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Cost Of Living Raises In UK

Shareholders Selling Investments As The Cost-of-living Rises

Friday, 7 October 2022

It’s no secret that the cost-of-living has risen rapidly this year. It may come as no surprise to learn, then, that nearly half of cash-strapped investors have cashed in on some of their investments to keep pace.

44% of investors have sold some of their stocks as they “need the cash”

Our new data demonstrates how the current economic environment has shaken up investor behaviour. Having surveyed 2,000 UK shareholders for our upcoming Shareholder Voice report due out next month, we’ve uncovered that 44% of investors have sold some of their stocks as they “need the cash”, just to cope with soaring inflation and household bills.

The scale of divestment differed across demographics. The research found men (46%) were more likely than women (41%) to take this course of action, and mainly those aged 18-40 (56%), with older investors (41-75) less likely to sell.

Notably, the research also showed that over a third (34%) of investors have switched out of ‘ethical’ stocks. Ethical investments have a positive impact on the world while also aiming to make a profit, yet many investors have opted to divest over the last 12 months, in a bid to achieve better returns elsewhere. Men again were more likely to adopt this approach (35% vs 32% of women). Younger investors (18–24-year-olds and 25–40-year-olds, both 43%) were also more likely to have divested, compared to older investors (41- 56 and 57-75, both 23%).

Time in the markets beats timing the markets

From a listed company perspective, this news does present a challenge, and the issue now will likely involve trying to persuade shareholders not to divest any further, by demonstrating their long-term value over providing a quick buck. As inflation continues to influence the economy, and interest rates steadily creeping up, investors will likely continue to see headwinds impacting their pockets, and whether they choose to continue investing despite these cost pressures will be a huge challenge.

That being said, time in the markets beats timing the markets, so any knee-jerk reactions should be avoided where possible. It’s important that investors who do dip into their pots to cover bills think of how they are going to replace those funds when that financial pressure subsides, as they might well be losing out on the benefits of compounding dividends, for example. The best strategy remains leaving your money in the markets for the long-term. The bottom line remains this; the sooner you can replace any money you withdraw, the better.