Share trading enthusiasm cools after pandemic surge

The record number of new, mostly younger, investors who started trading shares online during the worst of the pandemic has eased, as volatile markets dampen investor confidence.

Research firm Investment Trends estimates that 1.47 million investors placed at least one online trade during the year to June 30, down from 1.52 million for the year ended seven months earlier on November 30, 2021.

The numbers of share traders has fallen from the pandemic highs, but interest in lithium miners remains high.Credit:Bloomberg

Compounding this is further data from a survey carried out by the firm which shows investors are expecting negative returns from Australian shares, the first such expectation since the start of the pandemic.

Market watchers say rising inflation and increases in official interest rates both in Australia and overseas mean sharemarkets are likely to remain under pressure.

Irene Guiamatsia, head of research at Investment Trends, attributes the easing of investor numbers to not only a downbeat market but to rising cost-of-living pressures. Rising interest rates also mean investors can earn more on their savings, she says.

Not only have inflows of newbies into the market continued to shrink, Investment Trends estimates about 250,000 experienced investors stopped trading in the year ended June 30.

“It is common to see market downturns induce a paralysis of sorts, as many opt for a wait-and-see approach in turbulent times,” Guiamatsia says.

The bulk of dormant investors surveyed expressed a strong interest in re-engaging in a not-too-distant future. Guiamatsia says even though investor numbers have eased, she expects it to be temporary.

Many online share trading platforms launched during the past couple of years allowed people to invest in US-listed shares along with securities listed on the Australian Securities Exchange (ASX).

Many first-time investors were attracted to the US technology big names, such as Meta (Facebook), Amazon and Alphabet (owner of Google). Those tech shares surged during the pandemic but have taken big hits as interest rates rise.

Figures from Selfwealth, one of the largest online investment platforms, shows exchange-traded funds (ETFs), mining and banking equities have remained popular, at the expense of more-risky sectors, such as the buy now pay later (BNPL) sector, whose share prices have been in free-fall.

Selfwealth figures to the end of the last financial year show more than one-third all investments on the platform were ETFs. These are listed investments whose units trade just like shares.

The most popular ETFs are those that track the returns of sharemarket benchmark indices.

The Vanguard Australian Shares Index, which tracks the 300-largest companies by capitalisation on the ASX, was the most popular investment on the Selfwealth platform during 2021-22.

Lithium, which is used to make batteries for mobile phone, laptops and electric vehicles, was also a popular theme for new investors. They also continued to buy shares in iron ore, gold, nickel and copper miners, with a mix of established, up-and-coming, and speculative explorers.

However, investors shunned the Australian utilities sector, despite its stellar 25 per cent return in the past financial year – the best-performing sector of the ASX.

Among US-listed stocks, Tesla was the most popular with Selfwealth users during the first six months of this year, followed by Apple.

  • Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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