Confidence amongst active investors at highest since March 06

Latest investor confidence research from the Association of Investment Companies (AIC) suggests that confidence amongst active investors is at its highest in three and a half years. Confidence is also returning amongst the traditionally more cautious general public, who are at their most positive on the stockmarket since AIC records began in 2004. The general public's confidence in the UK housing market has also improved dramatically over the last year, although still has some way to go before it reaches the highs of a few years ago.

Confidence surges

Some 52% of active investors plan to increase their stockmarket exposure over the next few months, a big leap from 33% in September 2008 and September 2007. Confidence has not been as high since February 2006 (54%). Some 62% of active investors expect equities to outperform property over the next year, the highest since February 2005 (71%).

Risk appetite is also increasing amongst active investors, with 17% of active investors finding smaller companies the most attractive sector, over double the amount in February this year (8%). It's easy to see why smaller companies are back on investors' radar - the average UK Smaller Companies investment company is up 52% over the last 6 months to 30 September 2009, compared to a 29% rise in the average investment company. Given the stockmarket rally of the last 6 months, it's interesting to note that, of those active investors decreasing their stockmarket exposure (9%), over a quarter of these (27%) say they are taking profits.

General public enjoy feel good factor

The general public also seem to be warming up to the prospects for both the stockmarket and the UK housing market. Some 19% of the general public think equities will outperform the housing market over the next year, and this is the most positive the general public have been since AIC records began. Some 14% believe both will make good returns, compared to just 3% back in February.

Confidence in the UK housing market is also increasing amongst the general public, with 22% expecting the housing market to outperform the stockmarket compared to an all time low of 5% last year. This is the most confident the general public have been about the housing market since October 2007 (27%), but is still some way off the dizzy highs of a few years ago. Indeed in March 2005, some 46% of the general public expected the UK housing market to outperform the stockmarket over the year.

Active investors - favourite sectors

Blue chip stocks remain a firm favourite with active investors, with 20% finding blue chips the most attractive sector at the moment, although whilst still the most commonly favoured sector, it is down from 25% in February this year. The second most favoured sectors were smaller companies and resources and commodities, each on 17%, followed by financials (11%). Commercial property has seen a slight pick-up in sentiment, with 5% of active investors finding this the most attractive sector at the moment compared to 2% in February 2009 and 1% in October 2008.

Home or Away?

Active investors continue to favour the UK, with 67% of active investors saying they are mostly investing in the UK at the moment. Emerging Markets were the second most favoured investment region (11%), up from 6% in February 2009 and perhaps again reflecting increased risk appetite amongst active investors. This was followed by Asia Pacific (8%), Europe (7%) and North America (4%).

Annabel Brodie-Smith, Communications Director, Association of Investment Companies (AIC) said: "Clearly the recent market rally has helped investors put the market turbulence of the last 12 months behind them. It's encouraging to see investor confidence surge amongst both active investors and the general public. Certainly those investors who had the courage to invest earlier in the year will have been well rewarded. Risk appetite is also on the up, as tends to be the case during a market rally, and it will be interesting to see if this continues.

"Investors who are interested in getting access to the stockmarket should consider an investment company. Investment companies have a strong long-term performance record, generally have low charges and they allow investors to spread their investment risk. There is a wide range of companies available to suit different risk profiles and each company has an independent board to look after shareholders' interests."