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Investing insights

Do people in the US invest more or less than the UK?

We take a closer look at what the future could hold for retail investors in the UK stock market in 2024.
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Important information - This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

In the UK, only 23% of people have invested in the stock market. In the US, it’s almost two thirds.

But why is there such a difference?

Our latest survey* found that a quarter of people surveyed said it’s because Americans were more comfortable with risk. A quarter said it’s due to cultural differences, and just over a fifth thought the incentives are just better in the US.

Over one in 10 of Brits thought it was a sign of greed. But it makes sense in the US to be more self-sufficient to pay for medical bills or college education, due to a lack of government subsidy. This might be driving more American investors to start investing earlier.

Even with UK markets performing well recently , the UK stock market is still undervalued and unloved by a lot of investors, in our opinion.

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With an election around the corner, the two main contenders for number 10 are planning to bring in more UK retail investors.

Labour want to make it easier for people to feel the benefits of saving and investing their money. And the Conservatives see retail investor participation as crucial to helping boost London’s fortunes. The tricky part is getting people to take that first step.

Increasing retail participation could be a game changer for UK stocks, but people are still hesitant about taking the plunge and following in the footsteps of US investors.

This article isn’t personal advice. If you’re not sure whether an investment is right for you, seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you invest. Past performance isn’t a guide to future returns.

Workplace pensions are the exception

One area where the UK has an increased participation compared to the US is workplace pensions. Almost four in five UK workers are enrolled in a workplace pension, compared to just over half in the US.

But these higher figures are fuelled by auto-enrolment rules, not by those actively deciding to enrol.

On top of that, our research* shows only just over a third of people know if their pension is invested in the stock market. So, there’s a clear gap that needs addressing.

Making it clear how and where a pension is invested could persuade more people to move their money from savings accounts into investments by increasing their confidence.

These are the kind of simple steps that a new government could encourage to help people find the confidence to start investing and build more financial resilience.

The good news is that many people don’t need to find a penny more to improve their situation – they just need to make the most of the money they already have, according to our research.

Creating new investing habits

Our latest HL Savings and Resilience Barometer**, shows there are 6.4 million households without arrears and with sufficient savings, but no investments.

If these households are happy with the additional risks of investing they could move the savings they don’t need for more than five years into something like a Stocks and Shares ISAs. This could be used to invest in funds, shares, exchange traded funds (ETFs), investment trusts, bonds and more, all while sheltering the investments from UK income tax and capital gains tax. Tax rules can change and benefits depend on your circumstances.

By investing for the long term, when markets fall, they have tended to rise again. Holding your nerve and staying invested could lead to better returns. Diversification is an investing essential to help manage any bumps in the road. Although there are no guarantees and you could get back less than you invest.

Looking for investment ideas to get investing in the UK?

Whether you’re looking to invest in funds, shares or ETFs, discover the UK investment ideas our experts believe have the most long-term potential.

If the aim is to make investing in UK shares more attractive, there are other ways. Retail investors are usually cut out of initial public offerings (IPOs) and secondary capital raising rounds.

Recent popularity of the Raspberry Pi IPO and directly buying government bonds shows there’s an appetite from retail investors to be more involved in these areas of the market.

Wider participation in these could be a welcome boost for the UK’s IPO market. Although investing in IPOs and individual companies isn’t right for everyone. It’s a higher-risk way to invest.

*Figures from a survey of 2,000 people by Opinium for Hargreaves Lansdown, April 2024.

** The special edition of the HL Savings & Resilience Barometer on efficient use of money has been published and is available on the HL website here.

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Written by
Susannah Streeter
Susannah Streeter
Head of Money and Markets

Susannah is a key contributor to our content. She follows changes in monetary policy movements and fiscal policies closely to assess the impact on financial markets and economic growth, and has extensive experience in covering technology stocks and the retail sector.

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Article history
Published: 14th June 2024