HAMISH MCRAE: Why ARE we so scared of investing?

Daily Mail​

5 days ago

On to 10,000? The FTSE 100 share index spent Friday flirting with the 9,000 mark, pushing through it twice before closing at 8,992.
It makes you think. If shares can do this well with all the chaos for world trade, plus the miserable performance of our economy, and I'm afraid our own Government, what on earth might they do as and when the clouds lift?
And not just here. The S&P 500 hit an all-time high, with Germany's DAX just about there too.
Actually, the clouds over world trade did lift a little on Thursday. Jensen Huang, chief executive of the US chip-maker, Nvidia, met China's commerce minister, Wang Wentao, and there was a hint that China and America might start to co-operate on trade in semiconductors, rather than head into a full-scale trade war.
As a result, the shares of what was already the world's most valuable firm shot up further, giving it a market value of $4.25 trillion and leading to talk of it becoming the first $5 trillion enterprise. That pulled up some other US giants, including Microsoft, now worth $3.8 trillion.
This pattern of uneven economic news but booming share prices was given a new twist last week by Rachel Reeves. In her Mansion House speech, the Chancellor urged people to invest in equities, arguing that the benefits outweighed the risks.
Now, you may think that many of her actions have had quite the reverse effect by discouraging anyone from putting their savings into the market: increases in capital gains tax, making pension pots liable for inheritance tax from 2027, and so on. We will have to wait and see what she plans to do about cash Isas – whether she will try to cut or end them – but if she really wanted to get more people investing in shares, she would at the very least allow the capital gains tax allowance to be indexed against inflation.
True to form, there was a yawning gap between what she says and what she does. But actually, she's right. We have written here about the relentless selling of UK shares by pension funds and insurers since 1997, when they owned nearly half the market. By 2022 they were down to owning 4.2 per cent of it.
But private investors have also been in headlong retreat. In the 1960s more than half the shares on the London Stock Exchange were owned by individuals. By the 1990s, they owned 20 per cent, and in 2022, 10.8 per cent.
Foreigners, who accounted for less than 10 per cent of the market in 1979, had 57.7 per cent of quoted shares, an all-time high. Those figures are two and a half years out of date. Why the Office for National Statistics can't give us a more recent tally of who owns British enterprises, I don't know. I would have thought it was rather important.
However, it is just possible that, despite the negativity of this Government, black holes in its finances and all that, interest among ordinary savers is starting to pick up.
We do know that there are nearly 5,000 Isa millionaires. Indeed, this most recent uplift in the markets has probably pushed the number well above that level.
It also seems that Generation Z is prepared to risk money by buying cryptocurrencies. The most stunning statistic I have found on this is that the Financial Conduct Authority reckons that as of August last year, 12 per cent of UK adults owned cryptoassets. That's seven million people.
Since the prices have doubled since then, with Bitcoin up from about $60,000 to close to $118,000 now, they have done well out of it.
As we all know, there is nothing there: no physical assets, no commercial entity, no products or services, no dividends. But whatever you think about investing in crypto – I think it's nuts – it does at least show seven million Britons aren't afraid to take a punt.
What we need to do is to harness this spirit by hammering home the message that successful investment is a long game.
Yes, there are risks, including that governments like this one will clobber savers with yet higher taxes.
But keep putting money into solid companies, reinvest the dividends, and you will eventually have a nice nest egg. For once, our Chancellor is right.