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Lack of knowledge deters stock market investment

The Association of Investment Companies (AIC), the trade organisation for firms dealing in closed-ended investments, such as investment trusts, has published the findings of its June survey on attitudes to the stock market.

The survey found that despite recent events, the most significant deterrent to potential investors is lack of knowledge and understanding, rather than the risk attached to stocks and shares.

The June survey questioned 2,110 respondents and found that 15% of potential investors had concerns about stock market risks.

In September of last year that figures stood at 12% and given the events on the global markets in between times, a much higher increase than 3% could have been expected.

At the same time, 32% of those questioned said that they were not confident enough to invest on the stock market, due to a lack of understanding.

Twenty four per cent replied that they simply did not know how to go about it.

However, affordability was the dominant reason for avoiding such exposure; 47% of respondents thought they were not wealthy enough.

Property was considered the safest investment option by 48% of those surveyed, while 22% preferred banks and building societies.

Only 11% of respondents considered the stock market the best means of long-term investment growth.

The minimum lump sum required by most companies offering stock market investment schemes is £250.

However, 38% of respondents had no idea of the minimum lump sum required and 25% believed it to be over £1,000.

Thirty five per cent of respondents would be more likely to invest in stocks and shares if they could do so through in a pooled investment fund starting from £30 a month (or a £250 lump sum).

Daniel Godfrey, director general of AIC, interprets the survey as indicating that a lack of knowledge rather than risk aversion keeps potential investors away from the stock market.

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