Young investors shine as broker reveals DIY investors significantly outperformed the market in 2020
The UK’s second-largest DIY investing broker, interactive investor, recently reviewed how its users fared against the volatile market backdrop in 2020, and its findings were that its ever-growing band of self-directed investors fared well in a tumultuous year. Its headlines were:
- The FTSE All Share fell -13.2% to the end of November, ii median customer performance was -1%
- Younger investors’ portfolios saw strongest growth of +4.5%, boosted by high investment trust exposure
- Investors who trade more than twice a month, saw strongest returns (+1.8%)
Interactive investor (ii) reported that, on average, its more than 350,000 customers significantly outperformed the UK market this year. Whilst, according to Morningstar, the FTSE All-Share and FTSE100 are down -13.2% and -14.4%, respectively to the end of November, its customer portfolios across all age groups held up considerably better, down in median performance terms by -1%.
When broken down by account type, SIPP customers performed the best, with portfolios up +3.8% compared to -0.4% for ISAs and -6.9% for general investment accounts.
Its results showed no gender bias, ii’s 97,000 female customers performed broadly in line with men – down -1.3% compared to -1.1% for men.
The company plans to publish full year performance figures in January and looking ahead, plans to incorporate longer-term data, updated quarterly.
In announcing its findings, CEO Richard Wilson, said: ‘It is encouraging to see that our customers’ portfolios have held up comparatively well over an extremely challenging year to date. We look forward to seeing what long-term trends emerge from our customer data.
‘With the vast majority of private investors managing their own wealth as opposed to using a financial adviser or wealth manager, we think it is crucial to get an understanding of how their portfolios are performing through the good times and the bad.’
Youngest investors – trusting their investments in investment trusts
Since the first lockdown ii has reported people taking control of their finances as never before – ‘Coronavirus lockdown fuels spike in DIY investing’. Brokers have reported new accounts being opened in record numbers with the youngest investors particularly well represented, and it is those aged 18 to 24 that achieved the best investment performance with ii – portfolios up +4.5% during the year.
The 25 to 34 age bracket came a close second at +3.8%, and 35 to 44s up +2.9%; by contrast, those 65+ saw the value of their investments fall by -4.2% and those 55 to 64 by -1.1%.
Ii attributes the strong performance of the youngest group in part to them holding the highest proportion of investment trusts (38%) against a 22.6% average. Investment trusts performed strongly in the year to the end of November, up 8.4% according to the AIC, boosted by their exposure to overseas and alternative assets.
Mr Wilson continued: ‘We are delighted that the benefits of investment trusts, which have been serving shareholders for more than 150 years, are reaching a younger audience. Investment choice can be a powerful performance tool and younger investors have clearly been taking advantage of this.’
|Year-to-date performance across age groups to 30 November 2020|
|18 – 24||4.50%|
|25 – 34||3.80%|
|35 – 44||2.90%|
|45 – 54||0.60%|
|55 – 64||-1.10%|
Active retail investors achieve the strongest returns
Interactive investor reports that its most active customers – those using the platform frequently and trading more than twice a month – grew their portfolios by +1.8%.
2020 was a strong year for DIY investing, and it is likely that people will turn to financial self-reliance in increasing numbers as state provision becomes less certain, and those that were caught out by the pandemic will embrace the benefits of a rainy day fund.
Find more information see ‘Lockdown 2.0: Increasing numbers take personal financial responsibility and turn to DIY investing’ and to find out what they have been investing in see ‘Disaffected savers turn to DIY investing; which shares, funds and trusts have they been buying?’