Investors flock to cash amid market turmoil

The number of investors increasing their exposure to equity markets has fallen to 25 per cent, down from 49 per cent during the same period last year, a survey conducted by the Association of Investment Companies (AIC) has revealed.

The survey of close to 1,000 investors was conducted between 12 January and 12 February, one of the most volatile periods for global markets in recent history.

Accordingly, the AIC reports that the proportion of investors surveyed who are favouring cash Isas over stocks and shares Isas more than doubled to 26 per cent - up from just 10 per cent between January and February 2015. This is despite interest rates on cash accounts remaining at historic lows.

The number of investors using only the stock and shares element of an Isa also fell to 30 per cent, down from 37 per cent last year.

NO PANIC SELLING

Annabel Brodie-Smith, communications director at the AIC, says: 'Investor confidence has taken a knock in this year's volatile markets. Of course market timing is very difficult to get right and no-one knows what will happen to markets next. However, the market is currently significantly down on its April 2015 high.'

The AIC says that the number of investors unable to take a market view has also doubled, with 22 per cent reporting that they are unable to choose which sector is the most attractive at present, compared to 9 per cent last year.

Despite this decidedly 'risk-off' attitude, the survey suggests that the number of investors actively decreasing their exposure to stock markets is relatively low at 8 per cent - which is, in fact, less than the 9 per cent who said they were selling up between January and February 2015.

Of the 25 per cent who say that they are expanding their investment portfolios, over half (54 per cent) say they are taking advantage of stock market volatility to buy at lower prices.

UK FAVOURED

The UK remains the most favoured region to invest, with just over a quarter (26 per cent) of those surveyed reporting that they prefer the UK market compared to 24 per cent last year. Europe was the second most popular region, with 13 per cent of investors favouring it.

Smaller companies are the most favoured market segment for over a fifth (22 per cent) of investors. Pharmaceuticals and healthcare find favour with 12 per cent of investors.

Perhaps unsurprisingly given steep share price declines contributing to widespread dividend cuts, blue-chip shares have fallen largely out of favour with investors, with just 7 per cent favouring large multi-national corporations compared to 14 per cent between January and February 2015.

Brodie-Smith adds: 'It's encouraging to see there is no panic selling. 'Given the volatile start to the year, it's worth remembering the benefits of regular saving, which can smooth out some of those stomach churning highs and lows in the price of shares.

'In the past brave long-term investment company investors have also been rewarded. For example, an investment in the average investment company 10 years ago, which includes the extreme volatility of the credit crunch, is up 80 per cent.'

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