While people spent less during the Covid crisis, research has shown that almost one in five (18 percent) of adults invested more money into the stock market during the pandemic then they would normally do.
The findings come from behavioural finance experts Oxford Risk, which also found that of those surveyed, 12 percent invested at least 10 percent more than usual compared to just 5 percent who said they invested less.
A key reason why many people have invested more could be that 45 percent of people say the crisis has meant they have had more time to review their savings and investments, and 53 percent say it has made them think more about their finances and those of their loved ones.
Also, 23 percent said they thought it was a good time to invest when markets fell at the beginning of the crisis. However, Greg B Davies, head of behavioural finance at Oxford Risk, warned of the dangers of trying to time the markets. He said: “Trying to predict when markets represent the best opportunity to invest is very difficult to get right. We estimate the cost of the ‘Behaviour Gap’ – losses due to timing decisions caused by investing more money when times are good for stock markets and less when they are not – i.e. buying high and selling low – is on average around 1.5% to 2% per year over time.”
Overall, 25 percent of people said they had excess money to invest because of the crisis, compared to 48 percent who didn’t.
Of those people who have invested more during the crisis, 6 percent said they put all their extra investment into their pension fund, and 13 percent said most of it went here. Some 28 percent said it all went into accessible investment accounts such as equity ISAs, and 27 percent said most if it was invested in this way. One in four (26 percent) said it was evenly split between their pension fund and more accessible investment vehicles.
Oxford Risk builds software which attempts to help wealth managers and other financial services companies assist their clients in making the best financial decisions in the face of complexity, uncertainty, and behavioural biases. The company has developed a proprietary algorithm which ranks products, communications, and interventions for their suitability for each client at a particular time.
