Limited household participation in the stock market
Influence of life cycle and financial goals. Curetting© and Qualitative© reveal that life cycle determines investment decisions – the longer is the investment horizon, the riskier are the investments into financial products; 4. Risk tolerance. More risk-averse individuals will invest more in the safe asset relative to less risk averse individuals barriers including confidence , a feeling of loss of control over money. External factors that are usually met in the papers examining the personal financial decisions making to participate or not in the stock markets: 1 .
Entry costs. ћAlthough the literature has explored many possibilities, the view that seems to have gained most purport is that households contemplating entry in the stock market face some actual or perceived fixed costs of entry that can be overcome only if the planned size of stock investment and the perceived magnitude of the equity premium are sufficiently large relative to the costs”. Access to stock market is costs due to information and trading costs, including transaction time 6; 1. Social – demographic characteristics of the population.
For example, investigations reveal that urban dwellers tend to save and invest more than people from rural areas; 2. Legal conditions and political environment of the state (e. G. Supervision of the practices of mutual funds handling their accounts or the European Union directives on financial integration, financial liberalizing and removal of remaining capital controls that expanded the set of stocks available to households and lowered the costs of investing in theme); 3. Availability of professional advisory services for personal finances management.
Papers that examine the aspects of personal finance management reveal the importance of availability of professional advisory services in the households financial decision making process; 4. Other external factors: economic conditions and economic cycles, national mentality, entrepreneurship climate in the country, etc. As there might be several more factors that influence the decisions of households to participate in the stock market or not and each of it reveals vast fields of investigation, this paper will examine the influence of availability of professional advisory services for personal finances management.
Reasons of choosing this particular issue lay in the interesting coincidence that the country which possesses the largest proportion of households participating in stock market (about 33%) in EX. s the same country which is the first and most advanced in EX. to legally regulate and develop the institution of Personal Financial Advisor (this country is I-J). On the other hand countries with the lowest households participation in stock market rate (the Ballistics – less than 3%) are still making their first steps in legislation and development of Personal Financial Advisor institution.
Even though it might be only an accidental coincidence and only one of the before mentioned factors, this paper will examine the hypothesis that there is some correlation and causation between these two factors. Therefore further on the paper will examine 3 main issues: 1 . Relation between households participation in stock market and personal financial advisor institution; 2. Situation of personal financial advisors institution in I-J and Lithuania; 3. Households investment situation in UK and Lithuania.