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Equities still get investor pulses racing most quickly, despite ESG bluster

  • Equities are the most exciting asset class for UK investors (58%)
  • Just 34% find ESG investing exciting
  • Only 7% of UK investors have exposure to ESG products compared to 15% in crypto
  • But two thirds (76%) of those aged 18-34 describe their approach as either ‘hesitant’, ‘cautious’, ‘extremely cautious’, or ‘risk averse’

Despite a growing number of investment opportunities available to UK retail investors, it is equities that are the most likely to set pulses racing, with 58% of investors identifying them as the asset class that excites them most. Cash (48%) is in second place, followed by precious metals (47%) and bonds (44%). Growing interest in cryptocurrencies was also apparent, with 35% of investors describing them as an investment they are excited about.

Recent research carried out by Janus Henderson Investment Trusts also reveals that more than half of UK investors (57%) are simply left cold by ESG/SRI, saying that, as an asset class, this area is not interesting to them, despite the significant uptick in awareness of these products over the past 12-24 months. Just a third (34%) said that they found investing in this type of product exciting. Even fewer actually have exposure to ESG– just 7%. Notably, this is half as many as have exposure to cryptocurrencies.

Looking at the data by demographic, it appears that a considerable proportion of investors exhibit a risk appetite which contradicts what one might expect according to their relative age. More than two thirds (76%) of those aged 18-34 describe their approach as either ‘hesitant’, ‘cautious’, ‘extremely cautious’, or ‘risk averse’. At the other end of the scale, 20% of those aged 55+ describe their approach as speculative. Interestingly, varying perceptions of what constitutes risk are evident in the context of cryptocurrencies, which have been widely acknowledged by the industry as a higher risk investment. The research found, however, that more than a third (35%) of UK investors who see themselves pursuing a non-risky investment approach have included cryptocurrencies in their portfolio.

With such varied perceptions on the value of various investment types, and indeed on the appropriate level of risk appetite, many investors seek some kind of advice or guidance to help them make decisions. Looking at the key influences on investors’ behaviour, advisers are found to have the most impact for 64%, followed closely by books and websites (62%), newspapers and the media (56%), and family (54%). Despite significant growth in the use of social media, just 25% said these platforms had a bearing on their investment decisions. However, when split by age groups, there are significant differences. Online financial ‘influencers’ were listened to by 72% of those aged 18-34, while 61% took note of social media when making investment decisions. This compares with 21% and 6% respectively for the over 55s.

Along with knowing where to go for a bit of direction, better and more comprehensive financial education should also play a key part in helping ensure that investment decisions properly reflect life stage and financial goals. But worryingly, there remains a long way to go when it comes to solving the financial education conundrum. Among UK investors, two in five (42%) received no financial education at school and that figure is static amongst those at university. Fewer are let down by the workplace, but 32% still say that they have received no financial education there. This dramatically rises to 44% among those 55+ which is particularly worrying given the financial challenges posed by retirement.

James de Sausmarez, Head of Investment Trusts, Janus Henderson comments: “What really shines through from these findings is the need for better understanding of the different types of products available for investors, which life stages the varying products are suitable for, and the trigger points that should prompt a shift in investment strategy. 

“Typically, those younger investors should be taking the opportunity provided by the potential length of their investing life to be bolder in their strategy. That so many of this cohort appear to be taking a cautious, lower risk approach means that they are undermining their own financial future. Whether investors are passionate about equities, bonds, or investment trusts, each asset class can play an important part of a balanced portfolio. But getting that balance right is crucial.” 

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