Prudential warns ruling out stock market investment hits long-term returns
Prudential has recently released new research* that shows that one in four investors have ruled out a return to stock market investment in fear of losing money.
Around one in four potential investors - equivalent to 11.9** million people - are ruling out equity investments because of a lack of confidence in the stock market or because they don’t want to lose more money.
The FTSE-100’s 43 per cent surge*** from its low-point of 3,512.1 on March 3rd 2009 to more than 5,000 now has yet to convince millions of investors to return to stock market investing, Prudential believes.
But the retirement and savings giant warns that by ruling out stock market investments now, those people who can afford to save are potentially missing out on long-term gains delivered by the historically strong performance of shares.
The research shows 1.9 million - around 4 per cent of the population – have been put off investing more because of recent losses while approximately 12 per cent say they have no confidence in the stock market over the next 12 months and around another eight per cent say they have no confidence at all in the stock market.
Trevor Cheal, Retirement Savings Business Director for Prudential said: “The saying that it is not timing the markets but time in the markets that matters could never be more apt. Investors often act irrationally and driven by fear they sit out the markets as they begin to recover, missing out on some potentially spectacular gains.”
Prudential research shows that 32 per cent of those who do not intend investing in the stock market would be convinced to do so if they could be guaranteed they would not lose money, while 13 per cent say they will invest if the market shows strong signs of recovery. Another 6 per cent would do so if they had access to expert advice on where to invest.
However 25 per cent of those who reject stock market investments say there is nothing that could convince them to return to the stock market.
There are investors willing to buy however, with 9 per cent of the population - 4.3 million people - planning to invest directly in shares with another 11 per cent - 5.2 million people - planning to buy unit trusts or an ISA.
But direct equity investment is not the only option as Prudential’s Trevor Cheal, points out: “It is understandable that in volatile markets, investors may not want all their eggs in one basket and multi-asset funds which provide diversification can give them some degree of comfort while still giving the investor exposure to the stock market. Those who feel they lack the knowledge to manage a diversified portfolio should consider getting professional financial advice from a stockbroker or an IFA.”
Notes to editors
*Survey conducted by Research Plus among 2,000 UK adults aged 18+, between 9th – 15th July 2009
**Office of National Statistics 2007 show 47,864,000 adults aged 18+ in the UK. Research conducted for Prudential shows that 25 per cent of the 47,864,000 adults = 11.9 million
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