Lockdown investment trends
During the past 18 months, the number of first-time investors in Australia has grown at an unprecedented rate. See how market volatility, more convenient access to investment options and excess time at home have contributed to the growth.
Throughout the past 18 months, virtually every aspect of life has been affected by the Covid-19 pandemic and the restrictions that have come with it. Unsurprisingly, investment behaviours are no different. Between March 2020 and March 2021, Australia saw a record-breaking 435,000 first-time retail investors, demonstrating a significant increase in the number of individuals diving into the world of retail investing.
Over the past decade, retail investment has been on the rise, in large part due to an influx of millennial investors entering the market for the first time. Last year, though, marked a landmark year of record investment growth in Australia and across the globe. The causes for the uptick vary but generally centre around a few factors: excess time at home, more accessible investment options and market volatility.
A 2020 Investment Trends survey showed that the record-breaking number of first-time retail investors was dominated by one demographic group: millennials. While it’s not surprising that first-time investors would be younger people, it’s an unprecedented leap. “This year, the vast majority of first-time investors are under the age of 40 (70%), which represents a significant shift from last year (51%),” Recep Peker, Research Director at Investment Trends, told Finance Magnates.
One of the key factors in the influx of younger investors is the increased accessibility of low-cost investment opportunities. In the past, investing in successful companies typically required a considerable chunk of cash. Today’s market, however, is flooded with burgeoning startups and small-cap stocks that provide increased opportunities for everyday investors, albeit with increased risks.
But with more than a million retail investors now active in Australia, it’s more than just first-time buyers fueling the sector’s growth.
Market volatility has also been a contributing factor, spurring investors to get in early on stocks while they’re in flux. Of course, those attracted to such volatility must understand the inherent risks of the scenario they’re entering. With pandemic-induced uncertainty plaguing markets worldwide, many investors are seeking not only strong returns, but also a way to replace funds lost during the pandemic.
Of course, the stuck-at-home factor can’t be ignored. With a sudden lack of socialisation, less money being spent on entertainment, dining and travel, a perfect scenario was created for would-be investors to finally jump on board.
Altogether, 2020 and 2021 have been record years for the retail investing space, thanks to access to low-cost investment opportunities, market volatility and a whole lot of free time. While volatility is expected to settle over the coming months and years, we’re yet to see whether the influx of first-time retail investors will stay the course or step away once life has normalised. Investors should also keep in mind that despite the potential of volatile markets, this style of investing isn’t for everyone.
Other options, such as fixed income investing, may offer more of the stability investors are seeking, though, as with any investment, presenting its own risks to be considered. This style of investing remains an important part of Plenti’s funding structure and gives investors an alternative way to invest.
