Capital volatility of bonds – a difficult subject

Bonds_interest rates riseFor many investors, the perception is that a fixed rate, fixed term bond provides certainty of income and return of capital.

But what if the bond is cashed in early? What impact does the current level of market interest rates have?

Research Study

This pioneering survey by M&G, a UK asset manager, tested the investment knowledge levels of Asia’s wealthiest individuals across China, Hong Kong, Indonesia and Singapore.

The results from the 1,000 respondents may come as a surprise to investors and wealth advisors alike, finding the region’s high net worth individuals are not as financially literate as they might think.

Levels of financial literacy

When asked to rate their financial knowledge, the participants broadly believe their financial literacy levels to be quite good. They gave themselves 6.3 out of 10 on knowledge of key investment terms, which was more than a third higher than the actual results.

Just 8% of the respondents answered all of the questions correctly, while 56% got less than half right. In relation to bonds, less than 30% of the 1,000 participants knew if yields go up, bond prices go down.

Need for advice

Just because an individuals level of wealth classifies them as sophisticated, or they seek out complex financial products, it shouldn’t be assumed they have the requisite knowledge to appreciate the risks.

This highlights the importance of access to personal advice to ensure investors receive appropriate information to make informed decisions.

You can read the full article on the Wealth Knowledge Gap, including the results between wealth levels, here.