Struggling with Investment Losses? Over a Quarter of Investors Have Sold at a Deficit in the Last Year
Quarter of retail investors have incurred losses from selling their investment holdings over the past 12 months, according to data, as market uncertainty continues to rattle individual investors.
The primary factor driving retail investors to exit their positions was fear, with 36% expressing concerns that their holdings would continue to plummet, as evident from exclusive figures provided by Alliance Witan to This is Money. This apprehension transpired despite the standard counsel that investments should be maintained for at least five years to weather temporary price fluctuations.
Alliance Witan, having polled 1,000 UK adults with at least £10,000 in investable assets, disclosed this information.
The past year has seen tumultuous circumstances for investors, as global markets plunged following Donald Trump's tariff announcements that initiated a global selling panic. Some may have opted to liquidate their investments in the hope of preserving whatever value remained ahead of further stock declines.
Even if they remained steadfast during recent downturns, the figures indicate that one in six retail investors has sold an investment at a loss at some point during their investment careers.
Mark Atkinson, senior director of client management at WTW, opined that selling an investment at a lower price than its purchase value might be unavoidable, but impulsive decisions based on short-term market volatility could compromise returns.
However, nearly a third of investors, 29%, revealed they sold at a loss because they faced an emergency and required immediate funds. Moreover, 20% admitted they needed the money to fund a specific life event.
Financial experts generally encourage people to invest money they can afford to lose and to build up a substantial emergency savings fund to accommodate unforeseen expenses. It is commonly suggested that individuals set aside enough cash to cover three to six months of living expenses.
According to Alliance Witan, if investors had invested £100 with Alliance Trust in 1968 and reinvested dividends, they would have returned £25,404 by 2021. This illustrates the benefits of long-term investment growth based on historical trends.
Atkinson advised investors to retain patience and resilience amid current market uncertainties, reminding them of the findings from previous studies showing that investors who remained invested throughout tumultuous periods experienced higher returns in the long run.
He cautioned, "All investors, regardless of their experience level, will likely have been unsettled by the recent market swings we have witnessed, particularly those with shorter investment horizons. Those who choose to stay invested rather than crystallize any losses will likely benefit over the long term, as our analysis has demonstrated."
- Despite the advised longevity of investments, one in six retail investors have sold investments at a loss at some point during their careers, even after maintaining investments for at least five years to weather temporary price fluctuations.
- To mitigate the need to sell investments at a loss due to emergencies or specific life events, financial experts advise building up a substantial emergency savings fund, typically equivalent to three to six months of living expenses.
- Long-term investment growth, such as the £25,404 returned from a £100 investment with Alliance Trust in 1968 and reinvested dividends, demonstrates the benefits of maintaining patience and resilience in the face of market uncertainties, even during tumultuous periods like the past year, which saw plunges in global markets due to factors like Donald Trump's tariff announcements.
