Investors seek caution and run from equities

The average investor's holdings in equities fell 55 per cent in the last six months as market volatility is increasing caution.

Data from Lloyds TSB Wealth Management show 28 per cent of investors have moved money into more cautious investments, such as cash or bonds, in the last six months.

Furthermore 53 per cent of investors feel apprehensive about the stock market in the next twelve months.

Nathan Moss, managing director of wealth management at Lloyds TSB, said: "Stock market investors are ditching the FTSE in droves as confidence slumps. But, this approach could be costly in the long run.

"It is essential that investors seek professional advice before making an impulse decision that they could regret later when the market rallies."

Over the last six months 65 per cent of investors have reviewed their holdings, with 54 per cent saying they felt apprehensive about their stock market investments, up from 37 per cent in December.

Of those who have made changes to their investments over the past six months, 44 per cent moved some or all of their money into more cautious investments (such as cash or bonds), with five per cent moving their entire portfolio.

Fourteen per cent kept their stock market investments the same but put money in other investments, while nine per cent ploughed more money into equities in the hope that the markets will rally.

Looking forward 53 per cent of investors said that they felt apprehensive about stock market investments over the coming year, up from just 36 per cent six months ago.

Just 21 per cent felt confident about the future of the markets, a fall of five per cent.

Mr Moss added: "Evidence suggests that this period of financial uncertainty isn’t over. There are more shocks in store for financial markets and the economy in general that will challenge even the most intrepid investors’ nerves.

“However, as we enter these uncharted financial waters, those thinking about making changes to their portfolio in the hopes of side-stepping the credit crunch could benefit from taking the time to sit down with a professional adviser.

"Despite the uncertain outlook, it might be that gritting their teeth and holding on in the short-term could pay dividends when the market recovers."