DIY Investors could miss gains of up to 11.3% a year
Millions of investors that build their own portfolios suffer from seven bad habits, according to research by independent savings and investment advice website BoringMoney.co.uk and Quilter, which can lead them to miss out on 11.3% of potential gains a year.
The research surveying over 7000 UK adults and over 200 investors revealed seven habits that can reduce their return or increase their risks, sometimes both. The typical unadvised investor takes a huge amount of investment risk and gets very little back.
Nine in ten (91%) UK adults aged 18 or over (46.5 million people), have not received professional financial advice in the last 12 months, according to a report from consultancy firms Ignition House and Critical Research to inform the Financial Advice Market Review. Of these, two-fifths (39%), or 18.2 million people, have £10,000 or more in savings and/ or investments and, therefore, might have a need for advice.
The seven habits that can reduce investment return or increase risk are:
- Holding too few shares, or being ‘undiversified’
- A bias towards the UK, ignoring the opportunities in overseas markets
- Lack of asset allocation, using only shares when other assets could help
- Overtrading, fiddling around the margins of their portfolios
- Panic selling, ditching all their holdings at the first sign of trouble
- Not rebalancing, losing out on the proven ‘Rebalancing Bonus’ returns
- Lack of pound cost averaging - Pound cost averaging is a technique where you make investments on a regular basis and therefore average the price you pay for the total investment over time
Rick Eling, investment director at Quilter comments,
Buying shares has never been easier; anybody can do it online. But just buying shares isn’t the whole story. To invest well you need to understand risk, diversification, timescales and your own objectives. Too many solo investors seem to think that good investment is about picking a wonder stock and getting rich overnight. It’s far less glamorous than that!
Our research shows that people tend to stick to what they know buying a small number of UK shares from brand name companies. They often assume that a big, solid brand is a sign of a safe, solid investment, but that’s dangerous. You only need to remember names like Marconi, AIG and Carillion to know why.
The majority of DIY investors could see more substantial returns with lower risks if they invested in the way usually recommended by professional advisers: a diversified, risk-based multi-asset portfolio.
Holly Mackay, CEO of BoringMoney.co.uk comments,
Even the most seasoned DIY investors can make mistakes and let emotions get in the way of smart decisions. The key advantage of using an adviser is in having someone who is detached and can keep good investing habits at the centre of decision-making processes.
Notes to Editors:
Boring Money conducted the research in four phases:
- Initial qualitative phase: based partly on another Boring Money study (“DIY Digital Wealth and Robo UK 2018”). This included one-to-one interviews with 15 investors and a survey of 186 others.
- Granular segmentation: a quantitative survey of 1,069 UK adults with investments over £50,000.
- Market sizing: based on a further survey of 6,385 UK adults conducted in February 2018.
- Qualitative validation: telephone interviews with nine investors of different ages and wealth levels.
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About Boring Money:
(www.boringmoney.co.uk) BoringMoney.co.uk is an independent research and content business which provides information, tips and Best Buys to consumers. The business conducts regular research with industry providers and consumers and looks at the developing DIY investment market from both the customer and provider perspective. Boring Money holds test accounts with over 25 providers and also holds regular focus groups and interviews with consumers to ensure regular input and feedback from the user perspective. Founder Holly Mackay has worked in the investment industry for 19 years and is supported by a team of 10 researchers, analysts and marketing execs. Boring Money is not regulated to give personal financial advice, nor is it regulated by the industry watchdog.
Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.
Quilter plc oversees £118.1 billion in customer investments (as at 30 September 2018). It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions and discretionary fund management. The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.
The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.
Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.
Advice and Wealth Management encompasses the financial planning network, Intrinsic; Quilter Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.
The Quilter plc businesses are being re-branded to Quilter over a period of approximately two years:
- The Multi-asset business is now Quilter Investors
- Intrinsic to Quilter Financial Planning
- The private client advisers business is now Quilter Private Client Advisers
- The UK Platform to Quilter Wealth Solutions
- The International business to Quilter International
- The Heritage life assurance business to Quilter Life Assurance
- Quilter Cheviot will retain its name
This press release is for journalists only and should not be relied upon by financial advisers or customers.
Please remember that past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back any of the amount originally invested. Exchange rate changes may cause the value of overseas investments to rise or fall.
This communication is issued by Quilter plc. Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270. Registered in England.
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