One year of Covid-19: how different investors reacted

interactive investor compares the investing trends among regular and lump-sum investors since the start of lockdown in March 2020.

‘Keep calm and carry on’ is an often-used piece of sound advice at times of market crisis – but what does that look like in practice?

The past year saw trading records broken time and again, asvolatile markets propelled more people into engagement and a new generation of people became ‘accidental savers’ during lockdown. Alongside this, conditions for many active traders became arguably more interesting.

interactive investor, the UK second largest direct-to-consumer investment platform, has compared the investing trends among regular (monthly) investors and lump-sum investors since the start of lockdown on 23 March 2020 until 16 March 2021.

Regular investing is the ultimate ‘keep calm and carry on’ strategy – with the same selections automatically made month in, month out – whatever the weather. Lump-sum investments, in contrast, can have more potential to be driven by emotion and events.

Among direct equity investors, regular investors have focused on the traditional blue chips over the last year, with income stocks a key theme. While this was echoed in large part among lump-sum investors, there was some additional themes as they sought to take advantage of potential ‘pandemic’ buying opportunities.

Beaten up airlines, such as International Consolidated Airlines (LSE:IAG)and easyJet (LSE:EZJ), made the top 10 for lump-sum investors over the period, along with diagnostic and biotechnology companies, a clear pandemic theme – Omega Diagnostics (LSE:ODX) and Avacta Group (LSE:AVCT) being a case in point.

Richard Hunter, Head of Markets, interactive investor, says: “Many of our more experienced investors will simply have chosen to do nothing and will have ridden out the storms of the past year as the pandemic took hold. Regular investing is a good way to invest without lifting a finger - drip-feeding your investments through the ups and downs, by way of a direct debit, means investors buy fewer shares when markets are high, and more when markets are low.

“For the lump-sum investor, some of whom would have been seeking out potential opportunities, beaten up airlines and science companies have been a clear pandemic theme. Boohoo (LSE:BOO), whose share price had a torrid time after very serious allegations about employment practice and factory working conditions, also saw some traders moving in. The big question is which was the most successful strategy? While the jury is out, regular investors may well be sleeping better.”

Funds and investment trusts

Global strategies proved popular among regular and lump-sum investors and strikingly, out of the top 10 funds and investment trusts, there were only two UK options that made the top 10, and both were investment trusts: City of London (LSE:CTY) and Finsbury Growth & Income (LSE:FGT).

There are far more similarities than differences between regular and lump-sum investors. Fund heavyweights such as Fundsmith Equity, the Vanguard LifeStrategy range, and Lindsell Train Global Equity feature in both camps. Likewise, among investment trust investors, Scottish Mortgage (LSE:SMT) stayed rooted at the top of the buy lists, with City of London, Monks (LSE:MNKS) and Edinburgh Worldwide (LSE:EWI) also making the cut for both regular and lump-sum investors.

However, there were some interesting differences. While the top 10 buys among regular savers did not include China; for lump-sum investors, it was a different story, and China’s very different handling of the pandemic may well have got lump sum investors’ minds focused.

Among lump-sum investors, China makes the cut in the top 10 most bought funds (Baillie Gifford China) and investment trusts (Fidelity China Special Situations (LSE:FCSS) and JPMorgan China Growth & Income (LSE:JCGI)).

Regular investors also seem to have a little less Baillie Gifford. Among lump-sum fund investors, Baillie Gifford funds account for six of the top 10, but only three out of 10 for regular investors. Likewise, among investment trust investors, five out of the top 10 are Baillie Gifford managed trusts, compared to three out of 10 for regular investors.

Myron Jobson, Personal Finance Campaigner, interactive investor, says: “While we can’t generalise about our customers, they tend to be buy and hold investors, focusing on long term, ‘get rich slow’ wealth creation – but there will always be active and enthusiastic traders.

“It is clear that while the pandemic caused huge swings in the stock market and other asset prices such as bonds and equities, our regular investing customers have put their faith in funds and investment trusts that have become industry stalwarts, usually with a global focus, through trying times for global markets.

“But our lump-sum investors played the ‘rise of the East’ theme which played out the last quarter of 2020 to profit from then prevailing market conditions which had seen China, Japan and other Asian fare much better than Western regions in terms of managing the pandemic.

“One of the key takeaways from the coronavirus crisis is it pays to stay invested. While it is difficult, if not nigh impossible, to time the market, investing small amounts regularly by drip-feeding investments monthly is a good and proven way of lowering your investment risk. The advantage is that you also buy fewer shares when prices are high and more when prices are low – a process known as pound-cost averaging.”

• interactive investor offers free regular investing for funds, investment trusts, and popular UK shares

Top 10 direct equitieson interactive investor among lump-sum investors and regular monthly from 23 March 2020 – 16 March 2021

Top 10 funds on interactive investor among lump-sum investors and regular monthly from 23 March 2020 – 16 March 2021

Top 10 investment trusts on interactive investor among lump sum investors and regular monthly from 23 March 2020 – 16 March 2021