New figures suggest investors are increasingly worried
Thursday 14 Mar 2019 Author: Daniel Coatsworth

Brexit is nearly upon us and the dreaded ‘B’ word has been playing havoc with how we manage our money.

For example, many of us have been happy to buy extra longer-life food to avoid being caught out by any Brexit-related supply disruption. However, demand appears to have weakened for spending on holidays as travellers delay booking over Brexit fears.

Uncertainty over the process of separating the UK from the EU is clearly influencing our spending patterns and it also appears to extend to investing.

New figures from the Investment Association, a trade body, show net outflows from investment funds held within ISAs for the ninth month in a row.

Net outflows for retail investors in January added up to £135m for UK equity funds and £450m for European equity funds. Of the UK equity funds, there was a £200m net outflow of money in the All-Companies category while net inflows of £35m were recorded for the UK Equity Income category and £30m for the Smaller Companies category.

Overall there was an £870m net outflow from all types of equity funds (across the full range of geographies) in January 2019 versus a £1.39bn net inflow in the same month a year earlier. It also represents the fourth month in a row of net outflows for equity funds overall.

These figures would suggest investors are nervous about Brexit and possibly other factors such as a slowdown in global growth. While hoarding cash in times of strife is a natural
instinct, turning your back on investing isn’t necessarily the best option.

DRIP FEED CASH INTO THE MARKETS

One of the best approaches with investing is to drip feed money on a regular basis into your account. You buy less of something when its price is high and you buy more when its price is low.

Staying in the markets is also widely considered to be a good strategy. Moments of weakness can sometimes be shorter than you expect, meaning you are in position to benefit from a bounce-back and don’t miss out on any sudden recovery rally.

There is nothing wrong about being nervous when it comes to investing. Negative events do happen and it is perfectly normal to
see the value of your money go up and down. Just don’t let your nervousness put you off investing completely.

Importantly, you can still hold money as cash in an investment account and decide what to do with it later on.

We’re approaching the end of the tax year which means now is the perfect time to take advantage of any unused ISA allowance – you’re allowed to deposit £20,000 a year.

Nervous individuals still with capacity to add to their stocks and shares ISA should deposit some cash and enjoy the benefits of no tax on capital gains or dividends at a later date.

While you may receive minimal interest on this cash, you are actually giving yourself firepower with which to invest as soon as you are feeling more confident.

You cannot carry forward any unused ISA allowance to the next tax year but you can keep the engine running, so to speak, by acting now and filling up your account with cash. Once money is deposited, those tax advantages are locked in.

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