One in five people have tried and abandoned investing – and blame losses and volatile markets for pulling out their cash, new research reveals.
The challenges of keeping on top of information to make good decisions and understanding the jargon were other common reasons for giving up on investments.
Investors often make mistakes, but learning from them can help you do better in future.
The key is to take a longer term view and don’t panic, according to broker Charles Stanley Direct, which surveyed 2,100 people across the country.
Made a blunder? Tell us about your investing gaffes and what you learned below
Some 55 per cent of savers are not confident about understanding financial terminology, and the firm gives a rundown of common jargon and what it means below.
Charles Stanley found 35 per cent of people have tried investing and stuck with it, 19 per cent have done it but stopped, 25 per cent would like to invest in future and 15 per cent are not interested. The rest didn’t know or preferred not to say.
Among those who have dropped their efforts to invest, 40 per cent were concerned about market volatility and felt it was too risky, while 32 per cent said their investments weren’t performing as well as they wanted or they were losing money.
Some 20 per cent couldn’t keep on top of data, 15 decided investing wasn’t for them, and 14 per cent found it too time consuming
Meanwhile, 8 per cent said they had stopped when they achieved their financial goals.
The research also revealed a lack of confidence among those that currently invest, with 26 per cent admitting they don’t understand the different levels of risk and how to minimise their chances of losing money, and 51 per cent worrying they might make a bad investment.
There were gender differences, with 31 per cent of women choosing not to invest because they had no idea where to begin, compared with 20 per cent of men who said the same.
Some 16 per cent of women thought financial terminology was too confusing, compared with 10 per cent of men.
Charles Stanley asked savers what would help them improve their understanding of saving and investment options.
Some 38 per cent said the simplification or removal of jargon would help, 34 per cent wanted more financial education in schools, 20 per cent called for more regular communication from firms, and 18 per cent would prefer to receive education from their employers.
In addition to being willing to do some homework on the basics of investing, one of the keys is learning from your inevitable mistakes.
This is Money’s Editor, Simon Lambert, made an error in buying HMV shares a decade ago.
He wrote about the experience and what he learned from that and other investing mistakes here, and still cites his 60 per cent HMV loss whenever the topic of investing blunders comes up today.
Tell us about your investing gaffes and what you learned – see right.
Rob Morgan, investment analyst at Charles Stanley Direct says: ‘The most important thing is to take a long-term view.
‘Volatility is an inevitable part of investing and it can be very scary when the markets fall. A common mistake is to sell when that happens due to fear which can be the worst thing to do.
‘Investors must be prepared to hold their nerve and ride the ups and downs – “keeping invested” is usually the best strategy.
‘Historical evidence shows that if you invest for a 10-year period there’s around a 90 per cent chance of beating the return on cash savings when investing in global stock markets.’
Morgan adds: ‘When it comes to investing there is a lot of jargon to get your head around, so it can easily seem overwhelming.
‘But this shouldn’t mean that people are put off, particularly as cash returns are so poor at the moment. What is needed is time and confidence to understand some of the terms involved and the levels of risk you want to take.’
