Nearly half of investors are selling off stocks to cover rising bills and a third are switching out of ethical investments
- Investors under 40 more likely to offload shares than older people
- Men show a greater tendency to liquidate their investments than women
- Some 34% of shareholders surveyed said they had divested from ethical stocks
Nearly half of private investors have cashed in shares to meet rising household bills over the past year, new research reveals.
Investors under 40 were more likely to offload shares than older people, and men showed a greater tendency to liquidate their investments than women.
People with between £500 and £10,000 of stocks were the most likely to bail out due to cost of living pressures, while those with under £500 or £10,000-plus were more inclined to hang on in the market, according to the survey by EQ.
Financial pressure: Investors are changing behaviour as everyday bills rise and markets plunge
Some 34 per cent of shareholders surveyed said they had divested from ethical stocks in favour of ones with greater predicted returns in the past year.
Younger people were more likely to do so, with 43 per cent of 18 to 40-year-olds adopting this strategy versus 23 per cent of 41 to 75-year-olds.
The rising inflation rate, which hit 9.9 per cent in August, and turbulent stock markets have influenced people’s financial behaviour as they struggle to make ends meet.
Older pension investors trying to protect their retirement pots are taking far smaller tax-free lump sums and at a later age, but their income withdrawals to fund everyday spending have risen.
And the number of people opting out of work pension schemes spiked by 29 per cent over the summer, other research showed.
>>>Tempted to cut your pension saving? Here’s why it can lead to long-term pain
EQ, a provider of share registration and other technology services, found some 44 per cent of private investors have sold shares over the past year to help them pay their bills.
This rose to 56 per cent among people age 40 and under, but fell to 30 per cent in the 41-56 age group and 29 per cent among people aged 57-75.
It’s important that investors who dip into their pots to cover bills think of how they are going to replace those funds
Meanwhile, 46 per cent of men ditched some of their stocks, and 41 per cent of women.
‘Investors typically look to invest with a long-term horizon to build wealth but the current economic environment means a lot of people are being forced to rip up their plans,’ says Thera Prins, chief executive of UK shareholder services at EQ.
‘Inflation is at a 40-year high, which is putting immense pressure on household finances, therefore it’s no surprise that many people are looking to make up the shortfall by selling out of their investments.
‘There is nothing wrong with that, but it’s important that investors who dip into their pots to cover bills think of how they are going to replace those funds when that financial pressure subsides.
‘Ask any expert and they will say that the best strategy to build long-term wealth is leaving your money in the markets for the long term.’
Prins notes that private investing has boomed over the last two years as people looked to beat low interest rates and benefit from a market recovery after the pandemic, but enthusiasm now seems to be waning.
‘While we may see a contraction, especially among younger investors who may no longer have the extra funds to invest in equities, this doesn’t mean the end.
‘Once this cost-of-living crisis is over, we may well see more of an evolution of the retail investing landscape, and a continuation in younger, hungrier investors.’
EQ surveyed 2,000 people aged 18-plus who live in the UK and hold shares.