‘Keep calm and carry on’ is an often-used piece of sound advice at times of market crisis – but what does that look like in practice?
The past year saw trading records broken time and again, as volatile markets propelled more people into engagement and a new generation of people became ‘accidental savers’ during lockdown. Alongside this, conditions for many active traders became arguably more interesting.
Interactive investor, the UK second largest direct-to-consumer investment platform, has compared the investing trends among regular (monthly) investors and lump sum investors since the start of lockdown on 23 March 2020 until 16 March 2021.
Regular investing is the ultimate ‘keep calm and carry on’ strategy – with the same selections automatically made month in, month out – whatever the weather. Lump sum investments, in contrast, can have more potential to be driven by emotion and events.
Among direct equity investors, regular investors have focussed on the traditional blue chips over the last year, with income stocks a key theme. While this was echoed in large part among lump sum investors, there was some additional themes as they sought to take advantage of potential ‘pandemic’ buying opportunities.
Beaten up airlines, such as International Consolidated Airlines and easyJet, made the top 10 for lump sum investors over the period, along with diagnostic and biotechnology companies, a clear pandemic theme – Omega Diagnostics and Avacta Group being a case in point.
Richard Hunter, Head of Markets, interactive investor, says: “Many of our more experienced investors will simply have chosen to do nothing and will have ridden out the storms of the past year as the pandemic took hold. Regular investing is a good way to invest without lifting a finger – drip feeding your investments through the ups and downs, by way of a direct debit, means investors buy less shares when markets are high, and more when markets are low.
“For the lump sum investor, some of whom would have been seeking out potential opportunities, beaten up airlines and science companies have been a clear pandemic theme. Boohoo, whose share price had a torrid time after very serious allegations about employment practice and factory working conditions, also saw some traders moving in. The big question is which was the most successful strategy? While the jury is out, regular investors may well be sleeping better.”