Rising living costs are causing investors to shy away from online investments, according to the Investment Trends “2023 First Half Australian Online Investing Report”.
The report found the online investment marketplace in Australia contracted by 15 per cent in the 12 months leading up to May 2023, with a notable decrease in the number of Australians trading shares or exchange-traded funds online from 1.51 million to 1.28 million.
“The primary cause of the decline is a remarkable surge in dormancy, combined with lower inflows of new-to-market investors,” Investment Trends head of research Dr Irene Guiamatsia said.
Among the survey respondents who could be categorised as dormant online investors or investors who were previously active, 34 per cent mentioned ‘not having enough money’ to invest as the leading factor for opting not to invest online.
Of those surveyed who had not yet invested online, 36 per cent said the ‘lack of sufficient disposable income’ was the biggest impediment towards entering the online investment marketplace.
The report findings indicated 9 per cent of active investors are now opting for term deposits or high-yield savings accounts, up from 6 per cent in May 2022, showcasing a growing preference for safer investment avenues.
Guiamatsia acknowledged investment service providers will need to adapt to the changing investor landscape and one way they could so is by offering more resources for investors.
“The challenging environment is in fact fertile ground for new opportunities where the onus is on providers to create solutions that bring down these perceived barriers to entry and encourage ongoing engagement,” she said.
“We believe education and trading tools that are tailored to – or customisable by – each individual investor can enable this.”
The report also revealed a majority of the 117,000 investors who had reactivated their accounts and resumed investment activities during the reporting period were younger investors, particularly millennials (42 per cent) and those from generation Z (10 per cent).
“It is worth observing that markets, both domestically and overseas, have actually performed relatively well in recent weeks,” Guiamatsia noted.
“Whichever way brokers and other stakeholders choose to meet the challenges of the moment, it is important to acknowledge investor demographics have considerably changed in the past three years and returning to a pre-pandemic modus operandi is not a viable option.”
The report was based on a survey of 22,234 investors and traders conducted from April to May 2023 and examines the Australian online investing market, online investor attitudes and needs, and the product usage of active investors.