According to Capita Registrars, private investors had been enthusiastically buying into the equity rally in the six months to the end of May, adding a net £2.3bn to their holdings in that period.

The total of shareholdings by private investors came to £222.2bn by the end of May, equivalent to 11.0% of UK shares by value.

However, investors had not anticipated the market correction that began in June, and failed to take profits after May’s strong run in the markets.

Capita Registrars said that investors continued to buy right up until the end of May.

By the 18th June, they had lost £11.5bn as their holdings fell in value to £210.7bn.

Justin Cooper, chief executive of Capita Registrars, said: “Private investors have enjoyed a very good 12 months in the stock market, scooping capital gains and healthy dividend payments.

“They have traded shrewdly over the last few years, and have often timed the market well. But this year they failed to observe the old market cliché warning them to ‘sell in May and go away’.

“It’s cost them dearly in recent weeks. Investors have had a stark reminder that equities are not a one-way bet. With growing gloom over global growth, despite better news in the UK, and the likelihood of a winding down of monetary support, the outlook for asset prices is highly uncertain.”

Rising share prices coupled with the ‘vast sums’ being paid out by UK firms in dividends had attracted investors struggling to find income elsewhere.

However, investors are being warned that income may be harder to come this year as headline dividend income slows sharply owing mainly to the end of big special dividends.

Private investors should also expect smaller dividends as they now own a slightly smaller share of the market than a year ago (now 11.0%, down from 11.3%).

The report said that mining firms in particular had favoured these big dividend payouts but are said to be struggling with higher costs and lower prices for their production, meaning profits cannot support the level of dividends seen of late.