Money moved out of stock market as confidence falls

Dec 5 2007 by Peter McCusker, The Journal

ONE in five investors has moved money out of the stock market as a result of the recent credit crunch.

Around 21% of people said they had shifted some of their assets into more cautious investments, such as cash or bonds, during the three months to the end of October, according to Lloyds TSB Wealth Management.

At the same time, 37% said they felt apprehensive about stock market investments during the past quarter and 48% said they had either reviewed or considered reviewing their portfolios.

Among those who have made changes, 21% put money into more cautious investments and 17% kept their stock market investments the same but put more cash into other investments.

But 9% of people said they had invested more money in shares to take advantage of any subsequent price rises.

Nathan Moss, managing director of wealth management at Lloyds TSB, said: “Investors have undoubtedly been rattled by the recent stock market turbulence, and the widely-reported credit crunch has prompted many to review their investments. But it’s important for investors to consider their own circumstances and avoid a knee-jerk reaction.”

The main catalyst for investors making changes to their portfolio was concern about the market as a result of media coverage of the credit crunch, with 31% of people citing this, while 24% said they had acted on guidance from their financial adviser.

Just under half of those questioned said they had considered their decision carefully and had no regrets about the changes they made, while 30% claimed they had already benefited from them. More than a third of investors said they felt apprehensive about how the stock market would perform during the coming year, with just 26% of people feeling confident.

Among those who are concerned, 35% said returns from the FTSE had not been good in recent years and they thought this trend would continue, 18% of people also thought the stock market would fail to outperform cash and bonds over the long-term.

A further 17% of people also said they thought the risks associated with the stock market meant it was not worth investing in it.

Among those who feel confident about the market’s prospects, 64% said it should be seen as a long-term investment and short-term fluctuations should be ignored and 54% think it will outperform cash and bonds in the long term.

Half of people said they had a mix of investments, so they were not solely relying on the stock market, and 41% said they thought the stock market was resilient and the current turbulence was only a temporary blip.

Experian questioned 820 stock market investors during October.