The influence of risk attitudes on how we invest for our retirement

What is it about?

In two experimental studies (Study 1—Hong Kong sample and Study 2—United Kingdom sample), we show that personal risk attitudes were a strong predictor of which retirement investment portfolios people chose. We found that for those that are risk-averse the tendency is to go for low-risk retirement investment funds compared to those that high a higher risk appetite.

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Why is it important?

Over 3 million people in Hong Kong and 21 million people in the UK are saving for retirement under the mandatory provident fund and individual savings account schemes, respectively. The question is, are they saving enough? One reason that people might not be saving enough for their retirement is that, if they are mostly risk-averse, they will likely put their savings into low-risk, and consequently low yield funds which means that they may not have enough to enjoy their retirement.