Ahead of the 2013/14 ISA deadline, research has shown that a fifth of stocks and shares ISA investors are selecting their investments “blindly”. This is despite experts warning that it is vital for investors to research where they are placing their money to ensure sustainability.
The deadline for using your ISA allowance is midnight on April 5. This year, individuals can deposit up to £11,520 in a stocks and shares ISA tax-free.
Over 1,500 experienced investors with over £10,000 in equity investments were surveyed by the Share Centre. The findings show that 19% of those with a stock and shares ISA are stock selecting “blindly”.
Some 40% of ISA investors pick stocks independently, rather that investing in funds. Despite this, the organisation said a worrying number of investors are not conducting the research necessary to make informed decisions. Less than half of investors were found to regularly check the results of the companies they hold shares in and just 14% regularly read financial results directly on the company’s website.
A worrying 4% pick stocks purely based on the reputation of companies, rather than their results. This means that investors could be negatively impacted if a company shows signs of poor performance, as they would not be forewarned.
Helal Miah, investment research analyst at the Share Centre, commented, “The fundamental driver of a company’s share price is the expectations on its ability to generate earnings, pay a dividend or return capital to investors. Company’s results and statements are the best source to make an opinion of the future path.
“While not everyone is able to analyse financial statements, it should still be requisite for investors to understand why a company has performed as it has and where its management expect it to go. The financial media is very good at conveying this.”
Analysing a company’s sustainability can also ensure that investors have stable long-term profits. For example, MPs have recently warned that stock markets are at risk of serious instability because fossil fuel assets have become overvalued when the need to tackle climate change is factored in.