Why don't people invest?

capital0ne

I work with highly skilled and trained engineers, but none of them will consider investing in equities, either through shares, funds, ITs or ETFs and I often wonder why.

They even talk of their ISAs but I know they mean cash ISAs and they think it's investing!

They also don't even know you can earn £1k interest tax free!

Some friends I know are sitting on a pile of money just left in their current account(s) losing 3% a year.

I've tried to educate a few of them by letting them know how my portfolio is doing, and it's doing well, but I think they get a bit frightened by the 'noise' when I asy I'm down £10k this week or I'm up £12k the week before.
To me it's no-brainer, it's so easy as well with the wealtho of info on-line, soy why is it people don't invest?

Roman_Hantsyan

Some people are not ready to run into risk or don't have enought time

bostonerimus

Fear and ignorance.

Although engineers should be able to understand the maths and probability used in investing they are by nature conservative and will always want a safety margin in their plans and designs so they are not good taking risks.

bigadaj

bostonerimus wrote: »

Fear and ignorance.

Although engineers should be able to understand the maths and probability used in investing they are by nature conservative and will always want a safety margin in their plans and designs so they are not good taking risks.

Depends on the engineer and technical area, my area is inherently full of risk so leads to more appreciation and understanding of risk, not less.


Factors of safety are inherent in any form of assessment, and an appropriate factor needs to be determined which balances risk of failure against cost, the factor used will vary depending on many factors, including an individuals appetite for risk in most scenarios.

Shashy

I'd say ignorance (not necessarily a negative thing) primarily, which manifests as fear.

Many people's only experience/understanding of 'investing' is buying shares of a particular single company, and most have heard a horror story from some friend-of-a-friend who lost a fortune. I doubt the lay person would understand the concept of multi-asset diversification / exposure to various investments via vehicles such as funds.

Interestingly it's a very low barrier to entry for this sort of thing. A couple of weekends spent reading is a fabulous remedy for general ignorance, but financial education (especially self-driven) isn't very high on most people's priority list.

Alexland

Everyone is different and some people would struggle to cope with volatility or just have other priorities going on in their life using their brain cycles.

p00hsticks

Most of these people will be investing via their pensions schemes - they just may not realise it.

Cash-Cows

When the markets fall they will ask “how’s it going?”; “down 10% this year”, you say. Before you can say but I’m in it for the long game they’ve walked off shaking their head and glad they’ve not invested.

bostonerimus

bigadaj wrote: »

Depends on the engineer and technical area, my area is inherently full of risk so leads to more appreciation and understanding of risk, not less.


Factors of safety are inherent in any form of assessment, and an appropriate factor needs to be determined which balances risk of failure against cost, the factor used will vary depending on many factors, including an individuals appetite for risk in most scenarios.

Maybe assessing someone else's risk is easier that assessing your own and risk in engineering is far more easy to quantify and model than in economics and investing. Maybe it just comes down to psychological makeup.....which end of a normal distribution do you concentrate on. It's hard to look at an efficient frontier and actually back up the historical numbers with your own cash when the future is still out there waiting to mess you up.

Malthusian

Cash-Cows wrote: »

When the markets fall they will ask “how’s it going?”; “down 10% this year”, you say. Before you can say but I’m in it for the long game they’ve walked off shaking their head and glad they’ve not invested.

In the unlikely event that anyone actually asked me this, I'd say "excellently, my contributions are buying me 10% more shares to live off in retirement than they did last year".

bostonerimus

Malthusian wrote: »

In the unlikely event that anyone actually asked me this, I'd say "excellently, my contributions are buying me 10% more shares to live off in retirement than they did last year".

That's a great attitude when you're working and saving, it's harder to be sanguine about a market drop when you are retired and spending.....although your planning should have accounted for such drops.