However, Sarah Coles, of Hargreaves Lansdown, warned against staying outside of the stock market for too long. “You may struggle to find the ideal moment to restart and will miss out on market gains in the interim.”
Investors parking money in cash also face the eroding effect of inflation, which reached a 30-year high of 7pc in March.
The highest proportion was among customers with Lifetime Isas. Almost two thirds of investors under the age of 40 saving for a house did not invest their contributions in March.
Parents investing on behalf of their children in Junior stocks and shares Isas were similarly hesitant to put their money in the market, with more than two fifths keeping their contributions in cash.
Investors pulled their money from funds en masse during February, with £2.5bn being withdrawn, up from £1.2bn in January, according to the Investment Association, a trade body.
Funds that invested in British companies saw £503m pulled even as London’s benchmark index, the FTSE 100, climbed 3pc in March.
Ryan King, a 24-year-old accountant from London, said while he understood why some investors had panicked and stayed in cash, he was going to keep going.
“For many new investors, this could be the first time they have experienced a significant fall in the market. But if you have a long-term mindset, then the best thing to do is to stay invested.”
Mr King also said he would keep his monthly investment the same, despite rising bills elsewhere. “I have fixed expenses but there’s a lot that’s variable that I can cut back on, such as nights out and takeaways,” he said.
