And corporate bond funds have really caught our fancy.
According to the latest figures from HMRC, Britons now hold more money in Stocks and Shares ISAs than in Cash ISAs again, after the latter outpaced the former in 2009.
Hooray -- Britain has become a nation of shareholders once more!
Not so fast. The numbers, which come courtesy of HMRC, relate to the last tax year, which ran from 6 April 2009 to 5 April 2010.
Over that year, the total amount held in Stocks and Shares ISAs rose from £116 billion to £177 billion -- a rise of 53%. If you weren't paying attention that year, you might think that as a nation we'd been shaking down our sofas and selling our old jewellery to find every penny we could to plough into the market.
However it's worth recalling that this 12-month period coincided with one of the strongest rallies in shares the UK has ever seen. The FTSE 100 index rose 44% over the year to 5 April 2010.
In other words, most of the heavy uplift was done by the rise in the market, not by a fresh appetite for equity investing among the men and women on the Clapham Omnibus.
Corporate bond boom
In fact, if there has been a revolution in the past 12 months, it's been in the popularity of corporate bond funds, not equities.
Since 2006, the amount of Stocks and Shares ISA money allocated to corporate bond funds has hovered around the £5-6 billion mark. Yet by the 5 April 2010, the size of these holdings had leapt by £7.2 billion to £12.6 billion -- more than doubling the allocation of any of the past five years.
Corporate bonds have had a good run recently, but not that good! Most of the surge in the popularity of corporate bond funds is new money flowing in from people looking for an alternative to the derisory interest rates available on cash -- even when it's held in ISAs -- or from investors seeking shelter from the turbulent stock market.
Altogether now
A final sign that the UK has a while to go before we can rival the small shareholder culture that still prevails in the US, say, is how even those of us who do invest in equities achieve it.
The following table shows how Stocks and Shares ISA money that's allocated towards equities is divvied up among HMRC's various classifications:
| Component | Amount
£ billion |
|---|
| Shares | 26.7 |
| Unit Trusts | 40.8 |
| Shares in OEICs | 75.4 |
| Investment Trusts | 5.5 |
| Units/Shares in UCITS | 5.0 |
| Total in shares | 153.4 |
Just £27 billion of the £153 billion total is held directly in shares, compared to £126 billion that we invest in equities through collective vehicles like investment trusts and unit trusts. So much for Margaret Thatcher's vision of a nation of small shareholders, that was meant to be ushered in by the privatisation of swathes of British industry in the 1980s.
Of course, not all shareholders (and not all cash savers) keep their money sheltered in ISAs. Plenty of wealthier private investors are unable to squeeze their portfolios into the annual £10,200 a year limit for ISAs, for instance.
It's also worth noting too that when you add the amount held in PEPs -- the precursor to ISAs -- to the funds held in the latter, the combined total has only amounted to less than the cash ISA total once in the past five years.
And that was in April 2009, at the nadir of the recent bear market.
While individual shareholders are not super abundant and corporate bond funds look ominously popular, the death of share investing has probably been over-exaggerated.
More from Owain Bennallack:
> With The Motley Fool's Share Dealing Service, you can buy and sell shares in real time for a flat rate of just £10. You can also shelter them in an ISA or SIPP. Open an account for free today.
