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December 5, 2022

eToro : Retail investors see inflation as biggest threat to their portfolios

  • Increased retail demand for precious metals, energy and real estate to counter threat
  • Majority (53%) think their investments will get better over the next 12 months

Retail investors believe rising inflation is currently the biggest threat to their portfolios, new research from multi-asset investment platform eToro reveals.

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.

Investors in Poland (55%), the US (51%), Romania (48%) and Germany (48%) ranked inflation as a prominent threat. In Romania, the state of the global economy (44%) came a close second. Only one third of those surveyed cited the state of the Romanian economy as a threat to their investment portfolios.

Traditional hedges such as real estate were popular portfolio picks (22%), and 40% of global 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%).

25% of retail investors surveyed globally had invested in cryptoassets – although the percentage is almost double in Romania, with 46% investing in crypto. Romanian investors aged 18-34 were the most pro-crypto, with 61% saying they are likely to invest in cryptoassets over the next 12 months.

Despite inflation fears, retail investors are optimistic. Overall, 53% of global respondents think their investments will get better over the next 12 months, with Romania (70%), the US (60%) and Australia (57%) the most confident and France (41%) least confident.

Ben Laidler, Global Markets Strategist at eToro, commented: “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.”


Are markets overvalued? Are we in for a crash?


With regards to the markets themselves, two in five (40%) retail investors surveyed believe global markets are in bubble territory as stock prices reach new highs. The news comes as many major stock indices, such as the S&P 500 in the US, Dax 30 in Germany and CAC 40 in France, have hit or are at near-record 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.

In Romania, there is not a great degree of consensus when it comes to thinking about whether there will be a significant market fall in the next 3 months. When it comes to views on whether the markets are in a bubble, 43% of Romanian participants think they are, while 12% disagree, the rest remain undecided.

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. Investors in Poland are most worried about an imminent crash, with 39% of those surveyed saying they believe we will see one in the next three months. They are followed by investors in France (36%), Romania (35%), Spain (30%) and the Czech Republic (30%), and the US (29%). The Dutch (15%) and the Danes (17%) are the least worried about an upcoming crash.

Ben 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.

“It’s worth remembering that, while valuations are high, equities are currently cheap compared to bonds, and the fact that just one in four investors believe that another correction is due before the end of the year suggests that many of them are willing to carry on paying current valuations – for now, at least.

“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. 

“Even when central banks do begin to increase rates, I can’t see it taking the shine off of stocks; instead, I think we’ll just see retail investors shifting out of growth stocks and into cyclicals – something which has already been happening to some degree recently. The positive is that over half of investors (53%) think their investments will get better over the next 12 months, revealing a bullishness despite the world not quite being sure as to what is going to happen next, as we finally look to move out of Covid-19’s shadow.”



*Research conducted by Opinium from June 28 2021 – July 21 2021. In total, 6,000 retail investors sampled across 12 countries – 500 in each: UK, US, Germany, France, Italy, Spain, Netherlands, Denmark, Australia, Poland, Romania and the Czech Republic. Retail investors were defined as self-directed or advised and had to hold at least one investment product including shares, bonds, funds, investment ISAs or equivalent. They did not need to be eToro users.


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