61% of investors put safety over returns Go compare with our comparison table

61% of investors put safety over returns

10 May 2010 / by Rachel Mason

Nearly two thirds of investors think the safety of their cash is more important than the returns they receive.

According to research from the Fair Investment Company, when asked what they thought the most important element of investment is, 61% said safety compared to 31% who said returns.

The percentage who felt safety was more important is an increase, says Fair Investment Company, on six months ago, when returns was still more important than safety to the majority of investors.

Nick Scarrett, head of pensions and investments at Fair Investment Company says he thinks people are more cautious now because they have seen what can happen to financial institutions that offer fantastic rates but can't back them up.

"Prior to the credit crunch, you had to go back years to the last time a mainstream bank had gone under – for most people, it was just not something they could ever envisage happening, " he said. "But now, they have seen it happen and are much happier going for a safer institution with slightly less competitive rates than risking their money for a few extra percentage points."

Nick suggests that people's 'whole attitude to investment has changed,' saying that investors are more realistic now.  "Investors are just looking for secure returns in excess of inflation," he said. "No one is looking for the market leading rates anymore. And, with rates so low and the differences between rates so small, investors who have their money with a safe institution are not going to move their money to somewhere less safe for relatively little potential gain."

Although this explains why people are more cautious generally since the credit crunch, it doesn't necessarily explain why the past six months has seen investors become even more cautious still.
George Ladds, head of research at Fair Investment Company, says it could be to do with a number of factors.

"Some investment funds have seen a huge surge over the past six to twelve months, with the bailout of the Greek economy and uncertainty in other European countries in recent weeks; there is less confidence in the markets which means these gains could be lost. This could explain why investors are more cautious than they were six months ago as it could be that they are looking to encash gains that they have made," he said.

George says that now investors have seen the evidence of what can happen when too many risks are taken, it makes sense that many would be putting safety before returns and those who were taking more risk six months ago may now start being more cautious.

"Those that were taking some risks while the markets were rising are maybe now thinking that they should take the gains now and re-invest into more cautious investments, for example guaranteed/protected funds or absolute return funds," he said.

© Fair Investment Company Ltd
 

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