New kids on the block: How young Aussies are getting into investing
Over the course of this year, many Australians have seen volatility in global sharemarkets as a buying opportunity.
And many of those who have been active look different to past investors. The face of investors is changing, driven by a combination of shifting demographics and the emergence of affordable and digitally-led ways for consumers to access and trade in the markets.
What's underpinning this shift in demographics? There are two key trends.
First, Australia is on the cusp of an unprecedented transfer of intergenerational wealth. Over the next two decades, millennials and an increasingly younger demographic will be the beneficiaries of an anticipated $3.5 trillion in inheritances from their parents and grandparents. With interest rates at record lows, these younger investors are already seeking better ways to grow their wealth, including investing in shares, and this trend is expected to continue.
In addition, women are increasingly looking to invest in the markets, with the ASX Investor Study 2020 showing that female representation of on-exchange investment ownership has increased since 2017. Of the total base of investors, 38% are female and 62% are male. The study also showed that, for the first time, more women than men are intending to start investing in the next 12 months.
Second, new digitally-led investment services are giving younger investors new and accessible pathways to invest in the markets. Online trading platforms offered by the banks and others enable people with a measure of experience and knowledge to "DIY". And for those who need or want guidance and investment advice, the digital or "robo" advice sector offers easy-to-use, affordable access to such help.
In fact, the same ASX Investor Study found that 22% of investors who intended to invest in the next 12 months would look to do so through digital platforms. Women appear particularly comfortable embracing digital platforms to invest, with a recent Investment Trends report showing positive attitudes toward robo-advice among female investors in Australia and globally. In the US, where robo-advice is a more mature part of the financial services landscape, 29% of women who invest online use a robo-adviser compared with 22% of men. In fact, at Six Park, about 35% of our investors are female.
The shift to digital is only set to grow, as consumers become increasingly aware of the options that are available to them; and by a broader transformation of the wealth management space post-banking royal commission that is seeing an exodus of financial advisers from the sector, and a recognition of the need to have digital solutions to support the demand for investment advice as the supply of advisers continues to fall. COVID-19 has further accelerated the rise of digital in wealth management, as it has across many other consumer sectors.
So what are these investors buying?
Some investors have been focusing on companies that they believe will benefit from the changing landscape caused by the COVID-19 pandemic; in particular, technology-led shares that look to be winners in the move to a more digitally-led world.
Examples of this include Zoom, Amazon, Apple, and in the more high-growth, speculative arena, the likes of Zip and Afterpay.
Others are taking advantage of the growing number of exchange-traded funds (ETFs). ETFs provide a simple and affordable way to gain exposure to a variety of global asset classes via one ASX-listed fund. As such, ETFs are proving to be an increasingly popular way to manage the volatility and risk of trying to pick "winners" among individual stocks.
Some roboadvisers use ETFs to create offerings that provide people with a means to get exposure to multiple asset classes through diversified portfolios that are designed to match their risk appetite and life goals. These represent a great way for investors who are new to the markets to get started; and for seasoned investors to have a cost-effective and diversified core within their wider portfolio of investments.
The democratisation of access to the sharemarket through a combination of innovative investment products and digital advancement could not have been better timed to meet the rising demand from a younger, more digitally native consumer.
And these solutions are set to become an ever more embedded part of wealth management in Australia, as it undergoes a wider transformation driven by the shift in supply and demand dynamics as new, and an increasing number of, customers seek access and regulatory change compels advice practices to revise their business models.