The world of investing has many different obstacles to navigate but the biggest of these in the minds of investors is now the risk of inflation.
Rising costs are the biggest concern for investors hoping to prosper, new research findings suggest.
According to financial company eToro, 36% of UK retail investors share concern over higher prices.
Globally, the figure is slightly higher, with 38% of investors seeing inflation as a worry. In the US, where official measures of inflation have hit 13 year highs 51% of investors highlight it as an important issue.
eToro’s inaugural Retail Investor Beat, which surveyed 6,000 retail investors across 12 countries, revealed that the rising cost of goods and services is seemingly influencing investors’ portfolios.
Real estate and gold popular picks
Traditional hedges such as real estate were popular portfolio picks (22%), and 40% of respondents noted that precious metals such as gold presented the best commodity-buying opportunity over the next 12 months.
Mostly, however, portfolios were made up of equities (62%), bonds (39%) and cash (28%).
Interestingly, there is a divide among men and women. Only 34% of female investors see inflation as a threat compared to 42% of men.
A total of 25% of retail investors surveyed had invested in cryptoassets – although this was only 17% in the UK.
Investors aged 18-34 were the most pro-crypto, with 46% saying their portfolio contained these assets.
Research key for investing
Ben Laidler, eToro global markets strategist, said: “The data shows retail investors have balanced portfolios, they’re 60:40.
“They’re holding cash and focusing on fundamentals like diversification to spread their risk – which is the golden rule when markets are unpredictable, as they have been over the last few months.
“They’re also asking for help – no one has a magic investing formula and spreading knowledge by talking about investing or doing research is key to becoming a better investor.”
Two in five (40%) retail investors believe global markets are in bubble territory as stock prices reach new highs.
Just 15% of the 6,000 investors surveyed believe markets are fairly or undervalued, while 45% neither agreed nor disagreed, perhaps signalling uncertainty about future market performance.
Global economy in ‘strange state’
However, despite varying opinions on whether the market is overheated, few believe that another market crash is on the horizon.
eToro’s data shows that just one in four (27%) respondents believe it is likely there will be a significant slump in share prices.
Mr Laidler added: “This is probably the clearest signal yet that everyday investors believe markets are overpriced.
“However, as history has shown us, that does not necessarily mean that a new crash is on the horizon.
“The global economy is in a strange state at the moment. For perhaps the first time in history, central banks around the world are happy to let inflation run hot for a short period in order to let their economies recover from the pandemic.
“That provides incentive for investors to keep putting their money into equities, which have proven to be the only long-term asset able to consistently deliver inflation-beating returns.”