Sentiment among DIY investors remains upbeat despite growing market volatility, according to new research published today.
While global events have created uncertainty in the markets, a poll of 1,000 ISA holders conducted by Freetrade and InvestingReviews.co.uk showed almost a third (31%) plan on increasing subscriptions in 2022.
Of those, nearly half (46%) said they would use pay rises to support their increased contributions. Only a small number (2%) said they expected to scale back their contributions.
Overall, the most popular investments among Freetrade ISA holders in 2022 so far are US tech stocks, in particular Tesla, Meta and Apple, as well as S&P 500 tracker ETFs. Among investment trusts, the Scottish Mortgage Investment Trust led the way for ISA contributions, followed by the Realty Income REIT and the City of London Investment Trust.
ISA investors have more recently been drawn to the mining sector, financial services firms and commodities ETFs, given rising inflation and geopolitical shocks.
Most bought equity Investments among Freetrade ISA holders in 2022*
Most bought ETFs among Freetrade ISA holders in 2022*
- Vanguard S&P 500 ETF Acc.
- Vanguard S&P 500 ETF Dist.
- Vanguard FTSE All-World ETF Dist.
- iShares Core FTSE 100 ETF
- iShares UK Dividend ETF
Most bought investment trusts among Freetrade ISA holders in 2022*
- Scottish Mortgage Investment Trust
- Realty Income Corp
- City of London Investment Trust
- Foresight Solar Fund
- Seraphim Space Investment Trust
*Rankings based on number of buy orders up to 11/03/2022
Cash ISAs vs Stocks and Shares ISAs
The research also explored the attitudes of cash ISA holders whose pots have been losing value in real terms at the fastest rate in almost 30 years. Typically, a cash ISA will return savers less than 1% per annum, meaning around 4.5% is currently being lost in real terms.
This year alone cash ISA savers stand to loose around £7.8billion as inflation eats away at their pots. Despite this, they continue to outnumber Stocks and Shares ISAs (investment ISAs) by around 3 to 1.
Researchers found that 42% of cash ISA holders wanted to know exactly what return they were getting. Nearly a third (32%) admitted they didn’t know how investment ISAs worked, with a slightly larger number (37%) saying that investing in the stock market worried them.
Women were more likely than men to be worried by stock market investing (39% v 34%), with more women also saying they don’t understand how a stocks & shares ISA works (37% v 24%).
Dan Lane of Freetrade commented: “As market volatility heightens in light of global events, it’s important to have a sufficiently diversified portfolio and continue to focus on the long term. Pound-cost averaging through buying investments regularly in small amounts can also help to smooth out volatility and create some stability in the performance of your investments.
“When it comes to ISAs, some people who can’t stomach investment risk are just right to opt for a cash version. But with equity risk comes the opportunity to outperform cash and inflation over the long term. History tells us stock markets do go up over time and it doesn’t mean going full throttle on the risk pedal to take advantage of them”..
Simon Jones, CEO of InvestingReviews.co.uk, said: “While events across Europe threaten to dampen growth in 2022, investors with long-term horizons shouldn’t allow themselves to be rattled.
“The lesson of the pandemic is that those who retreat from the market at the first sign of volatility risk losing out when conditions improve later.”