Wealthy UK investors have suffered more than smaller traders since the start of the year, as market volatility hit riskier portfolios typically favoured by higher-level investors invest.

Interactive InvestorClients investing more than £1m lost 4.2% in the first three months of 2022, outpacing a loss of 3.6%, the firm, which accounts for about a fifth of the UK self-investment market, said on Monday. Ordinary account holder.

The loss of private investors, combined with the rising cost of living, has prompted signs that savers are pulling out of the market, with little hope of a better future.

“I dare say that rising inflation and slower growth could lead to stagflation,” said Alex Fink, chief investment officer at Schroders Investment Solutions. “That’s probably pretty difficult for most asset classes.”

fink speaks russia Invasion of Ukraine This has exacerbated tricky market conditions as inflation has been consistently higher than the central bank expected. “Since there hasn’t been serious inflation since the 1970s, I don’t think people understand the market’s reaction to high inflation,” he said.

The blow to investors comes as global equity and bond markets, which typically move in opposite directions and provide balance to portfolios, suffered one of their worst combined losses on record in the first quarter, leading professional fund managers to warn the market to leave “Nowhere to Hide”.

Investment funds saw record inflows of retail savings in 2021, but a flood of bad news reversed investors in January. Savers and their advisers pulled £3.68bn from their funds in January and February, according to the latest figures provided by the Investment Association.

The sell-off in funds continued into March, according to Calastone, a fund network that tracks the movements of retail and institutional investors.

“High inflation and growing economic uncertainty provide a troubling backdrop to escalating tensions between Russia and Ukraine,” said IA Chief Executive Chris Cummings.

Those with savings have become more cautious about entering the market. Investment platform Hargreaves Lansdown said about a third of investors who deposited Isa in stocks and shares this year kept their money in cash rather than investing, compared with the top two. A quarter of savers hoarded cash in 2018.

“Investors are reluctant to risk their Isa,” said Emma Wall, head of investment analysis and research at Hargreaves Lansdown.

But she added that people shouldn’t wait for the perfect moment before investing: “Investors should note that it’s nearly impossible to time the market perfectly . . . so waiting for full certainty could mean missing out on gains.”

To avoid unfortunate timing in volatile markets, Wall advises investors to “dribble” their cash into the market in small, regular amounts.

Other investors have cut back on their regular investing habits due to budgetary pressures. A poll by Interactive Investor found that a quarter of respondents stopped paying their investments or piggy bank because of the cost of living.

“Given the current outlook for household budgets and the knowledge that things are likely to get worse before they get better, it’s understandable that people are looking to cut as much as possible,” superannuation and pensions director Becky O’Connor said. Interactive Investor’s savings.

“Financial security in the future is important, and with things like reducing superannuation contributions now, people may be saving up hard for the future,” she said.

In turbulent times, emotional decision-making will be your worst enemy

Unusually, the first three months of trading resulted in larger losses for wealthy investors than for investors with smaller pots.

Wealthier investors are generally able to take on more risk in their portfolios, giving them bigger gains during the 2021 market rally. The situation has reversed this year, and the losses have been especially hard for those who have invested heavily in high-growth tech to share.

Despite impressive performance in recent years, tough times for growth stocks have had a short-term hit to the performance of two of the UK’s most popular investment vehicles. Terry Smith’s Fundsmith Fund Shares in the company have fallen 10 percent this year, according to Morningstar, while shares in Scottish Mortgage Investment Trust are down about 25 percent.

Fink said the short-term hit in growth stocks is a reminder to diversify across different investing styles, balancing different approaches like growth and value. “Never bet a farm on one style because timing these factors can be very difficult,” he said.

While many investments have underperformed, Fink advises investors not to make “knee-jerk” reactions. “In turbulent times, emotional decision-making will be your worst enemy,” he said.