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

Nearly half of retail investors have cashed in on equities in the past year to cover rising household bills, new research shows.

Investors under 40 were more likely to sell stocks than older people, and men were more likely to liquidate their investments than women.

People with between £500 and £10,000 in shares were the most likely to bail out because of the cost of living, while those with less than £500 or £10,000 were more likely to stay in the market, according to EQ’s research.

About 34 percent of shareholders surveyed said they’d divested ethical stocks in favor of stocks with higher forecasted returns in the past year.

Younger people were more likely to do this, with 43 percent of 18 to 40 year olds adopting this strategy versus 23 percent of 41 to 75 year olds.

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

Older retirement investors trying to protect their pension pots are taking much smaller tax-free lump sums and later in life, but their income withdrawals to fund day-to-day expenses have increased.

And the number of people who opted out of retirement plans rose 29 percent over the summer, another research found.

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

This rose to 56 percent among people 40 years and younger, but fell to 30 percent in the 41-56 age group and 29 percent among people 57-75 years.

Meanwhile, 46 percent of the men threw away some of their shares, and 41 percent of the women.

“Investors typically want to invest with a long-term horizon to build wealth, but the current economic environment means many people are forced to tear their plans apart,” said Thera Prins, chief executive of UK shareholder services at EQ.

“Inflation is at its highest point in 40 years, putting enormous pressure on household finances. It is therefore no surprise that many people try to make up the shortfall by selling their investments.

“There’s nothing wrong with that, but it’s important that investors who are diving into their pots to cover bills consider how they’re going to replace those funds when that financial pressure eases.

“Ask any expert and he’ll say the best strategy for building wealth over the long term is to leave your money in the market for the long haul.”

Prins notes that private investment has boomed in the past two years as people tried to beat low interest rates and take advantage of a post-pandemic market recovery, but enthusiasm now seems to be waning.

“While we are seeing a contraction, especially among younger investors who may no longer have the extra cash to invest in stocks, this is not the end.

“Once this cost of living crisis is over, we may see more of an evolution in the retail investment 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.