A new study issued by Behavioral Finance expert Oxford Risk reveals that amid the first Covid stock market shock and initial lockdown, 8% of savers and investors either sold part of their shares or robbed the stock market of money.
Of the number of shares owned, 34% said they were less than they did earlier this year.
Around 1.38 million retail investors sold more than £10,000 investments in the early stages of the Covid lockdown, with 531,900 people selling more than £100,000 holdings. Regarding the funds released, 59% left money in their savings, 31% used it to contribute to living expenses, and 29% spent money in liquidation of their debts.
Over the summer, stocks have regained a significant position, with technology and biotech stocks enjoying the tail end of the lockdown surge. Despite the opportunities these simple picks offer, 29% of investors who cashed their holdings at the start of lockdown have not reinvested it into the market. Similarly, only 10% have reinvested over 50%.
Of the number of reinvestments, 26% said they did this temporarily, 52% said they did it in chunks, and 22% gradually intaked money.
Speaking about the findings, Dr. Greg B. Davis, director of behavioral finance at Oxford Risk, said: With the Covid-19 crisis in place, losses will be high as stock market volatility levels are high this year. ”
“Investors who pulled money from the market in March will already have lost even more. They were lost when the market fell, and many have missed rebound ever since. And many people are likely to find this money emotionally difficult to reinvest over the long term, which could lead to even more positive returns over the long term.”
Recent findings have found that investors’ decisions to increase cash allocations during the pandemic could cost between 4% and 5% per year on long-term returns. Furthermore, “behavioral gaps” – losses caused by timing decisions caused by investing more money when there is less time appropriate for the stock market cost an average of 1.5% to 2% per year over time.
Oxford Risk CEO Dr. Marcus Quierin concluded by saying: (…) People who are worried about a decline in stock markets should remember that when selling, they will only turn paper losses into real ones. ”
“Retail investors should avoid watching the market every day as they raise anxiety, stay focused on long-term plans, and ignore a lot of the background noise that can entice them to make the wrong investment decisions.”
