Watchdog shines light on investor behaviour post COVID onset

ASIC has lifted the veil on investor motivations, attitudes and behaviours in the period following the onset of the pandemic, with the regulator’s research report offering up a few surprises.

ASIC has lifted the veil on investor motivations, attitudes and behaviours in the period following the onset of the pandemic, with the regulator’s research report offering up a few surprises.

The Australian Securities and Investments Commission surveyed 1053 Australian retail investors aged 18 and over who had directly traded in securities, derivatives or cryptocurrencies at least once since March 2020.

Almost three-quarters of surveyed investors reported holding Australian shares (73%), while 44% stated they held cryptocurrency, making the controversial asset the second-most common product type.

Of the crypto crowd, a quarter revealed that cryptocurrency was the only investment they held.

The research also showed that, after bank trading platforms (used by 31% of surveyed investors), the three most commonly used platforms all specialised in cryptocurrency.

“We are concerned about the number of people surveyed who reported investing in unregulated, volatile crypto-asset products,” ASIC chair Joe Longo said.

“Only 20% of cryptocurrency owners considered their investment approach to be ‘risk-taking’, raising concerns that investors did not understand the risks of this asset class.

“ASIC is also concerned that there are limited protections for crypto-asset investments given they have become increasingly mainstream and are heavily advertised and promoted. There is a strong case for regulation of crypto-assets to better protect investors.”

Preferences on pointers, products and portfolios

The research also confirmed the prominence of digital and social channels as sources of information for investors, with 34% asking Google for advice and 41% turning to YouTube (20%), Facebook (11%), podcasts (10%) and financial influencers (10%).

With more than half (51%) of new investors aged between 18 and 34, Mr Longo said it was encouraging to see more people, particularly younger investors, engaging in the market.

“A third of all surveyed investors said they are ‘in it for the long-term’. However, half of those surveyed admitted they have invested in things because they didn’t want to miss out,” he said.

“This, coupled with more complex and opaque financial product and service offerings, and the speed and reach of marketing and distribution through digital channels, may expose investors to new risks or higher levels of existing risks.”

The report also highlighted a lack of diversification, with 82% holding fewer than five product types overall, such as Australian shares, cryptocurrencies and international shares, and more than one-third (36%) holding one product type only.

Meanwhile, 20% of investors held up to $5000, 24% held between $5000 and $35,000, 25% held between $35,000 and $200,000, and 27% held $200,000 or more.

The proportion with a portfolio value greater than $200,000 was three times higher among the most experienced investors than recent investors – 47% versus 16% – with these investors also more likely to be older, with 68% aged 55 and over.

The period also saw increased activity in retail markets and, despite changes to economic conditions since the research was conducted in November last year, retail market activity has generally remained elevated this year compared with pre-pandemic levels, ASIC said.

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