Newly Released ASIC data shows that, unsurprisingly, equities are the most common asset for Australian investors – but crypto is coming, hard.
And the commission, concerned that the risks of cryptocurrency trading are unclear to many, says there is a “strong case” for regulating the sector.
The report, based on a survey conducted in November last year, also reveals that since then retail market activity has remained high compared to pre-pandemic levels.
This is the first part of Stockhead research coverage, which helps the regulator determine where to focus its efforts.
ASIC surveyed 1,053 Australian retail investors aged 18 and over who had directly traded securities, derivatives or cryptocurrencies at least once since March 2020, providing what the regulator says is a snapshot of the behavior of traders. investors during a period of heightened activity in retail markets, complementing existing market data and research conducted in Australia and overseas.
The report was prepared by SEC Newgate in close consultation with ASIC.
“With so many new investors active in capital markets, the research builds on our understanding of retail investors and helps us determine where our regulatory efforts are warranted,” ASIC Chairman Joe Longo said.
The growth of retail investment markets since Covid-19 has fueled changes in the mix of assets (ASIC denotes type of product) traded.
“The research also confirms the importance of digital and social channels as sources of information for investors, and the diversity of trading platforms they use,” he said.
Retail Investor Interest in Crypto Assets
Among retail investors surveyed, the most common asset class held by investors was Australian stocks at 73%, followed by cryptocurrency at 44%, at an impressive 44%.
A quarter of investors surveyed who held cryptocurrency said cryptocurrency was the only investment they held.
The research also showed that after banking trading platforms (used by 31% of investors surveyed), the three most commonly used platforms all specialized in cryptocurrency, drawing the ire of ASIC.
“We are concerned about the number of respondents who reported investing in unregulated and volatile crypto asset products,” Longo said.
“This research highlights, at this precise moment, the attractiveness of crypto assets in the market.
“According to the survey, only 20% of cryptocurrency owners viewed their investment approach as ‘risk-taking’, raising concerns that investors do not understand the risks of this asset class.
“ASIC is also concerned that there are limited protections for investments in crypto assets given that they have become increasingly mainstream and subject to publicity and promotion. intensive. There are strong arguments for regulating crypto assets to better protect investors.
Digitalization and socialization of trading
ASIC’s research shows that investors use a range of online trading platforms that offer easy access to a range of products, while using social media platforms for investing information. Since March 2020:
- 34% of investors surveyed said they got information from Google searches
- 41% of investors surveyed said they obtained information from social media and networking platforms, including YouTube (20%), Facebook (11%), podcasts (10%) and financial influencers (10%) .
With more than half (51%) of new investors aged between 18 and 34, Longo said it was encouraging to see young investors entering the market, with a third of all investors surveyed saying they were “in the long term”. .
However, fear of missing out (FOMO) emerged as a major reason for investing. Half of those surveyed admitted to investing because they didn’t want to miss out.
There are concerns that FOMO, combined with complex and opaque financial product and service offerings, and the speed and reach of marketing and distribution through digital channels, could expose investors to new risks or at higher levels of existing risks.
“ASIC is working to better understand the use of digital engagement practices and to maintain regulatory momentum with these developments. Risk is part of the investment process, but entities should operate fairly and avoid the use of features that can harm investors,” Longo said.
Lack of diversification among retail investors
The ASIC report highlighted a lack of diversification, with 82% of investors surveyed holding fewer than five product types in total, such as Australian stocks, cryptocurrencies and international stocks.
More than a third (36%) of investors held just one type of product, while 24% held two different types of products, 22% held three or four types of products, and 18% held five or more types of products.
Among investors who held only one type of product, 53% were invested in either Australian stocks only or (31%) only cryptocurrencies.
How much do Australians invest?
The total reported value of investors’ portfolios was mixed, with more experienced investors having higher value.
One in five investors (20%) estimated they held up to $5,000, about one in four (24%) estimated between $5,000 and $35,000.
Another 25% believed they held between $35,000 and $200,000 and 27% held $200,000 or more.
Among recent investors, 58% of recent investors reported holding less than $35,000, compared to 20% of more experienced investors.
The proportion with a portfolio value above $200,000 was three times higher among the most experienced investors than among recent investors – 47% versus 16% respectively.
The most experienced investors were also more likely to be older, with 68% of them aged 55 and over, and were more likely to have investment properties and self-managed pension funds (SMSF) and , hence larger portfolios.
Investment portfolios account for half of total investor wealth
Investors were asked to estimate, using a percentage, the share of their current investment portfolio in their current total wealth (including principal residence and any investment property, as well as all forms of savings, investment and retirement).
Investment portfolios are estimated to account for around 48% of total investor wealth on average, with Australian stocks, cryptocurrencies and residential investment properties being the most dominant in individual investment portfolios.
Of those who said they held Australian stocks, 51% felt they represented at least half the value of their portfolio.
For cryptocurrency, 40% of investors said it made up at least half of their portfolio, while 43% said residential investment properties made up the largest portion.
This content first appeared on stockhead.com.au
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Originally published as ASIC Retail Investor Research Reveals Stocks Are More Popular Than Ever, Crypto Gains