Consumers drawn to familiar assets, says Paxton Private Finance
Research from Paxton Private Finance reveals that consumers are most confident about investing in cash (39 per cent), residential property (31 per cent) and their private pension (31 per cent).
In contrast, commodities (five per cent), equities (four per cent) and fixed-income bonds (four per cent) were trusted by significantly fewer investors.
Age is a factor in investment behaviour and over-60s (nine per cent) are the most interested in equity investments but they are significantly less positive about private pensions (12 per cent) than younger investors (36 per cent). This suggests that while they may be less than pleased with the performance of their pension, they still have residual faith in equities following periods of excellent returns during their lifetime. Over-60s who have arguable benefitted most from the UK housing boom also have the most faith in this asset class.
When asked why they have the most faith in a particular asset, long-term performance (20 per cent) came second to their preference for investing in something they “can physically touch” (28 per cent). In addition, 14 per cent prefer to invest in something that they understand and 12 per cent are looking for a multi-purpose asset which, for example, provides tax-efficiency as well as good returns.
When asked where they intend to invest in 2013, 46 per cent chose cash, 23 per cent said residential property and 12 per cent would put money into equities. As only four per cent say they have confidence in equities, it suggests some people intend to put their doubts aside and hope 2013 will see improved performance in this asset class.
Nick McLean (pictured), partner at Paxton Private Finance, says: “With the current economic uncertainty consumers are looking for assets that they feel they can trust – be it due to long-term performance or the ability to physically see what they are investing in. As we head towards the end of the tax year, this suggests that we will see an increase in interest from SIPP and ISA investors in funds with these attributes.
“This research also suggests that advisers and providers need to keep communicating the benefits of portfolio diversification to their retail investors. While some asset classes may not have performed as well recently, it is vital that the emphasis is on long-term rather than short-term gains.
“While high-net worth and sophisticated investors have more disposable income to invest, we have found that they still have some of the same concerns about their portfolios. The Paxton Secured Income Fund provides them with the opportunity to participate in a UK property related investment, secure in the knowledge that strict risk management criteria are in place.”