs and got a pay rise, and it’s been much easier for me to invest now. Before this, even though I was getting decent pay for my age, I found it hard because I enjoy my lifestyle like going out for meals with friends, and that’s not something I’m willing to give up”
Roshan, 28, consultant
Financial Literacy And Risk Tolerance
ICMR’s research suggests a link between financial knowledge, financial confidence, and risk tolerance with the likelihood of investing and the kind of products invested in. For instance, someone who does not know much about financial matters and has little financial confidence is also unwilling to take risks – hence not investing and falling into Group A.
This could also explain behavioural differences between Group B, which invests only in ASNB funds or unit trust products, and Group C, which invests in other capital market products. The first unit trust company in Malaysia was set up in 1959. This might be why retail investors are most comfortable with unit trust products, considering their long history in Malaysia.
Additionally, many investors who only invest in ASNB funds or unit trust products (Group B) tend to be less risk tolerant and financially confident. In contrast, those who invest in other capital market products like shares or cryptocurrency, which are perceived to be riskier, tend to have higher risk tolerance levels and feel more financially confident.
“I have an ASNB account, although allocations can be hard for a Chinese. I consider the money in ASNB and my unit trust savings because they’re safer. I have some foreign shares and some cryptocurrency, which I consider investing. I make sure I keep 60 – 70% of my money in the safer options and make sure they’re on regulated platforms, and then I’m happy to take more risks with the other investments”
Han Cheong, 32, civil servant
Income Allocation
Behavioural shifts across the groups are also reflected in ICMR’s survey results on income allocation. A higher percentage of Group C stated that they set aside amounts for investing only (27%) or separate amounts for savings and investing (30%). On the other hand, a higher percentage in Group B stated that they set aside money for savings only (52%).
This indicates a shift in mental accounting from Group B to Group C, with those who invest in other capital market products being more likely to distinguish between saving and investing. Mental accounting refers to the tendency to mentally sort out funds into separate accounts, affecting how a person thinks about their spending.
Complementing the survey data above, findings from ICMR’s qualitative interviews also suggest that many young Malaysians perceive safer investment products as “savings.” In contrast, riskier products are perceived as “investing.” This tendency concerns their own personal risk assessments and methods of mentally dividing their money.
“I opened an ASB account and took out an RM50,000 ASB loan because my mother said I should. I pay the loan monthly, but I honestly have no idea how it works. I didn’t know until now that I could also put money regularly into my account if I wanted to”
Haris, 25, journalist
Catching Up With Young Investors
ICMR’s research findings on young investors highlight that many factors are linked to one’s investment behaviour, including income, financial knowledge or confidence, and risk tolerance. Policymakers and industry players should avoid a “one-size-fits-all” approach when dealing with millennial or Gen Z investors and instead adopt more nuanced or tiered policies and products.
As for young investors who are still unsure or not confident about investing, leveraging behavioral insights to incorporate the right tools, self-awareness, and techniques to navigate their personal finances can help. Understanding their biases and using heuristics (mental shortcuts) to simplify the investment decision-making process will encourage safer and more strategic investing habits for the long term.
This article is part of a content series by the Institute for Capital Market Research (ICMR). Follow ICMR’s Facebook page to stay updated about behavioral tips and insights for better investing habits. To learn more about ICMR’s research on millennials and Gen Z, visit www.icmr.my or download the full report here.
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