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Investments can go up and down in value, so you could get back less than you invest.
[0:10] Sarah Coles: Hello and welcome to Switch Your Money On – the Investment edition. I’m Sarah Coles – Head of Personal Finance at Hargreaves Lansdown.
[0:15] Helen Morrissey: And I’m Helen Morrissey – Head of Retirement Analysis.
[0:18] Sarah Coles: And Helen is guest-presenting this week because we’re covering something that’s dominated both of our lives for quite a long time – and that’s the launch of the latest edition of the HL Savings and Resilience Barometer.
So, there’s some really interesting findings relating to investment – and it’s exposed some really significant investment gaps. Also, on the flip side, it’s exposed a group of people who are investing that maybe shouldn’t be.
[0:39] Helen Morrissey: Absolutely – so we’ll be running through those results as well as taking a look at how retail investors are feeling right now with our investor confidence index.
[0:47] Sarah Coles: And loads to get through.
So, briefly – to recap – the Barometer isn’t a survey of people’s opinions. So, this is about what people are actually doing.
So, it starts off with this big load of official datasets – so it includes one from the Financial Conduct Authority, the Financial Lives Survey, and the Office for National Statistics’ Wealth and Asset Survey, which looks at loads of aspects of your finances – then Oxford Economics models the data and brings it forward because some of that data is a little bit older – and, by the time you’ve finished, it ends up with a picture of a number of aspects of people’s finances, and that includes investment.
[1:17] Helen Morrissey: And so, we remember the pandemic created a boom in investing, starting with people spending more time at home and fewer things to spend their money on – however, despite this, there are still some huge investment gaps.
[1:29] Sarah Coles: Yes – so it actually found that 8.8 million households are in a position to invest, but 42% of those people actually haven’t started investing. So, when you boil those figures down, earning more makes you more likely to invest.
So, if you take the top fifth of earners, 63% of them do compared to 23% of the lowest earners – but, even among those higher earners, of the 3.2 million households in this group that could invest, nearly a third actually aren’t currently doing so. So, it kind of demonstrates how much more needs to be done to build an investment culture in the UK – and, of course, what could be gained from encouraging more people to invest.
[2:08] Helen Morrissey: Yeah, it certainly does, Sarah. So, I think it comes down to a lack of confidence and knowledge, really – doesn’t it? The new ‘Tell Sid’ campaign run by the financial services industry will encourage people to engage with their investments, and so I think that’s gonna be pretty vital.
So, I also think the changes to the Advice Guidance Boundary are gonna have the potential to have a major difference in terms of helping people to feel more confident around investing.
So, just as a quick recap, it’s gonna enable providers to do more to help people to invest and give them more information and a bit more guidance than they previously would have been able to for fear of being seen to be offering advice. So, the idea is that, with that bit more support, people will feel a lot more confident about starting their investment journey.
[2:56] Sarah Coles: So, I mean, at the moment, one of the things the Barometer dug into is some of those people who are a little bit uncertain about starting, and some of those people who have really big investment gaps.
So, one of the areas was around gender – so, actually women tend to invest less than men. So, only 28% of single women invest compared to 39% of single men. Now, that owes something to the fact that women tend to be on lower average incomes – and so those who earn less tend to invest less.
In couples, they share more of the cost – they can free up more for investment – and that does mean that there is also a singles investment gap too. Because, if you’re looking right across singles and couples, 48% of couples invest, whereas only 32% of singles do – so there’s a real gap there. And part of this again is an extension of what’s known as the singles tax – which is the extra financial burden that single people face because they don’t share household costs with anyone because they’re kind of in the frame for everything.
Couples, interestingly, are actually more likely to invest as they get older. So, if you break couples down into their different age groups – so 43% of those aged 20 to 40 invest compared with a much larger 58% of those over the age of 50. So, you can see, over time, they’re gradually more in a position to invest, but the same actually isn’t true for single people – they’re actually less likely to invest at any age, and it goes to show, really, how deep that singles tax bites.
I guess one of the positives to this is that fostering an investment culture in the UK is actually gonna encourage all of those who are in a position to invest to make a start.
[4:23] Helen Morrissey: Think there’s some pretty startling stats that you’ve highlighted there, Sarah, but I think it’s also worth saying that... you know, some people need no encouragement and have actually started investing maybe before they should.
The Barometer assumes that households are in a position to invest if they’ve got more than three months’ worth of essential expenses in easy-access savings. If they don’t feel like their debts are a burden – and if they don’t have arrears – that gives them freedom to look to the future and consider investing for five to 10 years or more.
Now, what the Barometer is showing is that 2.9 million people are taking the plunge before it necessarily makes sense for their finances. Some 28% of households who don’t meet the criteria I’ve just outlined are already investing when maybe they should be focusing more on their shorter-term resilience.
[5:14] Sarah Coles: And are there any specific reasons why that might be – why people might be taking the plunge before they perhaps should?
[5:20] Helen Morrissey: Well, it might be that, in some cases, it could be because people are unhappy with their financial circumstances – and they’re may be trying to get a get-rich-quick approach out of desperation, really. Where they’ve maybe been [s.l. tending 5:34] to high-risk plays like meme stocks – or cryptocurrency, for instance – they could potentially lose far more of their money than they ever expected and actually end up in a worse position than when they started. At the same time, unexpected costs out of the blue could force them to borrow while investing instead of paying bills and meeting their debt obligations – and that could dig them deeper into a financial hole. elenHHelen
[5:59] Sarah Coles: I suppose it’s a useful reminder – aiming for investment is great, but it really shouldn’t come at the expense of paying debts and building those emergency savings.
And, of course, it is worth saying that it doesn’t mean you have to shelve your investment ambitions altogether. So, there are plenty of people who put some money aside every month for emergency savings and some of the future. It’s about finding that balance that makes the most sense for your circumstances.
[6:19] Helen Morrissey: And, for those who are in a position to invest, it’s interesting to explore the investor confidence index that’s been compiled by surveying HL clients on a monthly basis.
So, after some improvement in July, investor confidence did take a bit of a hit across global markets in August, with the sharpest decline seen in sentiment towards the UK, Europe, and Japan.
[6:43] Sarah Coles: Yeah – so confidence in UK economic growth also decreased by 16%. Now, that’s less than in July, but still it’s quite significant.
Now, there’s lots of things involved here – so weak GDP growth and budget speculation have added to investor caution, and confidence in the UK stock market also slipped a similar level.
Now, looking further afield – in Europe – investor confidence fell again by over 16% of signs of economic stagnation, and then that uncertainty over the European Central Bank’s next move on interest rates... they both weighed on sentiment.
And, meanwhile, Japan also saw confidence fall – this time by 11%. So, some of that optimism that had been driven by corporate reforms earlier in the year really cooled.
[7:23] Helen Morrissey: And so, if we look outside of those regions, we saw that the sentiment proved more resilient, but it still fell. So, the US saw a more modest decline against the backdrop of some recent strong earnings from major tech names – as did confidence in the Asia-Pacific and emerging markets.
Despite the downturn in confidence, in some cases, stock market performance continues to diverge from economic sentiment.
[7:48] Sarah Coles: So, it is a bit of a mixed bag in terms of confidence at the moment.
So, moving from ‘Mixed’ to ‘More positive’ – so it’s time for the fun fact of the week!
Now, obviously, crypto’s been in the news – so Trump Media and Technology Group and crypto.com have said they plan to launch a company that will implement a treasury-style strategy to accumulate crypto.com’s Native Token, which is called ‘Cronos.’ So, my thought... what a great idea to explore some of those lesser-known coins.
So, which one of these isn’t real?
Is it Helium, is it Ego, is it Polkadot, or is it Polygon?
[8:21] Helen Morrissey: This is a toughie!
[8:23] Sarah Coles: [Laughs] I could have made anything up there, couldn’t I?!
[8:25] Helen Morrissey: ‘Cause, yeah, they always have such wild names, don’t they? – and I’m just trying to think... I could well imagine one being called ‘Helium’ or ‘Ego.’ I’m gonna go with ‘Polkadot.’
[8:34] Sarah Coles: It does sound a little bit more airy-fairy than the others.
Well, actually, no – the one I made up was Ego.
[8:39] Helen Morrissey: Ah!
[8:39] Sarah Coles: There is one called ‘Ergo,’ but I don’t know why – when I was just thinking about maybe the White House – and the word ‘Eeg’ – I just don’t know where those things came from!
[8:47] Helen Morrissey: [Laughs]
[8:48] Sarah Coles: So, before we go, we should say this was recorded on 3rd September and all information was correct at the time of recording.
[8:53] Helen Morrissey: Nothing in this podcast is personal advice – you should seek advice if you’re not sure what’s right for you. Investments and any income they produce can rise and fall in value, so you could get back less than you invest and past performance is not a guide to the future.
[9:08] Sarah Coles: Yes – this is not advice or a recommendation to buy, sell, or hold any investment. No view is given on the present or future value or price of any investment and investors should form their own view on any proposed investment.
So, all that’s left is for me to thank Helen for guest-presenting this week and our Producer, Elizabeth Hotson, for working her usual magic.
[9:23] Helen Morrissey: And thank you all very much for listening and we’ll be back again soon. Goodbye!
[9:27] Sarah Coles: Goodbye!