Investment - Articles - Risk aversion remains high when investing in stocks


 ♦ Half of the UK adult population (50%) have invested in a Cash ISA 
 ♦ Only 14% of people have invested in a Stocks and Shares ISA
 ♦ 86% of people said they would not invest in a stock market related investment over the next twelve months

 24 million people across the UK (50% of the adult population) have invested in a low risk cash ISA, according to Scottish Widows’ seventh annual Savings and Investment Report. This compares to almost 7 million people (14%) choosing to invest in a higher risk stocks and shares ISA, with the hope of greater returns.

 Market linked investments, such as stocks and shares ISAs involve a degree of risk to capital and require a longer investment period than a cash portfolio, however the opportunity for enhanced returns and hedging against inflation is much higher. When taking a closer look at the younger generation it is therefore interesting to see from the research that just 6% of 18-34 year olds have invested in a stocks and shares ISA, compared to a fifth (20%) of 50+ year olds. 

 There appears to be no real gender gap when looking at less risky cash ISA’s, however there is a clear gap when investing in stocks and shares ISAs, with females being much more risk averse, with just over one in ten (11%) investing compared to almost one fifth (17%) of males.

 Over half of cash ISA owners (54%) claim that the tax-free element was the main reason for investing, while a third (32%) of stocks and shares ISA owners state the potential for a greater rate of return as the main reason, with a further 17% saying it met with their long term goals. However, when people were asked if they would put money into a stock market related investment in the next twelve months a huge 86% said they would not.

 When it comes to long term versus short term savings habits, just 16% are investing exclusively for the long term, with a fifth (20%) investing exclusively for the short term. It is however promising that over a third (34%) of people are saving for both the short and long term. When looking at time horizons, almost a third (31%) state the short term as less than a year, while a further third (33%) state the long term as being as little as five years or less.

 Iain McGowan, Head of Savings and Investments at Scottish Widows said: 

 “It is encouraging to see some small signals of progress in people’s savings habits from this years report in relation to the large numbers investing in cash ISAs, plus those who are investing for both the short and long term, but there’s still a very long way to go. In particular, the savings perspective of the population remains short term as it aims to generate funds for emergencies or a rainy day. Whilst this is unlikely to change anytime soon, our challenge as an industry is to incentivise additional long term saving and persuade the UK population that the sacrifice is worth making.

 “Offering more flexibility that combines the accessibility of an ISA with a pension or other long term savings products could help future generations face up to the twin challenge of saving for short term while at the same time setting aside enough for retirement.”  

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