RE: Sp17 Nov 2020 13:22
The Cost Of Emotionally Driven Investment Decisions (1235 Gmt)
"When COVID-19 hit the market and equities fell sharply earlier this year, some people in the UK rushed to pull some, or all, of their cash out of the stock market.
Some 1.38 million retail investors sold £10,000 or more of their investments during the early stages of the crisis, and 531,900 people sold £100,000 or more of their holdings, Oxford Risk says in a report.
The study claims that retail investors took these decisions seeking for ?emotional comfort and their anxiety will cost them a fair amount of money.
“Many of the investment decisions retail investors ?make are for ?emotional comfort,? and in a normal year this can on average cost them 3% in ?returns. Driven by the COVID-19 crisis, stock market volatility levels have been greater this year, so the losses will be higher,” says Greg B Davies, head of behavioural finance at Oxford Risk.
“Those investors who pulled money out of the markets in March will already have lost much more… they lost when the markets dropped, and many have missed out on the rebound since. Many are also likely to find it emotionally difficult to get this money reinvested for the long-term and so may lose out on even more foregone returns in the long-run,” says Greg B Davies, head of behavioural finance at Oxford Risk.
Oxford Risk's advise?
“Retail investors should avoid watching the markets day-to-day as this increase anxiety and remain focused on their long-term plans and ignore much of the background noise that can tempt them into making the wrong investment decisions,” says Marcus? Quierin, ?Oxford Risk CEO. "
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