" class="no-js "lang="en-US"> UK Retail Investors Diversify in Response to Uncertain Economic Outlook, Finds eToro Study - Fintech Finance
Tuesday, March 19, 2024

UK Retail Investors Diversify in Response to Uncertain Economic Outlook, Finds eToro Study

UK retail investors have spent the last 12 months diversifying their portfolios amid the uncertain global economic backdrop, new research from eToro reveals.

The trading and investing platform’s latest Retail Investor Beat – a quarterly survey of 10,000 global retail investors (1,000 in the UK) – shows an increase in UK investors holding various asset classes – from foreign-listed equities and bonds to commodities and cash. However, one asset class bucks the trend, with the proportion of UK investors holding UK-listed stocks falling from 48% in Q1 2022 to 43% in Q1 2023.

Ben Laidler, Global Markets Strategist at eToro, said: “In the not-so-recent past many investors would have stuck with that they knew best – locally-listed stocks and familiar brands. That has become less true over the years as access to global markets has improved.

“The findings of our latest quarterly survey indicate that this diversification drive has been accelerated in the last 12 months as retail investors have sought ways to shield themselves from the uncertain global economic outlook. More UK investors hold bonds, more hold internationally listed stocks whilst far more are holding cash assets to take advantage of the high interest rate environment.”

Since Q1 2022, the proportion of UK retail investors holding foreign equities has risen by three percentage points, to 28%. There has also been a 15 percentage point jump (to 26%) in UK investors holding commodities, whilst the proportion holding domestic and foreign bonds has jumped two percentage points and six percentage points respectively.

When asked what the single biggest threat to their portfolio was over the next 12 months, UK investors were most likely to cite the state of the national economy (21%) followed by inflation (18%), with the UK still an outlier amongst major economies due to its plus-10% inflation figure.

Whilst uncertainty over the UK economy may explain why some UK investors have removed locally listed stocks from their portfolios, the FTSE 100 has held up better than rivals in the US and Europe over the past year..

Since 23 March 2022, the FTSE 100 has returned -0.7%, outstripping both the S&P 500 (-13.2%) and Europe’s Stoxx 600 (-3%), although trailing Japan’s Nikkei225 (0.3%) and China’s Shanghai Composite Index (-0.4%).

Laidler adds: “The FTSE 100 often gets criticised for a dearth of technology or growth stocks, but it has many strengths and has been a good place to be invested over the past 12 months. Firstly, it is choc full of good dividend payers, particularly important if you are in or approaching retirement and need income. It also contains some world-class brands likely to generate steady returns over the long-term, and it has cheap valuations. It’s a timely reminder that economies are not stock markets.”

The latest Retail Investor Beat also found that UK investor confidence has rebounded to its highest level since the bull market (Q4 2021), with 74% confident in their portfolios. More than a third (34%) plan to up their investment contributions in the next three months versus 12% who say they will reduce the amount they invest.

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