The Times reports that Jeremy Hunt has abandoned his plan to sell shares in NatWest to the public (at least for the period of the election).

Investing in UK stocks may be what the Government want us to do, but (having done it for forty years) I don’t find it either easy or rewarding. I am “Sid” and I’m not happy.

Forty of fifty years ago, investing in the stock market meant investing in a small number of companies whose shares were listed in the newspapers. If you didn’t have a stockbroker, you could invest in a unit-trust or an insurance company managed fund.

You can still do this but you have to select the option, no default investment strategy focusses on UK equities (Virgin Money’s stakeholder pension plan – with sad results).

This has not always been the case. In the past we had to self-select choices to invest abroad, the US, Europe and most temptingly – Japan .The vast majority of people thought that “the stock market” was about the FTSE index and that’s where their money went.

And it did – Pension Funds invested in UK shares , so did PEPs.

But the average pension fund has tuned down its investment in UK equities over the years

People are not invested in UK equities by default anymore. Only 4% of a typical pension fund is now invested in the UK stock market.

The FTSE 100 Index with its 100 constituents^[8] was launched on 3 January 1984.^[8][7] The market capitalisation weighted FTSE 100 index replaced the price-weighted FT30 Index as the performance benchmark for most investors.^[9]

Of course there are other FTSE indices, but the core constituents of the FTSE 30 were in place in 1935 and three out of the original 30 are still listed (GKN, Tate& Lyle and BAT).

The FTSE 30 was revamped in 1947 after the war , but none of the 1947 intake survive (the middle column represents how long they remained listed in their own right

Since 1947, a long list of FTSE 30 companies have been delisted

Our current FTSE 30 Companies are all new to the index since 1984

The survival of British stocks is a sorry story

Any centenarian who was a teenager when the FTSE 30 index was launched in 1935 , could have held share certificates in 35 companies, only 3 of which survive today , replacing stocks falling out of the index with new entrants would have been even more thankless. Piles of paperwork , the odd blow-out and a huge amount of time invested would leave the tracker out of pocket and probably out of work!

The story for the FTSE 100 is the same as for the FTSE 30. The bias is against survival.

The Government wants us to invest in British stock (listed and unlisted). It is preparing NatWest to return to public ownership, but investing in the stock market , if you are a private investor, seems anything but easy.

Why do active funds under-perform?

I suspect that any active manager, trying to invest in stocks listed on the FTSE 30, 100 or 250 indices, would have found that over the past 90 years, their long-term strategies would have consistently been thwarted by the delisting of almost every stock they held for more than 10 years.

The research – to which the FT headline refers, was carried out by AJ Bell

The research, published this week, looked specifically at pension funds invested in UK companies and found that nine out of 10 underperformed a FTSE All-Share tracker over 10 years.

Investing in listed stocks, whatever the index, is a time-consuming business because listed stocks don’t stay listed long enough. The tracker operates at a scale and with an efficiency that cannot be matched by the active manager. Not only does the active manager have to charge more (reducing net returns) but he/she has to deal with the costs of all this corporate activity in terms of dis and re-investment.

Meanwhile, the private investors – looking to hold UK stocks over time, should avoid direct investment in the stock-market, unless they have an appetite for administration and no regard for the cost of their time.