Private investors took advantage of a disastrous start to the year to buy £484m of equities, according to the latest research from Capita Registrars.

This means private investors have been modest net buyers of shares for six months running, following 18 months of net selling.

According to the research, by the end of January investors owned £209.0 billion of UK equities, down from £221.9 billion at the end of December, a decline in value of 5.8 per cent. Allowing for the net purchase, this fall nevertheless outperformed the overall market, which dropped by 8.6 per cent in December and January (FTSE Allshare).

As a result both of the net purchase of stock and the out-performance of the shares they own, private investors saw their share of UK Plc rise from 11.6 per cent at the end of November to 11.9 per cent, the highest level since September 2006.

Part of this out-performance reflects the fact that private shareholders are disproportionately weighted in smaller companies which did slightly better than their larger rivals. More importantly though, it reflects the heavily defensive profile of the private investor portfolios which the Capita research first identified early last year.

The worst two performing sectors in the period were consumer services and financial stocks – two sectors heavily exposed to worsening economic conditions – which fell 14 per cent and 11 per cent respectively.

In the 12 months to the end of November, private investors had dumped almost £3 billion of their holdings in these two sectors alone.

By contrast, utilities and telecoms stocks, defensive companies whose shares tend to outperform in weak markets, only fell 5.6 per cent. Private investors had invested a massive £1.9 billion into these stocks in the previous 12 months, the only sector which had seen net buying.

John Roundhill, director of Capita Registrars explains, ‘The stock market, with its dramatic mood swings, can best be described as bipolar. But private investors have played a clever game. They used the last few months of the bull market to reduce their equity holdings and to refocus their remaining portfolio into stocks better able to weather an economic, and a market, downturn. Although they tend to sit on their hands when the markets are very volatile, sharp downward dips prove irresistible to them, and they have made modest reinvestments. The net buying is still small however – just £1.5bn over the last six months, and compares to £15bn of net selling over the preceding year and a half.

‘With bricks and mortar no longer such a solid investment, the advantages of good dividend yields and the ability to diversify one’s risk, make shares look more attractive.’