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Young investors acting without advice, strategy

young investors

Vanguard research has found many younger investors don’t have a financial plan or sufficient knowledge to take action.

More than two-thirds of younger investors have no financial plan or strategy and those who do typically do not use a professional to seek advice, according to research conducted by Vanguard.

The investment manager’s investigation into young investors to understand how financial goals differ between generations found more than 70 per cent have no plan.

The survey involved 1024 respondents over 18 years old, with 81 per cent of respondents from the generation Z, millennial and generation X demographics, and 19 per cent from the baby boomer and silent generation cohorts.

Vanguard found 48 per cent of those surveyed think about their financial security daily, yet 71 per cent do not have a documented financial plan, and of those who did, men (36 per cent) were more likely than women (21 per cent) to have a written plan.

When making investment decisions, of those surveyed who have a written financial plan, men were more likely than women to seek out professional financial advice when making investment decisions and only 17 per cent sought out information from a registered financial planner, with the leading source of information being family and friends (38 per cent).

The report also highlighted how many were misinformed about investing, with 35 per cent of those surveyed believing more than $10,000 was required to make an initial investment, while 70 per cent believed they needed more than $1000 to start investing.

Survey respondents also flagged a lack of knowledge and confidence as holding them back from investing, with 50 per cent claiming they had insufficient funds, 21 per cent saying they had a lack of understanding and 20 per cent indicating they were afraid of making a bad investment.

Vanguard head of personal investor Balaji Gopal said the survey is evidence of how misconceptions have discouraged people from investing.

“The survey highlights that many people hesitate to get started investing because of the misconception that you need a substantial amount of money,” Gopal said.

“When surveyed on investment strategies, pleasingly respondents largely displayed positive investing behaviour through investing regularly, buying more than they sell, and tending to invest regularly and for the long term. Some 44 per cent invest on a weekly or monthly basis, while only 25 per cent sold in the same period. One in three who invest said they plan to hold for the long term, however, women were 34 per cent more likely than men to hold long term.

“While it’s encouraging that this survey highlights how engaged Australians are in investing, and displaying some sensible investing behaviours, it’s troubling that so many seem to be doing so without first considering a financial plan or some view of a goal they are seeking to achieve. Without a plan it’s all too easy to get seduced by the daily hype or rattled by short-term market bumps.”

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