Retail investors are falling out of love with their local equities

New survey finds that the share of respondents who hold locally-listed stocks fell by 12% in the past year

Retail investors are falling out of love with their local equities

Retail investors have cut back their holdings of equities listed in their own countries according to a new global poll.

The 12% cut in domestic stocks over the past year reflects investors’ desire for diversification amid turbulent markets impacted by inflation, rising interest rates, supply chain disruption, and geopolitical tension.

The survey from social investment platform eToro included more than 10,000 self-directed investors in 13 countries across the world and found that investors are looking further afield for opportunities in different markets and asset classes, with less ‘home bias’.

Less than half (45%) reported having locally-listed equities in their portfolio (down from 51% a year ago) and this is particularly stark among US respondents where the share has fallen from 60% to 42% in a year.

Ben Laidler, Global Markets Strategist at eToro, says that it feels like a turning point.

“It has never been easier or cheaper for investors to take advantage of the diversification and investment opportunities in the rest of the world, with more ETF’s and commission free trading, for example,” he said. “The market volatility of the last year seems to have been the catalyst, with the proportion of investors looking to their home markets falling below 50% for the first time.”

Laidler added that bonds are also gaining ground.

“This latest survey shows a significant rise in investors holding international bonds in their portfolio compared to last year. This may be a smart diversification move with bond yields now the highest in over a decade, after their dramatic price falls last year,” he noted.

Commodities in favour

While foreign stocks may be gaining traction at the expense of domestic options, investors are also diversifying their asset classes.

Commodities are in favour with the percentage holding these assets jumping from 16% to 27% over the past year.

Alternatives have also seen increased interest - up from 21% to 23% - those with FX exposure is up from 9% to 19%, while those with crypto exposure has remained steady at 29%.

Confidence rises

The survey also reveals a rise in retail investor confidence.

Sentiment rebounded to its highest level since the 2021 bull market with 76% confident in their portfolios vs 69% in the previous quarter. More than two in five (44%) have upped their investment contributions in 2023.

Among the biggest perceived risks cited by respondents, inflation remains top at 22% while international conflict (18%) has shown increased concern among poll participants.