Alongside interior design, gardening and baking, more Britons seem to have tapped into an undiscovered passion for investing in shares since lockdown.
While funds and trusts are often the go-to for the beginner investor, this year has seen an increase in trading activity in company shares.
With more people working from home and a keener interest in the impact of the coronavirus on the economy, plus some very high profile global stock market names such as Tesla, Apple and Amazon flying high, more and more people have taken to trading in shares directly.
And some have reaped significant rewards for doing so after boldly buying in after markets hit a coronavirus crash bottom on 23 March.
Lockdown has seen many tap into an undiscovered passion for investing in stocks and shares
So, what is going on? Why has there been a resurgence in people investing or trading directly in shares and is it linked to a similar trend in the US – typically a more investing-orientated nation.
This is Money spoke to the UK’s leading DIY investing platforms and some of their upstart rivals that are slashing the cost of buying and selling shares to find out how more of the nation became hooked on the stock market while in quarantine and what this might mean for the future of investing.
The rise of the lockdown share trader
Britain is buying and selling more shares during lockdown.
Our research shows that the amount of trades in stocks and shares across all major platforms rose during the nationwide lockdown this year, which was officially implemented on 23 March and began easing in early July, compared to same period in 2019.
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Most industry experts we spoke to put this partially down to the increase in people working from home and therefore people having slightly more time on their hands without the commute, or the every day distractions one might have in an office.
Some of those furloughed or unable to work have also been getting involved.
We spoke to one amateur share trader, who asked not to be named, who after being unable to work as a photographer started playing the markets in March and has made a decent profit since.
Russ Mould, investment director at AJ Bell, said: ‘Lockdown meant that people actually had time to take stock of their finances and manage them to best effect, topping up annual allowances in tax-efficient wrappers where they could.
AJ Bell’s Mould said lockdown meant people had time to take stock of their finances
‘It is also possible that some investors are also taking the view that central bank money printing and soaring Government budget deficits mean inflation – and loss of purchasing power for cash – is on the way, with the result that they are seeking to protect their wealth by buying real assets, such as shares in companies.’
Meanwhile, Bestinvest reported higher levels of engagement from clients over the lockdown months, attributing it to many people being on furlough and so having the time to think about their financial circumstances.
Myron Jobson, of Interactive Investor, said it is possible that the current global crisis may have simply inspired people to start saving because now is arguably that ‘rainy day’ we all should have been saving for.
How have the numbers changed?
Social trading platform, eToro, which allows users to copy other investors’ trades, saw a huge uptick in new UK registrants over lockdown, alongside a whopping 420 per cent increase in the number of opened stock trades from January to June, compared to the same period in 2019.
Adam Vettese, of eToro, said part of this is driven by the pandemic encouraging ‘working-from-home investors’ but also by the launch of its zero commission stocks offering.
Trades in shares at Interactive Investor were up 119 per cent year-on-year between 1 April and 31 August, while trading volumes over March and April at AJ Bell were three times higher than the same period in 2019.
The group said since then, trading volumes have decreased but have still been running at double normal volumes throughout the last few months.
Meanwhile Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said the investing platform giant saw a 221 per cent rise in the number of trades between 24 March and 30 June, compared to the same timeframe last year.
She added: ‘Although there was an increase in sells by 183 per cent, our clients were much more interested in buying into the market, with shares purchased up by 258 per cent.’
Commission-free investing platform Freetrade also reported record figures, with a 26 per cent increase in order volume between April and July and a spike in June.
Who is in this new group of investors?
It’s not just the amount of trades and new investors coming to market that is interesting – it’s who those investors are.
Traditonally, investors in shares in the UK have skewed towards being part of an older generation that came of financial age at a time of personal stockbrokers and financial advisers.
They have continued to invest directly in shares, while the younger generation of investors coming through has preferred funds and more recently ETFs.
But between March and September, Freetrade saw an 80 per cent increase in its total number of customers, with the biggest portions being made up of those aged 18 to 25 (27 percent of total customers) and 26 to 35 (42 per cent of total customers).
Similarly, eToro found that just under 40 per cent of all new UK customers that joined the platform within the last 12 months, and which currently hold real stocks are under 29 years old.
This reflects the Robinhood effect in the US, which has partially been credited with fuelling the stratospheric rise in popular tech stars shares, such as Tesla, Apple, Amazon and new kid on the block Zoom. The app that offers commission free trading has lured in a new generation of investors, although many question whether they are investing in the long-term sense or simply trading to speculate.
Freetrade and eToro both offer commission-free share trading in the UK, whereas platform giant Hargreaves Lansdown charges £11.95 to buy or sell, Interactive Investor charges £7.99, Fidelity charges £10 and AJ Bell charges £9.95. Even cut price favourite iWeb charges £5.
But it’s not just the newer, shinier, primarily app-based platforms that have seen an influx of new younger investors. The longer-standing, more traditional platforms are also experiencing somewhat of a revolution.
AJ Bell said 22 per cent of its new Youinvest customers in the first six months of the year were aged between 21 and 30, compared to just 13 per cent of overall customers. The group said this trend saw its average customer age fall from 44 to 38 over the past 18 months.
A spokesperson added: ‘Online platforms are increasingly catering for the needs of younger investors through intuitive mobile apps, ready-made investment solutions and content specifically designed to help them get stated with investing.’
New account openings at Interactive Investor increased by as much as 238 per cent among certain age groups in April and May 2020 compared to the same period in 2019
Meanwhile, Interactive Investor also saw record numbers of younger people opening accounts in April and May this year compared to the same period last year. The amount of new accounts opened by 25 to 34 year-olds increased by a staggering 238 per cent.
In terms of who the investors were that were actually performing the bulk of trading during lockdown however, these were, perhaps unsurprisingly, older and more seasoned investors.
Interactive Investor’s Jobson added: ‘There has been a notable increase in share trades among the 25 to 24 age group – accounting for 6.75 per cent of trades this year to the end of August compared to 4.33 per cent over the same period last year.
‘But the lion’s share of trades were made by older generations as you’d expect – around three quarters of trades were made by those aged over 45 this year.’
Jason Hollands, of Bestinvest, said: ‘Higher engagement has been particularly noticeable from those in their 50s, who are thinking about how their retirement timeline might be impacted by effect on their pensions, as well as those who want to assess whether they could afford to retire earlier than anticipated if they find themselves out of work.’
Interestingly, share trading activity among older clients of Hargreaves Lansdown fell markedly, particularly among those in retirement.
Susannah Streeter said: ’14 per cent of those aged between 64 and 80 made a share trade between March and June this year, compared to 14 per cent last year.
‘What’s also striking is that almost half (49 per cent) of clients who placed a trade were aged between 30 and 54, up from 43 per cent last year, while those trading shares in the 18 to 29 age group also rose to 15 per cent, from 10 per cent the year before.’
Hargreaves Lansdown’s Susannah Streeter said it was ‘striking’ that more clients aged between 30 and 54 invested in shares over lockdown compared to the same period last year
What shares are people buying?
Most markets and industries were hit by the coronavirus pandemic, so it could be argued that opportunities were, and still are, to be found pretty much everywhere.
Significant trading activity at Hargreaves Lansdown centred around the travel sector, which suffered steep declines during the pandemic.
Streeter said easyJet, Carnival and International Consolidated Airlines Group were among the ten most popular shares traded on the platform.
What is fractional share trading?
Fractional share trading is the ability to buy a part or piece of a full share, rather than the whole thing.
Many shares can be quite costly but with fractional shares you get the same price movements as full shares, simply in smaller increments.
Wombat Invest chief executive Kane Harrison believes fractional share trading is the future of investing.
He said: ‘It removes the concept of needing to save up to buy full shares. People can get started much earlier and are able to simply buy however much they can afford to invest.
‘This is important because it allows people to get started on their investing journey much earlier, and develop the knowledge and skills they need to become successful investors.’
Between 1 April and 31 July, Tesla was the most popular stock at Freetrade, followed by Apple, Microsoft, Amazon and Boohoo.
Most of these companies are still firm favourites today with the top five stocks at eToro for August 2020 featuring Apple, Advanced Micro Devices, Microsoft and Tesla.
Lloyds Banking Group was the best-selling stock between 1 April and 31 August at both Interactive Investor and AJ Bell. The top ten at the two platforms didn’t vary much either with International Consolidated Airlines, BP, Boohoo, Barclays, EasyJet and Avacta featuring in both, though in different positions.
Ed Monk, of Fidelity International, said trends for the most traded shares indicate that it is household UK names which still catch British investors’ eyes, with a firm focus on dividend paying sectors like oil, the banks and pharmaceuticals.
He said the platform’s five most traded shares year to date are Lloyds, Barclays, Royal Dutch Shell, BP and International Consolidated Airlines.
Meanwhile Wombat Invest, which launched early last year and allows customers to trade in fractional shares, has a select few stocks available to invest in.
Of these, it has found that its customers love investing in British brands and its most popular companies to date are JD Wetherspoon, Games Workshop, JD Sports and Ocado.
What next for the lockdown share traders?
Those who started investing for the first time during lockdown, and stayed put even as volatility continued to hit global markets, will be smiling to themselves now after being handsomely rewarded by the strength of the rally.
Mike, one of our Money Pit Stop readers made £15,000 just from ‘copy-trading’ on eToro in recent months, and is keen to continue investing due to his success.
This may well have given investors like Mike a confidence boost to continue trading directly in stocks over funds and trusts, though they must remain aware of the risks.
Regardless, all platforms believe trading will remain a popular pastime even after lockdown.
eToro’s Vettese said: ‘The number of opportunities now available to consumers to actively engage with their investments is really encouraging.
‘The pandemic has certainly accelerated the adoption of fintech and online investment but, most importantly, this increased popularity has led to more conversations around investment.
‘We hope one of the legacies of this year will be a generation of investors who continue to seek education around the financial markets and take increased responsibility for their investments.
‘This could well translate to more people investing directly in shares as consumers seek to build their own diversified, long-term portfolios.’
Fidelity International’s Monk added: ‘Fund investing, which provides diversification and day-to-day oversight of investment decisions, will remain the most appropriate place for most new investors but the extra appetite for shares that we’re seeing suggests there’s a rising number of people confident to invest under their own steam.’
Meanwhile, PrimaryBid, which enables retail shareholders to access corporate fundraisings from which they have historically been excluded, also saw increased activity on its platform and expects this to continue in the same direction.
While the increase in activity may have been partly to do with an increased investor appetite over lockdown, it also couldn’t have happened without the fact that a large number of UK listed companies decided to raise money between March and July to protect their businesses.
Anand Sambasivan, chief executive of PrimaryBid, said: ‘Where companies have allowed retail investors to participate, there’s been a huge increase in activity. Examples include businesses like Compass Group, Taylor Wimpey, Segro and Ocado.
‘These are all companies that retail investors follow and actively trade in the secondary market, but for the first time they were given the opportunity to participate in so-called “primary” raises where a company raises new money.’
‘Fundamentally people want to take control of their financial futures and they now have the tools to do so, even if they are only investing in small size.’