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New research from behavioural finance experts Oxford Risk, reveals that during the early stages of the COVID-19 crisis when stock markets fell sharply, 8% of people with savings and investments either sold some of their investments or took their money out of the stocks markets.

Of those people who own shares, 34% say they now own fewer than they did at the start of the year, compared to 12% who own more.

Some 1.38 million retail investors sold £10,000 or more of their investments during the early stages of the crisis, and 531,900 people sold £100,000 or more of their holdings. In terms of what people did with the funds, 59% left it in cash savings, 31% used it to pay for living costs and 29% to clear debts.


In recent months stock markets have recovered much of their losses, but Oxford Risk’s research reveals that of those investors who cashed in some of their investments at the start of the crisis, 29% have not reinvested any of this money back into the markets. Only 10% have reinvested 50% or more. Of those that have reinvested the money into the stock market, 26% said they did this in one go, 52% did so a in a few ‘chunks’, and 22% have gradually drip fed their money back in.

Greg B Davies, PhD, Head of Behavioural Finance Oxford Risk said:

“Many of the investment decisions retail investors make are for emotional comfort, and in a normal year this can on average cost them 3% in returns. Driven by the COVID-19 crisis, stock market volatility levels have been greater this year, so the losses will be higher. Those investors who pulled money out of the markets in March will already have lost much more… they lost when the markets dropped, and many have missed out on the rebound since. Many are also likely to find it emotionally difficult to get this money reinvested for the long-term and so may lose out on even more foregone returns in the long-run.”

Paper losses only turn into real ones when you sell

There are many behaviours common with investors during volatile and uncertain times, and they can be tempted to focus too much on the present and feel compelled to do something even when sitting tight is the best solution. This means they can fall into the trap of selling low or buying high, for example, and the cost of this on average is around 1.5% to 2% a year over time. Those worried about falling stock markets should remember that they only turn paper losses into real ones when they sell.

“Retail investors should avoid watching the markets day-to-day as this increase anxiety and remain focused on their long-term plans and ignore much of the background noise that can tempt them into making the wrong investment decisions,” said Marcus Querin, PhD, CEO of Oxford Risk.

Oxford Risk has launched a free Market Emergency Survival Kit which allows retail investors to measure six key dimensions of financial personality, which the company has identified through extensive research into investor psychology and financial wellbeing. The service also provides personalised recommendations on how best to invest, which are based on the findings.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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