Is inflation the biggest threat to your portfolio?

This week eToro launched our new quarterly investment update — the Retail Investor Beat*, which looks at current retail investor attitudes to a number of issues — confidence, buying opportunities and portfolio make-up to name but a few. We’ve talked to 6,000 retail investors across 12 countries to understand the latest trends and concerns affecting investors today. The first edition had some interesting takeaways:

  • Inflation is retail investors’ number one concern 

When asked what the biggest external risk to their investments was, retail investors globally (38%) signalled that they were most worried about inflation. This was followed by the state of the global economy (35%) and the state of domestic economies (31%). Investors in Poland (55%), the US (51%), and Germany (48%) were the most concerned about it, and globally, men (42%) saw rising inflation as more of a threat than women (34%).

  • They’re diversifying to spread the risk

The data indicated that retail investors are taking action to protect their portfolios from inflation and potential volatility, with traditional hedges such as real estate (22%) being popular portfolio picks. Two in five (40%) noted that precious metals such as gold presented the best commodity-buying opportunity over the next 12 months. Mostly, however, portfolios were made up of equities (62%), bonds (39%) and cash (28%). 

Interestingly, cryptoassets were included in 25% of retail investors’ portfolios. Investors aged 18-34 were the most pro-crypto, with 46% saying their portfolio contained these assets. 

  • Don’t underestimate the importance of community for portfolio management

To help manage their investments, retail investors used a variety of methods to help them make sound investment decisions. Personal recommendations (37%) were investors’ main sources of information, with women (43%) more likely to confide in friends or family. Men, on the other hand, preferred the media (40%) or Google (35%) as their primary source of information. Younger investors aged 18-34 were also the most likely to turn to personal recommendations, with investors aged 55+ relying on the media for guidance. Social media was also a key source for 29% of 18-34 year olds, much like online forums such as Twitter (27%).

  • Some investors think we’re in bubble territory…

With many major stock indices, such as the S&P 500 in the US, Dax 30 in Germany and CAC 40 in France, hitting or at near-record highs, it led to some retail investors stating they think the markets are in bubble territory. Two in five (40%) of the 6,000 investors thought this was the case, with 15% believing the markets were fairly or undervalued. A further 45% were not sure – implying continued uncertainty as the markets look to move out of a post-covid world.

  • …But confidence is strong and investors are optimistic about their returns

Globally over half of investors were confident about their returns – with 53% predicting their investments will get better over the coming 12 months – indicating a bullishness returning to markets. Just one in four (27%) think there will be a significant slump in share prices in the short-term, with Polish investors the most concerned (39%).  They are followed by investors in France (36%), Romania (35%), Spain and the Czech Republic (both 30%), the US (29%), the UK (26%), Italy and Australia (both 25%), Germany (22%), Denmark (17%) and the Netherlands (15%).

Looking at the results from the Beat, despite some concerns, it’s great to see strong levels of positivity returning to markets. The importance of community really shone through, as retail investors look to set up their portfolios as we move out of Covid-19’s shadow. To enable this, retail investors are currently adopting a 60:40 approach to their portfolios, and remembering key rules such as the importance of diversification and spreading risk. 

 

* Research conducted by Opinium from June 28th 2021 – July 21st 2021. In total, 6,000 retail investors sampled across 12 countries – 500 in each: UK, US, Germany, France, Italy, Spain, Netherlands, Denmark, Australia, Poland, Romania and the Czech Republic. Retail investors were defined as self-directed or advised and had to hold at least one investment product including shares, bonds, funds, investment ISAs or equivalent, they did not need to be eToro users. 

 

This communication is for information and education purposes only and should not be taken as investment advice, a personal recommendation, or an offer of, or solicitation to buy or sell, any financial instruments. This material has been prepared without taking into account any particular recipient’s investment objectives or financial situation, and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past or future performance of a financial instrument, index or a packaged investment product are not, and should not be taken as, a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication.”

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