DOES dabbling in the stock market make you more money or is professional advice the only way forward? Richard Eastwood, Financial Services Partner, discusses:
Many people play the stock market, google pension advice and attempt DIY investments – but nothing can replace the advice of a professional if you want to make your money work hard for you.
You may be thinking as a financial adviser I would say that but the figures never lie and a recent survey by a fund manager found that advised investors in the UK are outperforming DIY investors by more than 25 per cent a year.
That’s the difference between retirement with long holidays free from financial stress or a retirement where you have to penny pinch a little bit more than anticipated.
The survey of more than 1,000 investors in the UK found on average advised investors achieved a return of nearly 7.5 per cent in 2018, significantly higher than the 5.9 per cent achieved by those who pick their own investments.
The outperformance means advised investors on average generated a 27 per cent higher return than DIY peers and so more money for retirement and enjoying the finer things in life.
The difference was driven by significant differences in asset allocations over the past 12 months.
Of those surveyed, DIY investors had nearly half of their savings (46.8 per cent) in cash compared to just under a third (29.7 per cent) for those who took financial advice.
It could be that people who pick their own investments tend to be much “more cautious.”
Instead of cash, advised investors were found to hold nearly four times as much in alternative investments, which include commodities and hedge funds.
The findings come from the Legg Mason Global Investment Survey, now in its sixth year, which polled 16,810 investors across the globe. Respondents had to have at least approximately £8,500 to invest in the next 12 months.
While there will always be those who prefer to choose their own investments – and there is nothing wrong with that – research shows a clear correlation between taking advice and higher returns.
On average, people who tend to choose their own investments take less risk than those who take advice, which can have a significant effect on returns.
A good adviser will take a considered view on higher-risk investments and search for higher returns in areas that perhaps most DIY investors wouldn’t, while at the same time ensuring clients are adequately diversified to withstand any market shocks.
It’s never too early so if you’re just starting out in work and want to make pension choices, if you have an inheritance to maximise or simply want to plan for an immanent retirement call our team and we can give balanced and professional advice.