We are almost at the end of the first quarter of the year. With hindsight, we could say that 2022 hasn’t been particularly kind to either savers or investors. Inflation is still growing and bills are rising sharply, which will only stretch tight household budgets even further. To top it all off, we have also seen the first major European conflict since the Second World War. But despite all this uncertainty, retail investors remain upbeat, and some ISA holders are even planning to increase their contributions in 2022.
Here, I break down the findings of a poll of 1,000 ISA holders conducted by Freetrade and InvestingReviews. Let’s dive straight in.
[top_pitch]
Has market volatility spooked investors?
While uncertainty has been prevalent in the global markets, retail investors have managed to hold their nerve. The research suggests that almost a third of ISA holders (31%) plan to increase their contributions in 2022. In contrast, only a fraction of respondents (2%) said they expect to scale back on their contributions.
But what do ISA holders invest in?
According to the poll, US tech stock remain the most popular investment among ISA holders in 2022. In particular, Tesla, Meta and Apple, as well as S&P 500 tracker ETFs. When it comes to investments trusts, the Scottish Mortgage Investment Trust leads the way for ISA contributions.
Given high inflation and the European geopolitical crisis, ISA investors have turned their sights towards mining, financial institutions and commodities ETFs in an attempt to ride out the uncertainty.
Here are the most-bought equity investments among Freetrade ISA holders up to 11 March based on the number of buy orders:
Rank
Equity investment
1
Tesla
2
Meta
3
Apple
4
Microsoft
5
Alphabet
And here are the most-bought ETFs among Freetrade ISA holders in the same period:
Rank
ETF
1
Vanguard S&P 500 ETF Acc.
2
Vanguard S&P 500 ETF Dist.
3
Vanguard FTSE All-World ETF Dist.
4
iShares Core FTSE 100 ETF
5
iShares UK Dividend ETF
And finally, these are the most-bought investment trusts among Freetrade ISA holders:
Rank
Investment trust
1
Scottish Mortgage Investment Trust
2
Realty Income Corp
3
City of London Investment Trust
4
Foresight Solar Fund
5
Seraphim Space Investment Trust
[middle_pitch]
How are cash ISAs fairing against stocks and shares ISAs?
Cash ISA holders have seen the value of their pots lose value as inflation has soared to a 30-year high. With a typical return of under 1%, cash ISAs are now losing around 4.5% of their value in real terms (return minus inflation). This year alone, that loss could reach £8.7 billion and despite this, cash ISA holders outnumber their stocks and shares counterparts by three to one.
The research revealed that wanting to know the exact return was the main reason cash ISA holders stayed put. Almost a third (32%) were unsure of how to use stocks and shares ISA. A further 37% were worried about investing in the stock market.
The survey also revealed some gender discrepancies. A larger proportion of women (39%) than men (34%) were worried about investing in the market. Women were also found to be more likely to not know how investing ISAs work (37% vs 24%).
If you are unsure of how stocks and shares ISAs work or simply want to check your knowledge, check out our ISA basics.
A word of advice
Commenting on the research, Dan Lane from Freetrade said he believes that strategies like having a sufficiently diversified portfolio and continued focus on the long term could prove instrumental in times of uncertainty.
He feels that a more passive approach, like pound-cost averaging, could smooth the impact of market volatility as buying investments regularly in small amounts could improve overall portfolio performance.
Simon Jones, CEO of InvestingReviews said that long-term investors “shouldn’t allow themselves to be rattled” despite the current events. The lesson from the pandemic seems to be that those who remain disciplined are those who come out on top when the markets recover.
The post 31% of ISA holders plan to increase their contributions despite uncertainty appeared first on The Motley Fool UK.
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