Younger investors fearful of underperformance
Fears of underperformance and hidden fees are the biggest challenge for the next generation of young investors at 35% and 33% respectively.
In an in-depth report conducted by the Australian Securities Exchange (ASX), the organisation questioned what was hindering people from investing.
Among the next generation, those aged 18 to 24, it found 35% were fearful of underperformance which was the biggest concern. This compared to 29% of people aged 25 to 59 and 30% of retirees.
However, these fears would be largely unfounded as data from FE Analytics found the ASX 200 had gone up by 46.3% over the past five years. Meanwhile, the average Australian equity fund, within the Australian Core Strategies universe, had risen by 41.1% over the five years to 31 August, 2020.
The best-performing Australian equity fund was Bennelong Concentrated Australian Equities which had returned 107.9% over the same period.
For those who invested in global equity funds, the average fund had returned 50% over the five-year period.
The second biggest concern was hidden fees which was a hinderance for 33% of young investors compared to 26% of peopled aged 25 to 59 and just 22% of retirees.
However, they were significantly less concerned than older counterparts about market volatility or low interest rate environment, perhaps indicating the understanding of investing for a long time horizon.
Just 24% were concerned about market volatility and 19% concerned about low interest rates versus 44% and 39% of retirees respectively.
“Comparatively risk averse, the [next generation] have tended to focus on generating a reliable income stream – at least until the COVID-19 induced market plunge led to a new emphasis on capital growth. Yet they also actively seek new opportunities, monitoring their portfolios frequently, despite having relatively little capital at their disposal,” the report said.
Looking at assets, the next generation were least likely demographic to own Australian shares and most likely to own an exchange traded fund (ETF). Just over a third said they owned Australian shares compared to 77% of retirees while 20% held ETFs versus 7% of retirees.
But over the next 12 months, 83% of young investors said they expected to purchase Australian shares and 45% expected to buy an ETF.
AUTHOR
Laura Dew
Recommended for you
Having predicted three ETF trends for Australia at the start of this year, State Street has shared how these are tracking and whether Australia will successfully reach US$30 billion ETF inflows for 2025.
Magellan fund manager Nikki Thomas is to depart next month as the firm reviews its range of global equity funds and transitions her High Conviction fund.
Sydney-based alternative fund manager East Coast Capital Management has formed its first advisory council as it enters its next phase of growth.
With 40 per cent of advice practices looking to increase their ETF usage, the next frontier being embraced is smart beta ETFs with flows doubling in July, providers have said.
