UK equity ownership lowest in G7 – why Brits need to invest - Crypto News

UK investors are lagging their global counterparts when it comes to investing in equities, which could be harming their portfolio prospects.

New analysis suggests an obsession with buy-to-let property among UK investors could mean missing out on putting money into the best stocks or building a portfolio of top funds.

The analysis by asset manager abrdn found that, in the UK, adults hold the smallest amount in equities and mutual funds of any G7 country at just eight per cent.

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Much British wealth outside of a pension is tied up in property at 50%, with 15% held in cash, according to the research.

The UK has the third highest proportion of wealth held in property and the third highest proportion of wealth held in cash, abrdn said.

Meanwhile, UK savers have double the amount of wealth in property than their American counterparts, who hold 26% in bricks and mortar.

Meanwhile, Americans hold four-times more of their wealth in investments compared with the UK at 33%.

Xavier Meyer, CEO Investments at abrdn, said: “We need a virtuous circle of good regulation, good products and both institutional and retail participation. Getting the UK investing is a critical challenge for society and, as an asset manager and investment platform owner, we aim to be part of the solution.”

Swipe to scroll horizontally

Country	Housing	Pension fund	Cash	Bonds	Equities and mutual funds	Life insurance and other annuities	Other
UK	50%	19%	15%	0%	8%	5%	3%
USA	26%	17%	10%	3%	33%	1%	9%
Germany	57%	6%	16%	1%	9%	6%	5%
France	52%	12%	13%	0%	13%	1%	9%
Italy	46%	9%	14%	2%	19%	0%	10%
Japan	37%	16%	35%	1%	9%	0%	2%
Canada	43%	15%	11%	1%	22%	0%	8%

Why Brits are avoiding equity investments

One factor that seems to deter UK investors from the stock market is the nation’s obsession with property.

“I’ve lost track of how often I’ve heard ‘my property is my pension,’” says Faisal Sheikh, managing director of Monmouth Capital.

“Interestingly, as the UK population becomes more diverse, this idea may be held even more strongly: first generation immigrants will often perceive property as a key, solid asset, the first thing to tick off if they establish themselves here; stocks and shares are risky. I know that’s how my parents have always felt – despite their son becoming a financial adviser.”

Abrdn suggests cultural factors may have helped inspire America’s strong retail participation in stock markets – such as the New York Stock Exchange’s ‘Own Your Share’ campaign that ran from 1954 to 1968 and, in more recent times, the role of social media platforms.

In contrast, the UK had the Tell Sid campaign for British Gas shares in 1986 but nothing since. Even plans for a similar NatWest share sale have been abandoned.

Another issue is tax.

Richard Wilson, chief executive of abdrn-owned interactive investor, says: “The single biggest, and most simple, near-term boost would be to scrap stamp duty on UK shares – a ‘big bang’ moment to get Britain investing and a vote of confidence in UK PLC.

“If stamp duty wasn’t a barrier to investing, why is it that we are losing systematically to the markets that don’t apply it? Sweden, famed for its personal investing culture, applied a Financial Transaction (FTT) Tax of 0.5% between 1984 – 1991.

“Having removed FTT, the market has grown and the burgeoning activity in Swedish capital markets is enough to make the rest of Europe blush, if figures compiled by New Financial earlier this year are anything to go by.”

The risk of avoiding equities

Investing in the stock market may seem risky but can typically reap rewards over the long term.

For example, the FTSE 100 is up 8.45% over five years, while the S&P 500 has risen 81%, helped by the Magnificent Seven technology and artificial intelligence stocks.

An index tracker following these markets may have annual charges but would be tax-free if held in an ISA.

In contrast, the most recent Land Registry data for the five years to the end of October shows house prices are up 25%. Any profit if selling as an additional property would face capital gains tax though. Income tax is also charged on rent being paid, while rental growth has been slowing in recent months for landlords. There are also extra regulations to consider with a buy-to-let portfolio, which you don’t have with a stock or fund.

Even property development firms recognise that it is important to also back equities.

Kundan Bhaduri, property developer at The Kushman Group, says: “The UK’s preference for cash and property over equities seems to reflect a deep-rooted cultural aversion to risk, rather than a well-calculated investment strategy. While property has traditionally been seen as a safe bet, and cash offers security, it’s becoming increasingly clear that avoiding equities can be a costly decision in the long run.

“The reluctance to dive into equities likely stems from a mix of Brexit hangovers, market volatility, and perhaps an aversion to financial jargon. Yet, avoiding equities entirely is a risky strategy in itself, as inflation nibbles away at cash and property returns lag behind a diversified portfolio.

“A more diversified approach could provide better protection and growth opportunities for UK investors.”

UK equity ownership lowest in G7 – why Brits need to invest

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UK equity ownership lowest in G7 – why Brits need to invest

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