In the face of challenges with housing affordability confronting the millennial generation across Australia, data released by CommSec on Monday found they are now the largest group of new investors taking up share investing.
More than 50 per cent of all new customers to CommSec are under the age of 35, suggesting younger Australians are turning to the stock market to invest, build wealth and save. Over the past five years, the number of millennial investors has increased by 51 per cent, now representing 28 per cent of all active CommSec customer accounts or approximately 70,000 trades per month.
“Younger investors have embraced online share investing as a means to take control of their finances and save for their financial goals. However, it’s important that new investors understand the risks and benefits of the share market and that they are making informed investment decisions,” said CommSec managing director Paul Rayson.
Data on typical portfolios suggests that millennials have differing approaches to risk and return. According to CommSec data, many younger investors are investing in blue chip stocks that pay dividends with more stable share prices.
However, some millennials are choosing to invest in growth stocks - stocks that may have higher growth potential but can be volatile and may not pay a dividend. This may reflect that younger investors have a higher risk appetite or longer term investment horizon or it may reflect a lack of understanding of the importance of diversification.
Millennials are also investing in exchange traded funds (ETFs) to increase diversification by tracking a market index or basket of stocks rather than investing in an individual stock. In 2017, millennials accounted for 25 per cent of all ETF trades via CommSec.
This new wave of share investors are also big users of mobile and represent up to 50 per cent of all mobile trades made through the CommSec mobile app.
“Technology has made it easier for us to support new investors with online tools such as CommSec Learn, a series of online tutorials that teach the basics of selecting and managing investments, and portfolio checks to better educate on share quality and diversification,” Rayson said.
“It’s important that their first thousand dollars of hard-earned cash is invested wisely so they can build their capability and confidence to invest for the long term to achieve their goals.”
In response to this emerging customer growth, CommSec announced a halving of online brokerage fees for lower value trades to make smaller investments more affordable to the millennial group. As of Monday it reduced brokerage to $10 from $19.95 for small trades up to $1,000 in value.