CXOs save 40% of their annual income on average: IMA India report

The 2023 CXO Personal Finance Report delves into the savings and investment habits of CXOs, revealing portfolio preferences.

A recent personal finance survey by market research firm IMA India revealed that top executives (CXOs) are saving a substantial portion of their annual income, with an average savings rate of around 40%. The survey examined the investment preferences of these executives, with equity investments making up 42% of their portfolios, real estate at 22%, fixed income assets at 20%, and pension funds and insurance combining to constitute approximately 12% of their overall investment portfolios.

What is the 2023 CXO Personal Finance Report?

The 2023 CXO Personal Finance Report, which summarises the insights of the October 2023 survey conducted on wealth management practices within the CXO community, focuses on assisting C-suite and other senior executives in making more informed investment decisions. The report, which received responses from over 350 CXO participants, also sheds light on the prevailing trends in savings, investments, and portfolio diversification, among other things.

Analysing savings patterns and overall allocations

Examining savings patterns, the report highlights that while CXOs, on average, save 40% of their annual income, a quarter of respondents reported saving 50% or more, while another quarter reported saving 30% or less. However, these savings patterns vary based on factors like age and the number of years to retirement.

In terms of overall allocations across investment classes, the survey found that equity and fixed income together account for a significant portion of CXOs’ investment portfolios, with equity investments having a slight edge in a roughly 2:1 ratio.

Here’s a breakdown of the portfolio diversification as per the report:

Equity, in terms of portfolio allocation, is highest among Chief Marketing Officers (CMOs), approximately 45%, while CEOs, CFOs, and Chief Human Resources Officers (CHROs) fall in the range of around 41%.

Real estate makes up about one-fifth of the average investment portfolio, but its prominence increases for CXOs in the 40-45 age group.

Pension funds and insurance collectively constitute approximately 12% of the average portfolio and are essential components of financial planning. Younger CXOs allocate the highest share, around 14%, to this area, while those over 60 allocate the lowest, just 5.4%. Among those with life insurance, the majority opt for cost-effective term insurance plans.

Other popular categories include retirement plans, ULIPs and whole-life insurance. However, the report noted that age is a significant predictor of investment choices, particularly when it comes to fixed-income holdings, which tend to increase with age.

How investment portfolios changed for CXOs in last 5 years

The IMA India report found that mutual funds, direct equity, and real estate have seen the most significant shifts in allocation over the past five years in CXO portfolios, whereas other categories have experienced only modest changes.

However, the report addresses that these trends vary based on job designation, with CFOs and others leaning more toward direct equity, CMOs showing a tendency to avoid direct equity, and CHROs increasing their bank deposits, indicating a more conservative investment approach.

Expected changes in CXOs’ investment portfolios in next 1-3 years

In terms of estimated allocation changes in the next 1-3 years, younger investors express greater enthusiasm for direct equity, real estate, and gold, while older investors plan to increase their investments in private/principal equity and reduce their real estate exposure. Additionally, there is a noticeable decline in the inclination to invest in pensions and insurance as investors age.

Bottom line

The IMA India report looks at other prevalent factors like returns on Investment, Investment Decisions, etc. In conclusion, it incorporates personal wealth management recommendations from C-suite executives based on their investment experiences. The general consensus among CXOs centres on a straightforward message: ‘Start investing early and regularly. Trust in equity. Stay the course and watch compounding do its magic.’

Click here https://www.ima-india.com/reports/Personal_Finance/ to view the detailed report.