Tens of thousands of investors who fled shares for the safety of cash in the midst of the coronavirus market crash would have been better off if they had remained invested, new research shows.
Almost 32,000 American retail investors and pension savers who manage their finances with asset management giant Vanguard moved 100pc of their portfolios into cash between the middle of February and the end of May of this year.
Over that time the S&P 500 index of American companies fell by more than 10pc. However, when the asset manager analysed the performance of those portfolios, it found moving to cash protected investors in just a fifth of cases. The remaining 80pc who tried to shield themselves from the wild peaks and troughs of the market in the first half of the year would have been better off had they not touched their investments at all, it found.
In a report compiled by Vanguard, seen exclusively by Telegraph Money, it said most investors had not successfully identified the “bottom of the market”, with most missing out on large parts of the recovery in share prices. It also said more active trading can lead to increased costs, which can ultimately eat into returns.
Vanguard’s Jean Young said: “Time in the markets beats market timing, as selling after a big drop often means missing a big recovery.”