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Investors remain bullish despite market contraction – eToro

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UK retail investors have been standing fast in the face of a global sell-off with 90% holding onto their investments or buying the dip, according to research from eToro, the social investment network.

eToro’s investigation canvassed 10,000 retail investors in 14 countries, and 1,000 investors in the UK. The Israeli trading platform found that only 20% of UK investors had sold their investments as a reaction to recent market turmoil, and nearly one-quarter (24%) had used the market contraction to expand their portfolio by buying the dip.

The survey broke down respondents by time investing in the markets, and found that relatively new investors, who had been active since the Covid-19 pandemic, have been steely-nerved and held strong, avoiding the temptation to sell.

Of these new investors, 29% bought the dip with only 7% selling out.

“The golden rule of investing is that ‘time in the markets beats timing the markets’, so it’s encouraging to see investors, particularly those who are relatively new to investing, refraining from making any knee jerk decisions when things became choppy,” said Ben Laidler, eToro’s Global Market Strategist.

Erecting defences

However, eToro did note that investors have been building more defensive fortifications into their portfolios, with commodities becoming a particular favourite with UK investors. As a reaction to rocketing inflation and rising interest rates, commodity exposure was up 40% since 1Q22.

Other popular defensive plays since the start of the year have been energy stocks (up 18%), utilities (up 16%), but also tech stocks (up 16%) – which are fashionably being seen as new defensives – healthcare and real estate.

Laidler said: “Those who only started investing since the pandemic have been on a rollercoaster ride over the past two years. However, the message to these people is the same as it is to all investors: if you back firms you believe in and you have a long-term investment horizon, you significantly increase your chances of making a good return on your money.”

Risk recognition

However, investors have become more aware of systemic market risks with 50% of respondents to the survey citing inflation as the biggest risk, followed by international conflict (43%) and the state of the UK economy (40%). That said, eToro found that just over one-third had done anything to proof their portfolios against these risks.

Instead, eToro found that investors were prepared to double-down with 33% looking at increasing their holdings in the next year and 47% planning to keep investing at the same rate. Only 20% plan to invest less.

“For many, this is their first experience of a pullback in markets. Managing risk, mastering emotions and maintaining a focus on long term goals is something that even the most established investors struggle with. With bull markets ultimately built on the shoulders of bear markets and near four times the length and magnitude, staying the course should serve these investors well,” said Laidler.

This article is not investment advice. Investors should do their own research or consult a professional advisor.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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