Picking safe shares means missing out on the best returns, it is suggested

UK investors are picking safe share options but could be missing out on the best returns which can come from less traditional options, research suggests.

Banking stocks top the charts as investors favourite sector, younger investors fall for the tech effect and female investors choose to invest where they shop, according to a report from The Share Centre.It says that the majority of investors stick to their comfort zone but it warns that this could lead to people missing out on the best returns.

Surprisingly, given the instability of the banking sector over the past three years and the part-nationalisation of two of the UK’s largest banks, banking emerged as the most preferred sector for private investors. Whilst banking has traditionally been one of the safer options for investors it is surprising that it is still favoured so highly today with 39% of investors choosing this sector.

‘Banking stocks have continually remained our most bought and sold shares over the past three years as people have sought to try and gain from the instability in the market and speculate on future growth. However some people will certainly have been burned along the way - as there has been significantly more volatility than previously,’ said Graham Spooner, investment adviser at The Share Centre.

When it comes to how people select stocks, almost a third, 29%, buy shares in areas that interest them, as opposed to those that are potentially doing well in less interesting sectors.  For female investors aged 35 to 54 this means a significant bias to retail, with 23% choosing this as their favourite sector and showing the value of getting next season’s fashions right for brands such as Next, ASOS and Marks and Spencer.

Whether it’s an HD-TV or the latest smart phone, having the latest technology is unavoidable nowadays, especially for younger people. Apparently this extends to investing too, with 33% of 18 to 34 year olds citing the technology sector as their preferred sector.

Friends also have an influence as 16% of 18 to 34 year olds have invested in shares on recommendations from friends, and overall over a third of investors, 38%, admitted that at some time they may be interested in forming an investment club to invest with their friends.

‘It makes sense to invest in companies you like and indeed companies you use. Having a greater knowledge of a company or sector enables the investor to get used to where the trading range lies; to buy when it’s at the lowest range and sell at the highest end. If you believe enough in a brand to buy its products, then believe in its performance,’ said Spooner.

‘However it is important that people make sure they don’t miss out by exploring other areas. Over the past three years some of the biggest returns have come from the mining sector, which has been less affected by the global financial crisis. By checking out the performance of companies in the financial pages and on the many useful websites investors could start to diversify their portfolio a little and also mean they are not so exposed in the event their preferred sector takes a turn for the worst,’ he added.