Retail investors cautious about economic recovery

Now in its fifth year, the 2009 TD Waterhouse Investor Confidence Survey shows that retail investors have adopted a more cautious investment approach amid generally mixed views on the ‘shape' of the UK economy. Over a third of respondents (37%) believe the UK economy is currently V-shaped i.e. in recovery mode, however almost the same proportion (36%) think the UK economy is W-shaped and we are in a double-dip recession, while a fifth (20%) of respondents say we are currently in an L-shaped depression.

It is therefore not surprising that almost half (45%) of respondents say they have adopted a more cautious approach to investment in the current economic climate.

However, despite the general trend towards caution UK investors reveal growing levels of satisfaction in the performance of their portfolios. The majority of respondents (60%) are satisfied with the performance of their portfolio over the past 12 months, which constitutes a 16% increase in satisfaction since this time last year. Moreover, 58% of investors surveyed said they felt more confident in the UK stock market today compared to 12 months ago and a third (33%) cited the low Bank of England base rate environment as the biggest driver of stock market investment over the past year, closely followed by general stock market volatility (28%).

In light of these findings, it is perhaps most interesting to see that compared to 12 months ago, more than half, (53%) of investors in the UK are now relying more upon their own decisions when they choose to invest compared to 19% who are happy to rely on the advice from an IFA or broker.

Commenting on the results, Angus Rigby, CEO of TD Waterhouse UK said: "It is interesting to note the mixed views regarding the shape of our economy, and it is clear that many investors do not think we are out of the woods just yet. The ongoing global turmoil has obviously given investors food for thought regarding their investment choices this year and it is encouraging to see that investors are still making profits despite adopting a cautious investment approach - with 6 in 10 respondents stating they are satisfied with the performance of thier portfolio in the current economic climate."

UK investors are relying more on their own decisions when choosing to invest:

Compared to 12 months ago, most UK investors (53%) are relying more upon their own decisions when investing, 28% say there has been no change in the way they invest and only 19% rely more on the advice from an IFA or broker.

There has been a  dramatic return of confidence in the UK stock market:

58% of investors are more confident in the UK stock market now than they were 12 months ago, compared to just 17% in 2008

Investment in UK companies remains the most popular choice among respondents (85%),  while holding shares in international companies remains the second choice (37%).

Timing your trades is key to get the best and avoid the worst from your investment choices:

Banking sector stocks were rated the best and the worst performing investments over the past 12 months

Of the best investments for the past 12 months - banking stocks were 1st (18%), energy & mining 2nd (13%) and retail and leisure 3rd (11%)

Of the worst performing investments for the past 12 months, banking stocks were 1st (33%), property 2nd (11%) and retail and leisure 3rd (6%)

Despite this - overall there has been a return of confidence in banking sector:

Confidence in the banking sector has increased with 35% of UK investors ranking it in their top three sectors to perform best over the next few months
Other sectors expected to be top performers in the next few months include the Drugs and Healthcare sector (37%) and the energy and mining sector (33%)

Looking ahead to 2010:

Overall 39% of UK investors indicated that saving for their retirement was a key concern for 2010 while 35% of UK investors cited job security as another key concern for 2010 (decreasing from 42% in 2008)

In the immediate future, 19% of investors expect to see precious metals/commodities perform best followed by the Asian markets (18%), the UK markets (14%) and the European markets (10%)

For the second consecutive year, investors would buy Tesco shares if they had £5K to spare followed by Barclays, BP and RBS. However, the number of people choosing to invest in Tesco has dipped 6% since 2008

Angus Rigby concludes: "The general tone from our respondents this year seems to be cautious optimism coupled with a desire to take control of their investment decisions. Despite the mixed views on the current state of the UK economy it is encouraging to see that there has been a return of confidence in the UK stock market and investors are positive about other markets such as Asia and Europe. However, with more people now concerned about saving for their retirment than they are for the security of their job, there is a general view that the long-term effects of the ongoing ecnonomic climate have yet to be realised."