The securities market is the beating heart of any economy. All capital investments, whatever description they may go by, end up on the securities market. No Wonder. It is the only place where money, in the literal sense, makes money. Sounds trivial? Maybe, but not for everyone – it seems to me.
How many Poles are aware that the only real and effective way of multiplying their savings is investment in securities? The truth is shocking, so when I saw the survey results I was a bit incredulous. Can it really be true that in the 21st century, the age of open and historically easiest access to information, an overwhelming majority of our compatriots do not know what the securities market is for? Individual investment accounts, all kinds of trust funds – all these methods of investment account for at most 5 per cent of total investment decisions of adult Poles. In other words, barely every twentieth Pole has made a conscious decision to own securities in one form or another. By way of comment, consider the statistics from across the Ocean where as many as 55 per cent of all Americans have invested some of their money through a stock exchange.
Those of us who have some sort of stake in the market are least likely to have invested the money on their own, without the help of some intermediaries. The number of individual brokerage accounts stands at a paltry two hundred thousand, more or less the same as ten years ago. There is little doubt that this number is a direct result of the financial crisis in the last decade, because the number of accounts grew steadily after 2007 to over four hundred thousand in 2010. In the early years of the crisis there would have been few individuals who chose to pull out of the market at a loss while low share prices acted as a magnet for investors. Thus, the negative impact of stock market falls was in fact deferred in time. Similar trends could be seen in the United States, where the current 55 per cent of American citizens with money in securities is a fraction less than the 65 per cent before the crisis.
Poles have been far more enthusiastic about investment funds, which have attracted over a million and maybe as many as two million citizens. The latter figure refers to the investors in all types of funds, the former is an estimate which takes account of the fact that a majority of Investment Fund Company clients own investment units in more than one fund. It’s precisely thanks to such funds that we can talk about any investment interest among individuals. This relatively large participation in investment funds compared to direct stock ownership is likely the aftermath of half of the Open Pension Fund savings being transferred by government order to the National Insurance Fund. This coincided with the biggest growth in the Investment Fund Company participation. On the other hand, it is noteworthy that the steady growth in this type of investment was recorded by the safest funds specialising in money markets and government bonds, not in shares or mixed instruments.
Thus, the question is: what do Poles do with their savings? Well, to begin with, they still have very little money of their own saved up. No point in me juggling the figures – the statistics can be easily found online. Saving money is not Polish people’s favourite pastime, no doubt about it. The truth is we keep what we can save, most readily in the bank, or under the mattress. Full stop.
It is a bit of a paradox because, with small earnings, we should be all the more keen to put our money to work. As I have said before, the place for that is the stock exchange. Of course, I don’t mean what is referred to as playing on the market. I mean long-term investment with a good earnings potential and acting as an alternative pension fund. Why do so few Poles decide to take this step? The simplest explanation is probably a lack of knowledge. Why then are there so few of us who invest in funds, where the knowledge argument does not stand up?
I admit I do not have a clear answer to these questions. The most convincing theory seems to be the belief among the majority of Poles that the securities market has something of a mysterious and elitist nature, and that in order to invest you have to have an enormous amount of knowledge and even more money. Of course, this is a mistaken belief. The securities market is absolutely for everyone, including those who, in putting money aside for their future pension, are prepared to invest not more than a hundred złoties a month. If you want to sleep easy, you could do worse than taking Warren Buffett’s advice and choosing a few strong and stable companies which are more than likely to grow in the future. I am not dropping any hints, but I can think of one such company which is a good investment. No kudos for guessing which one!
There is a lot of information online about Pole’s saving habits. Data on saving through banks and investment funds have been published in connection with the funds ranking:
Some interesting if somewhat arcane comparisons concerning the spending habits of Polish people:
Not the latest – it’s true – but credible information about stock market investment:
More about our savings:
Interesting calculations concerning the actual number of Investment Fund Company clients: