Stock market suffers exodus of DIY investors

Yet falling stock markets have prompted many to park their savings in the perceived safety of cash. Anna Bowes of the analyst Savings Champion said: “We are seeing a big increase in the number of people coming to our website seeking the best rates – and asking for help to improve the interest they are earning.”

What should investors do? Financial advisers warn against trying to judge the rise and fall of markets, arguing that the benefits of drip-feed investing mean the best strategy is to keep buying into the market when prices are low.

Calastone’s Edward Glyn said selling out of a depressed market, when stocks were generally falling, often worked against investors’ interests, as it meant that they would lose out on returns during the subsequent recovery.

Rick Eling of the wealth manager Quilter added that moving in and out of the stock market would also rack up transaction fees; most stockbrokers charge for every purchase or sale of a fund or share.

“Some savers seem to believe that good investing is about using clairvoyance to jump in and out of shares at precisely the right time,” he said. “This strategy is a fool’s game. If your long-term plan is sound, the best thing you can do when markets tank is to lose the password to your trading account. Many people focus on ‘what should I buy?’ when approaching the markets; the real secret to investment success is ‘how should I behave?’.

“The first approach lends itself to all kinds of dangerous errors and traps, such as herd behaviour, falling for scams or spurious tips, or emotional panic selling. The latter approach requires a clear goal, a relaxed mind, a sense of mission and an acceptance that rises and falls are unavoidable.”

As well as savings accounts, people are searching for reliable returns in the property market. Despite a crackdown on landlords, more than 483,000 homeowners over the age of 65 in England drew rental income from a residential investment last year, according to Savills, the estate agent.

It found that the number of homes owned by over-65s had risen from 1.3  million to 1.5 million over the past three years and estimated that those properties were now worth an estimated £437bn in total, or £387bn after any outstanding mortgage finance was taken into account.

This slow exodus away from the stock market is fraying nerves within the DIY investment industry. Hedge funds have been ramping up bets against Hargreaves Lansdown this month. A record one in 20 of its shares is now being used for “short-selling” – a bet that the company’s value will fall.

Last month Hargreaves Lansdown’s chief executive, Chris Hill, wrote in its annual report that while there had been subdued flows and lower activity, the firm had secured £5.5bn of net new business and attracted 92,000 net new clients.


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