PERSONAL FINANCE: Nervous Investors Cash in; Personal Finance

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Byline: By Jeremy Gates

Although 2.6 million customers of insurance giant Standard Life swelled Britain's army of small shareholders this summer, some investors may be getting nervy about holding their savings in shares.

A survey from Capita Registrars, which provides share registration services to more than 2,000 companies in the UK and Ireland, claims private investors took pounds 9.9 billion in cash from the London market between February and July.

Around pounds 6 billion of that was in June and July alone, though the London market regained its stability and is currently not far below its May peak of 6,100, achieved after a remarkable advance from a low of 3,287 on March 12, 2003.

The giant sell-off, says Capita, equates to pounds 381 for every household in Britain. And it suggests that smaller shareholders fear a downturn in the UK and the world economy.

Says Capita director John Roundhill: "The 600 point fall in the stock market in May and June wiped over pounds 160 billion off the value of shares.

"Private investors got quite a jolt. They may have used the recent bounce in the stock market to trim holdings and lock in profits from the recent bull run."

Despite the near-pounds 10 billion sell-off, small investors retain pounds 192.3 billion in shares, equivalent to about 11 per cent of the London market.

The average personal portfolio is worth about pounds 12,000, and John Roundhill reckons much of the pounds 10 billion raised from shares might have gone towards paying off credit card debts standing at pounds 55 billion.

Despite rising interest rates, a weakening US economy, and bitter Middle East conflict, however, not everybody is joining the general "dash for cash".

The Investment Management Association (IMA), which represents fund managers, says net investment by individual savers in the first two quarters of 2006, mainly in funds holding shares, was worth pounds 8.2 billion net, against an pounds 8.4 billion net inflow for the whole of 2005.

Says IMA spokeswoman Helen Stephenson: "We often see huge inflows when the market is peaking. A lot of people buy at the peak in funds, while direct shareholders with individual shares are always keen to sell near the top."

Small shareholders still have something to play for. Thousands of them holding shares with Lloyds TSB Bank for its generous dividend have heard in recent days that the bank may again be a takeover target - despite its massive pounds 29 billion valuation. Private equity has taken over House of Fraser, and Matalan could go in the same direction soon.

Professional fund managers, however, might view this puzzling market differently to the amateurs.

Ed Burke, manager of Invesco Perpetual UK Growth fund, says: "Obviously one looks for opportunities when markets see as sharp a decline as occurred in May.

"I am finding value in larger FTSE stocks, for example BP, Shell, HSBC and Vodafone, and gradually putting money in these areas.

"In my portfolios, I am currently about 65 per cent weighted in the top 100 stocks in the market (compared with two or three years ago when I probably had as little as 25-30 per cent in large cap stocks)".

Burke also upped holdings in oil exploration and production company Sterling Energy and biotech firm BTG, believing they were oversold after a "change in risk attitude" in the market in May, and he tips Rolls-Royce for defensive qualities in tough times. …