Brave Or Crazy? Individual Investors Continue To Buy Shares Despite Losing £35bn

During the recession individual investors have invested a sum of £1.3bn extra into the stock market than what they have gained from it. Claims the roll administrator for Britain’s biggest shareholders. This is a direct opposite to the reaction of professional fund managers who transitioned into the safety of gilts.

A good way to gain capital in the past was to buy on dips; however, a double dip recession may mean a busted flush? Individuals who purchase shares after a reduction in price may be setting themselves up for a large profit in future? Or are they simply throwing money away?

CEO of Capita, Charles Cryer claims that: “Every day during the shaky months of August private investors lost or made an average of £4.4bn, it was very brave for them to continue buying during the dip.

“Despite the uncertainty of the economic outlook investors are looking for bargains. The busy turnover during the summer was surprising because private investors generally trade less in an erratic market.

Recent individual investors will suffer short term losses, but to those who are investing into retirement funds and do not plan on retiring until five years or more, there may be no effect on their investments as long as there is a recovery by that time.

“Regardless of the confusion, there has been a growth in dividends this year, and there is now a yield of 3.8pc in the market, which is twice as much as government bonds. At the same time there may be the potential for a growth in income as cash rich companies have started to return their cash to shareholders. The forever desperate search for yield is reflected in the buying spree. Points out Mr Cryer.

So are the investors brave or simply desperate? Only the future will tell if they continue to lose on their investments.