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J&T BANKA WEALTH REPORT: Survey of Czech and Slovakian dollar millionaires

9. June 2014

For the fourth time J&T BANKA, private bank of the successful, brings you unrivalled research on the behaviour and plans of Czech and Slovak dollar millionaires. Learn about the conclusions of this unique study and discover what our rich have to face, what hurts them, and where they invest.

Who are dollar millionaires?

Czech and Slovak dollar millionaires are mostly university graduates, (80% in the Czech Republic and 89% in Slovakia), standing on the threshold of their fifties, (the average age of respondents in the Czech Republic is 51 and in Slovakia 49). A whole 40% of Czech and 30% of Slovak millionaires are aged between 50 and 59. They expect a start-up of the economy and growth in GDP. They see the current economic situation rather as an opportunity for their investment. They are very active in civil society. They give to charity, support sports and cultural activities and actively engage in aiding victims of natural disasters. They are hurt by the way the justice system works, inefficiency of the government and high tax burdens. Dollar millionaires are in most cases company owners, (48% in the Czech Republic and 66% in Slovakia), executives in employment roles, (15% in the Czech Republic and 11% in Slovakia), or self-employed, (10% in the Czech Republic and 5% in Slovakia).

Dollar millionaires as investors

The majority of dollar millionaires consider themselves as conservative investors who regard correct layout of their investment portfolio as key. They are steered toward a certain conservatism primarily by the stage of life they find themselves in and they recognise their responsibility to their families, companies, and the people they employ.

They make decisions on investment very intuitively. Emotions play just as important a role as intuition when making a decision about a given investment, that is, how close a given sphere is to the investor. Dollar millionaires wish to understand to a considerable extent the field into which they are preparing to invest. In fact, 69% of Czech and 86% of Slovak dollar millionaires emphasise the importance of knowing a field.

Dollar millionaires often discuss their investments among small circles of friends and acquaintances, though it is a question of a professional "reciprocal exchange of information" where they offer their advice by way of exchange. Among dollar millionaires it is necessary to distinguish between "professional investors" who invest independently and who use a range of sources of information when making decisions, and between businessmen who deal with investments outside their own companies only marginally. For them, their primary source of information is therefore their private bankers.

Farmland and construction sites are climbing to the summit

Among dollar millionaires there is a visible departure from traditional investment tools which today, with the occurrence of a constant decrease in interest rates, no longer offer attractive appreciation. The most interesting areas of investment are agricultural land, (31% in the Czech Republic and 38% in Slovakia), or construction sites, (28% in the Czech Republic and 20% in Slovakia). The cost of farmland, which in comparison with that of neighbouring countries is very low, plays in its favour and therefore in all likelihood the cost of such land around Europe will sooner or later balance out.

The home stock exchange lacks allure

Purchasing companies, stock in foreign companies, and corporate bonds remain lucrative. Investment in shares, primarily in foreign companies is considered to be of interest, (24% in the Czech Republic and 23% in Slovakia). Both Czech and Slovak dollar millionaires, (52% of Czech and 75% of Slovakian), therefore agree that the Prague and Bratislava stock exchanges are not of interest for investment. This is primarily caused by limited offerings and minimal opportunity for traded companies to skyrocket.

Alternative investments are also in play

The desire to invest in companies can also be seen in the approach to start-ups. An entire 74% of Czech and 63% of Slovakian millionaires will not reject them. On the contrary, almost 40% are already contemplating investing in start-ups and approximately one in eight already has. Just as with investment in companies, here too there is a visible attempt to support the business and handing over of know-how. Alongside start-ups, dollar millionaires will not refuse alternative investments. Investment in paintings and other works of art, (45% in the Czech Republic and 38% in Slovakia), veterans, (16% in the Czech Republic and 21% in Slovakia), and in Slovakia also valuable coins, banknotes and old decorations, (9% in the Czech Republic and 29% in Slovakia), can enjoy the biggest interest. In contrast from a once traditional way of preserving wealth, philately is today in decline.

Expanding markets offer opportunity

Millionaires recognise the dynamically expanding south-east Asian market as the region to offer the most promising return on investment over the next three to five years. Indeed a whole 62% of Czech and 57% of Slovak dollar millionaires concur that the developing markets such as those of China, India, Russia, Africa or South America offer excellent possibilities for return on investment. At the same time they are very much aware of potential risks connected with such investments. The developed markets of Western Europe, the USA and Japan are considered stable yet only 45% of them regard these markets as places currently worth investing in.

Commodities have become a flop

The biggest slump in expected returns of investment was experienced by commodities, which dropped from 17% in 2013 to 7% this year among Czech millionaires. In Slovakia not only commodities experienced a downswing, (11% in 2013 versus 7% in 2014), but above all trading in currencies which plunged from 22% in 2013 to 9%.

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