By Trevor Clawson
Most Britons would rather go to the dentist than invest directly in the stock market, but for those who do put their money into shares, the emotional buzz of ringing up a return is as significant as the financial reward.
That’s the finding of research carried out by online investment management company, Wealthify. Conducted in March of this year and based on interviews with more than 2,000 people, the report suggests that, collectively speaking, we Brits are not a nation of enthusiastic investors. Almost two thirds (62%) of those who took part said they had never made an investment in shares or similar assets. Only 2.0% had invested this year.
That’s not to say that Britons are indifferent to their own financial wellbeing. When asked about their priorities, almost half said they were focused on making sure than that bills were paid. However, only 2% cited starting a stocks and shares ISA as a priority. That compared to the 5% who put a visit to the dentist at the top of their ‘to do’ list.
Michelle Pearce, co-founder of Wealthify said she was heartened by the finding that just over a third of Britons had at some point made an investment, but she acknowledged that the investment industry had to do more to encourage people to explore the potential benefits of exposure to the stock market.
“In today’s low interest and high inflation environment, it is encouraging to see that over a third (35%) of Brits invest,” she said. “However, with just 2% saying they’ve put money into a Stocks & Shares ISA for the first time in the last twelve months, there’s clearly still much to do to persuade Brits to open their eyes to the opportunities investing can provide.”
There are undoubtedly huge perception problems to overcome. Thanks to a combination of deregulation and the arrival of the internet, it has been possible for ordinary mortals to not only invest in, say, ISAs, but also directly buy and sell shares online with relative ease for more than two decades. But in the wake of the financial crisis and at a time of huge economic uncertainty, dipping a toe in the potentially choppy stock market waters remains a daunting prospect for many. It remains a minority sport.
The fear factor is highlighted by the report. Panellists cited the risks associated with investment and lack of investment knowledge as deterrents. But according to Pearce, those perceptions suggest they are based on a misunderstanding of the range of investment options available.
“It is surprising, for instance, that one in five people think investing is too risky,” said Pearce. “This suggests they don’t realise that not all types of investing are high-risk and they can choose a risk level that suits them.”
And as Pearce argues, those who actively invest enjoy benefits that go beyond the financial.
“Our research highlights that there are clear emotional benefits too – helping people to feel more confident, satisfied, secure and in control of their finances,” she said.
Britons don’t necessarily invest to improve their emotional well-being or to secure a dopamine hit every time they receive a dividend statement. The main reason for investment is to secure a comfortable retirement or simply “to make their money work harder.”
But the financial rewards seem to walk hand in hand with emotional factors, with 39% of investors saying seeing their money grow helps them “feel in control”. Meanwhile, 35% said investment gave them a sense of satisfaction and for 15% it was excitement that mattered.
But just how much excitement? Well, Wealthify’s panellists came up with some interesting answers on that point, with comparing the feeling of securing a good return with booking a holiday or bagging a bargain in a sale. Some (15%) even suggested that turning a profit on an investment was better than sex.
A New Investment Era
In theory, at least, we should be entering a new age of user-friendly investment, underpinned by a proliferation of Mobile apps that promise to make the process committing to cash to the stock market – or indeed other assets such as bonds – much easier.
And according to Kerim Derhalli CEO of investment app company Invstr, investment should be seen as a social good.
“As a society, we need to invest more,” he says. “Society has come to a critical point – we are vulnerable financially and in other ways. We need to invest more and consume less.”
But whether or not we become a nation of investors, probably depends on the ability of those apps to convince the man and woman in the streets that the potential rewards from an investment, outweigh the perceived risk.
For its part, Wealthify offers its users a softly, softly route into investment by allowing them to commit as little as £1 in the first instance. This counters perception that only those with a lot of money can invest. Once a user signs up, the company works out an investment plan, based his or her financial goals.
There are variations on the theme. App-based services such as Nutmeg, WealthSimple and Moneyfarm all provide a means to create a portfolio through investment in managed funds, with the details of each investment being based on the financial ambitions and the appetite for risk of the user.
In contrast, Invstr allows its users to invest directly in the US, and from this week the Indian, Stock markets. Its deal with a US brokerage allows a minimum investment of $1, plus commission. Derhalli sees it as important that the entry level is affordable.
“We are enabling people to start investing at an early age. Research suggests that if you start investing at 20 with £100 you will be able to stop at 40. In addition, putting in small amounts initially means you can diversify across more companies reducing the risk.”
Making your own decisions is inherently more difficult – riskier – than investing into a managed fund. Few of us feel confident enough to pick the companies that will perform well and back that judgement with hard cash. Invstr believes the answer is education, coupled with gameplay. So the platform offers a wealth of information on the markets, a social media platform to enable discussions, and gaming component that allows potential users to practice with real-time market data, to assess their own performance before committing their money.
If all that sounds like hard work, there are also apps that will invest your savings for you. For instance, Moneybox ‘rounds up’ purchases and invests small sums on an ongoing business. So when a user buys a coffee for £2.50, the app rounds it up to £3.00 and invests the difference. The money is channelled to a tracker fund with can be wrapped in an ISA. Meanwhile, towards the upper end of the market, there is even an app – BullionVault – which makes it simple to invest in gold.
Investment used, to begin with, a visit to a financial adviser. Today the app store may well be the first port of call. If the app entrepreneurs have their way, more of us will be enjoying the investment buzz.