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Nearly half of investors are selling off stocks to cover rising bills

Financial pressure: Investors change behavior as daily bills rise and markets plunge

Nearly half of investors are selling stocks to cover rising bills and a third are abandoning ethical investments

  • Investors under 40 are more likely to sell stocks than older people
  • Men are more likely to liquidate their investments than women
  • Some 34% of shareholders surveyed say they have divested from ethical values

Nearly half of private investors cashed in on stocks to meet rising household bills over the past year, a new study finds.

Investors under 40 were more likely to divest from stocks than older people, and men showed a greater tendency to liquidate their investments than women.

People holding between £500 and £10,000 of shares were most likely to bail out due to cost of living pressures, while those holding less than £500 or £10,000 and more were more likely to hold on to market, according to Equalizer’s survey.

Financial pressure: Investors change behavior as daily bills rise and markets plunge

Financial pressure: Investors change behavior as daily bills rise and markets plunge

Some 34% of shareholders surveyed said they had divested from ethical stocks in favor of those with higher expected returns over the past year.

Young people were more likely to do so, with 43% of 18-40 year olds adopting this strategy compared to 23% of 41-75 year olds.

Rising inflation, which reached 9.9% in August, and turbulent stock markets have influenced people’s financial behavior as they struggle to make ends meet.

Older retirement investors trying to protect their retirement pots are taking much smaller tax-free lump sums at older ages, but their income withdrawals to fund day-to-day expenses have increased.

And the number of people opting out of work pension schemes rose 29% over the summer, other research shows.

>>> Tempted to reduce your pension savings? Here’s why it can lead to long-term pain

EQ, a provider of stock registration and other technology services, found that some 44% of retail investors have sold stocks in the past year to help pay their bills.

This percentage increased to 56% among those aged 40 and under, but fell to 30% in the 41-56 age group and 29% among those aged 57-75.

It is important that investors who dip into their pots to cover their bills think about how they will replace these funds

During this time, 46% of men gave up some of their stocks and 41% of women.

“Investors generally seek to invest with a long-term horizon to build wealth, but the current economic environment means many people are being forced to tear up their plans,” says Thera Prins, managing director of UK shareholder services at EQ.

“Inflation is at its highest level in 40 years, putting immense pressure on household finances. It is therefore not surprising that many people seek to make up the shortfall by selling their investments.

“There’s nothing wrong with that, but it’s important for investors who are dipping into their pots to cover their bills to think about how they’re going to replace those funds when that financial strain subsides.”

“Ask any expert and they’ll tell you that the best strategy for building long-term wealth is to leave your money in the markets for the long term.”

Prins notes that private investment has exploded over the past two years as people sought to beat low interest rates and benefit from a post-pandemic market recovery, but enthusiasm now appears to be waning.

“While we may see a contraction, particularly among younger investors who may no longer have the extra funds to invest in stocks, that does not mean the end.

“Once this cost-of-living crisis is over, we may well see a shift in the retail investing landscape and a continuation among younger, hungrier investors.”

EQ surveyed 2,000 people aged 18 and over who live in the UK and own shares.

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