Analysing the risk tolerance levels of stokvel investors

Stokvels (globally known as credit unions) as an investment alternative has been one of the most profitable informal investment products. Yet, it is not recognised as a formal investment product due to the large risk attached to its informal investment process. For this reason, it is pertinent to analyse the propensity to take risk of investors who choose to invest in stokvels compared to other investment products. Therefore, to profile stock investors, this paper aimed to analyse the risk tolerance levels of investors investing in stokvels based on their demographical factors. In terms of the demographics of the investors, the results of this study were similar to those of previous studies indicating a higher risk tolerance level for male investors, younger individual investors and those in high-income brackets. In aggregate, it was found that the majority of participants were willing to take average financial and investment risk with the expectation of earning average returns, therefore can be classified as risk-averse or conservative. Furthermore, it was found that investors investing in stokvels had the highest propensity to take on financial risk compared to all other investment product choices, especially those investing in government bonds. This will aid in the creation of investment offerings that investment companies offer to stokvel members, in range with their risk tolerance levels and possible investment objectives. This will be a step in the right direction of making stokvels safer for members and more profitable for investment companies.