Cold feet: fear of losing money holds back majority of amateur investors

Just over half of investors feel confident investing (57%) with only one in five feeling very confident (20%), new research shows. The latest survey from Alliance Witan asked those with more than £10,000 in investable assets how comfortable they felt with investing as well as exploring key barriers holding investors back and lessons to be learned. 

Of those who felt unconfident, the most common reason for this was the fear of losing money (71%). Over a quarter said they wanted easy access to their money (27%), while nearly a third named the economic climate as an obstacle in their investment journey (31%). Nearly three in ten (28%) reported they didn’t feel they had enough knowledge to invest. This hesitancy to invest is not novel – the latest FCA Financial Lives report found 90% of adults had cash savings while just over a third had investments (35%). 

Whilst starting an investment journey may feel daunting, and investment does carry inherent risks, the long-term benefits can be considerable. When investors who labelled themselves as confident were asked what advice they would share, nearly half of respondents advised building an emergency cash fund before investing (49%). 

Additionally, this group also advocated for investing small amounts regularly (44%) and making the most of your tax-free ISA allowances (44%). Alliance Witan analysis shows drip-feeding the £20,000 ISA allowance into a Stocks & Shares ISA over a 15-year period historically resulted in gains of nearly £200k. This is compared to putting the same amount into a Cash ISA, which has historically returned just under £18k within the same time period. 

Confident investors also felt it is important to increase financial education by reading books or online resources to ensure consumers are making informed decisions about where their money goes (41%). 

Finally, the confident cohort also highlighted another golden investment rule: choosing options that are already diversified  – funds or investment trusts – thereby spreading risk across different sectors, investment approaches, and geographies, which 39% recommended doing. 

Mark Atkinson Senior Director at WTW, which manages the trust, comments: “Encouraging people to invest is a key priority for the government – not only because it helps boost the economy, but it also puts consumers on a better financial footing.

“Those starting out should heed the advice of more seasoned investors,and build up their confidence with tried-and-true methods of investing. History tells us that those who keep their holdings well diversified and allow their returns to compound over time will ultimately stand a good chance of building wealth in the long-term, and be all the more comfortable  for it.”