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Advised investors outperform DIY investors by 25%, study finds

financial adviceProfessionally-advised investors in the UK are outperforming self-managed (DIY) investors by more than 25% each year, a Legg Mason report suggests.

Out of 1,000 investors surveyed, on average advised investors achieved returns of nearly 7.5% last year, whereas DIY investors made returns of 5.9%, meaning they are generating a 27% lower return than investors who take financial advice.

DIY investors had nearly half of their savings in cash compared to just under a third for investors with advisors. This indicates that self-managed investors “tend to be more cautious”, according to the report.

Favouring cash over their guided counterparts, DIY investors hold just 3% of their portfolios in alternative investments such as hedge funds and commodities, while advised investors hold nearly four times as much at 12.6%.

“There will always be those who prefer to choose their own investments – and there is nothing wrong with that – but our research shows a strong and clear correlation between taking advice and higher returns,” said Legg Mason’s head of UK distribution Alex Barry.

The survey was carried out in 17 countries worldwide. According to Legg Mason, the “research defined ‘investors’ as people who will be investing at least €10,000 in the next 12 months and who have made changes to their investments within the last five years”.

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