Sri Lankans are missing out on ‘power of investing’

The capital market in Sri Lanka is under-owned against its frontier market peers and as a result of this people are missing out on a valuable opportunities to build long-term savings for retirement, Candor Group Director and CEO Ravi Abeysuriya said.

Speaking at a forum organised by the Ceylon Chamber of Commerce on ‘Stock Market: Regulatory Framework and Investment Challenges’, Abeysuriya acknowledged that the Colombo Stock Exchange (CSE) had one of the lowest participation rates of domestic investors in our capital market.

Despite the fact that there are around 765,000 Central Depository System (CDS) accounts at present, in actual terms active trading happens in only about 25,000 CDS accounts, he stated. A recent study has revealed that around 350,000 are plantation worker accounts and another 100,000 are student accounts that are dormant. It was pointed out that this was largely due to lack of investor confidence and trust in Sri Lanka’s capital market, Abeysuriya elaborated.

Highlighting what people in Sri Lanka miss out on by demonstrating the ‘power of investing’, he said if Rs. 10,000 was invested by a risk averse investor in the NSB savings account in 1985 it would be worth only Rs.2,379 in 2015 even after compound interest due to a loss of purchasing power from inflation. Whereas, the same Rs.10,000 invested in the ASPI by a risk-taker would have given him or her the ability to buy Rs. 35,421 worth of goods or services in 2015 after inflation, that is 3.5 times more, he pointed out.

However, he urged caution when taking the risk of investing without long-term perspective as stock markets go up and down and therefore require staying power to wait until the markets recover over time.

Abeysuriya said for most people the capital market offers the means to participate as an owner in the growth of the companies that make up the Sri Lanka economy. What makes it powerful is that companies are motivated to grow their businesses over time. Stock ownership is the way for individuals to participate in that growth. Of course investing takes optimism about future opportunities. It requires investing wisely, taking a reasonable amount of risk and a long-term view and most importantly getting professional help, Abeysuriya said.

Clarifying his point further he said: “When we have a blood clot in our brain we enquire about the best, most qualified and respected neurosurgeon. We do not go to a smooth-talking nearby barber.” He said most people in Sri Lanka failed to exercise the same sense when investing their hard-earned money.

The potential for a prudent investor who invests in a portfolio of fundamentally sound stocks taking advice from a professional investment advisor who has the client’s interest at heart will have returns which will be several times more, he said.

Sri Lanka being one of the fastest aging countries in the world, Abeysuriya stated that “there will be massive social impact in Sri Lanka in the not-too-distant future unless they start investing. People will have a lower quality of life and may have to work longer and will have intergenerational stress.”  

Abeysuriya encouraged everyone to become financially literate and make use of the “power of investing” to transform their lives and make their dreams come true.