Why are there no great champions of stock market investing?
How has Britain lost its love of – and confidence in – the stock market? How did this country go from being an outstanding pioneer in the process of pooling money with which to back new ventures – with all the risk and potential profit that entailed – to one where the average saver doesn’t understand the stock market and/or mistrusts everything to do with it?
We’ve become a nation of reluctant investors. If we own shares at all, it’s because we’re forced to do so through belonging to pension schemes.
Only a dwindling minority of people own shares directly.
Some of this is structural. Institutions, and increasingly overseas institutions, have come to dominate stock markets that just two generations ago were primarily owned by individual shareholders.
So London’s stock market, still one of the world’s biggest and most important, is now just 11pc owned by individual investors. In the 1960s individuals owned more than half of everything listed there.
This institutionalisation and internationalisation of the stock market is perhaps one reason why savers perceive it as remote and incomprehensible.
The rise of electronic “nominee” accounts – where shareholders are effectively severed from a direct relationship with the companies they own – is another factor.
Older readers might recall a different culture, when shares and companies’ fortunes were more commonly discussed, almost the fare of family mealtimes.
I remember my grandmother’s weather-beaten box file of share certificates and her interest in the businesses she owned. Voting forms, dividend statements, annual reports – these were a large part of her everyday post, even though she was far from wealthy.
Today suspicion has attached to share investing. Voices on the Left sneer at the market, writing it off as a vehicle of privilege, even where it is understood that so much of all workers’ pension wealth is tied up in shares.
Today when we discuss companies and brands it’s inevitably from the point of view of consumers: we’re talking about the prices of goods, bargains, fashions.
Separate from all this, a different line of criticism has attacked brokers and fund managers associated with the stock market – and thus the stock market itself – as a cesspool of rip-offs and cons. This is wrong and dangerous.
Whatever the cause, the trend away from equities doesn’t seem to be reversing. The graph shows annual contributions to Isas split by type: cash or stocks and shares.
Contributions to both types of Isa have grown significantly as the allowance has been increased. But cash is a distinct favourite.
If you look further back – to when the “Pep” system was in place in the Nineties – there was a far greater contribution to shares than to cash. But that was because Pep rules made a priority of share investing. The more liberal Isa system, by contrast, has given savers greater choice over whether they opt for cash or shares – and their choice is clear.
No reliable statistics are collected to show what proportion of Britons choose to invest in shares or sharesbased funds, but these Isa figures are a proxy. Of these active savers, just one in four chooses exposure to equities. So out of a wider population including people who don’t actively save, the proportion is going to be smaller.
In America the culture of share ownership is quite different.
Gallup, the pollster, conducts annual polls on stock ownership in America and its latest snapshot – from 2016 – found that 52pc of adults owned shares or funds investing in shares. This, interestingly, is down from 65pc in pre-crisis 2007, suggesting that a similar disaffection has taken hold there.
The greatest danger of overlooking the stock market – or demonising it – is that savers miss out on returns.
Parents who today invest their young child’s Junior Isa in cash are taking a huge risk. Last week number-crunchers at insurer Royal London worked out that cautious Isa investors, who chose cash over stocks-and-shares, had forfeited an average £5,000 in returns over the past turbulent decade.
But there are other problems with sidelining the market. One is that shareholders remain an effective, if imperfect, way of governing a corporate world. There should be more of us.
‘Parents investing a young child’s Isa in cash take a huge risk’