Retail Investment Portfolio Report: Financial Services, Cash Assets Remain in Focus as Investors Seek Sizable Returns: eToro

Retail investors are often seen as overly indexing tech stocks; however, financial services is the most owned sector among this group, according to data from the latest Retail Investor Beat (RIB) from trading and investing platform eToro.

In the study of American retail investors, 54% indicated “holding financial services stocks, with technology as the second most owned sector at 49% and energy third at 39%.”

All three industries have been in focus over the last 18 months, “with energy and tech stocks outperforming, and financial services stocks expected to build momentum.”

The average retail investor portfolio is also “likely to include cash, with 76% of investors owning cash assets, while domestic stocks ranked second (49%) amongst asset classes, followed by domestic bonds (40%).”

The popularity of cash assets has continued “to increase this year according to the RIB data, as high-for-longer 5% risk-free savings rates have become widely available.”

Retail investors see tech and crypto as the biggest opportunities

When retail investors were asked which sector they are “most likely to up their investments in, tech (22%) and financial services (9%) once again topped the list, followed by real estate (8%), healthcare (8%) and energy (8%).”

Looking at the top asset classes, cash remains king when “considering the biggest opportunity, with 19% of investors prioritizing this asset class going forward.”

Cash holdings were followed “by domestic stocks (16%), crypto-assets (12%), and domestic bonds (9%). While cryptoassets are among the top three most held assets, younger investors ages 18-34 are most likely to increase their holdings here (26%) over any other asset.”

eToro US Investment Analyst Bret Kenwell says:

“With interest rates still elevated in the US, it’s no surprise that investors are leaning into cash assets for a solid risk-free return. While sitting out of the market for too long has its risks, retail investors seem to be aware of this risk, with domestic stocks a close second on the list of assets they are looking to increase exposure to. Investors’ cash holdings puts them in a good place to take advantage of market opportunities when they arise.”

Investors remain confident yet cautious about lingering inflation

While reports show cooling inflation, 30% of investors “cited inflation as the biggest threat to their portfolio, followed by the state of the US economy (21%), and high interest rates (11%). Despite ongoing inflationary concerns, the majority of investors reported confidence in their job security (75%), investing portfolios (72%), and income and cost of living standards (61%).”

When asked how investors have reacted “to losing money or watching the value of their portfolios decline, 51% of investors cited becoming more cautious in response.”

This was especially high in younger investors “ages 18-34 (63%), while investors ages 55+ were four times (22%) more likely to report little to no impact vs. their younger counterparts (5%). Investors 18-34 aren’t being scared off by previous losses, instead they’re becoming more resilient investors (36%) and using seasonal opportunities to buy the dip (43%) compared to the older cohort (16% and 16% respectively).”

Kenwell adds:

“Older investors were able to flex their experience, proving to be less rattled by losses and pullbacks in the market. However, younger investors are embracing the ups and the downs that come with investing as they use corrections and losses to gain experience, while continuing to look for opportunities.”

About this report

The latest Retail Investor Beat was “based on a survey of 10,000 retail investors across 12 countries and 3 continents.”

The following countries reportedly “had 1,000 respondents: UK, US, Germany, France, Australia, Italy and Spain.”

The following countries “had 500 respondents: Netherlands, Denmark, Poland, Romania, and the Czech Republic.”

The survey was conducted “from May 15 – June 5 2024 and carried out by research company Opinium.”

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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