Investors retreat from the market

Adrian Lowcock, senior investment adviser at Bestinvest, has reacted to November IMA figures showing the biggest investor retreat from markets for 20 years.

Commenting he said: “As 2011 drew to a close there was an increase in risk aversion amid concerns over the eurozone crisis.

“This concern over the global economic situation is combined with a deteriorating outlook in the UK as austerity measures start to have an effect. Whilst the net outflow is negative it is relatively small. In comparison the out flow of money invested in equities is of greater significance with outflows of over £850 million in November.

“This reflects investor concerns over the state of the economy and the ability of European politicians to address the crisis in the eurozone. Investors have clearly moved money away from higher risk assets to lower risk and less volatile investments such as bonds – which was the highest selling sector in November with new money of £443m being invested along with absolute return funds which also featured highly with new money of £164m being invested.   

“Investors continue to find gilts popular which proved to be a good decision in 2011, however even low risk assets can become a bubble and investors can lose money.

“With real returns below the level of inflation gilts do not offer an attractive investment at this stage and investors should look to consider reducing exposure to the asset class in favour of higher yielding investments such as bonds or equity income.

“Trying to time the market will be incredibly difficult and frequently result in exaggerating the impact of falling markets because it is not easy to buy back in at the right point.

“Instead investors should ensure they have a diversified portfolio and their investments meet with their objectives.”