The bias of UK investors that could lead to lower returns

By Lora Benson | Oct 08, 2019
A major new test has found UK investors are most likely to suffer from ambiguity aversion, a bias that could potentially mean them taking fewer investment risks.

Whether we realise it or not, as investors we all have behavioural biases that can affect our investment decisions. By understanding these traits, we might be able to improve our outcomes.

More than 23,000 people in the UK have now taken the Schroders investIQ test, which was designed to help investors understand such behavioural biases.

The test found that UK investors on average have a bias towards ambiguity aversion.

Investors with ambiguity aversion tend to choose investments that will provide them with more of a known possible outcome over ones that are more uncertain. This could lead to investors taking less risk, which might lead to lower potential returns. However, taking on more risk is subject to greater losses.

The bias that investors in the UK are least likely to suffer from on average is the herd influence. This relates to the assumption that the herd collectively knows something we don’t. As a result we might irrationally follow others; ignoring the information we have, and what’s right for us as individuals.

Read the full report here >

Important information

This communication is marketing material. The views and opinions contained herein are those of the named author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds.

This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy.

The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions.

Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.  Exchange rate changes may cause the value of any overseas investments to rise or fall.

Any sectors, securities, regions or countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell.

The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. Forecasts and assumptions may be affected by external economic or other factors.

Issued by Schroder Unit Trusts Limited, 31 Gresham Street, London, EC2V 7QA. Registered Number 4191730 England. Authorised and regulated by the Financial Conduct Authority.