By John Collett
Online trading platforms are pulling out the stops to attract new users as the COVID-driven boom in sign-ups cools, hoping to capture more young investors by providing easier access to US stocks such as Tesla and Nvidia.
A study by investment researcher Investment Trends released in August estimated that about 1.28 million Australians placed trades on shares or exchange-traded funds (ETFs) in the 12 months to May this year. That is down from 1.51 million for the 12-month period that ended six months earlier.
Even though share trading has cooled since the COVID-period boom, younger investors are still buying US tech stocks.Credit: AP
Irene Guiamatsia, the head of research at Investment Trends, said there had been not only a fall in the number of people opening accounts, but also a surge in “dormancy”, where previously active investors did not trade as much.
She said cost-of-living pressures are playing a part in the trend, with those who have accounts but are not trading saying the main reason for that is they do not have enough money to invest. Those who had yet to start investing said that is because of a lack of sufficient disposable income.
Stake is one of the share trading platforms that came to prominence during the pandemic, as a wave of young investors started trading listed securities such as shares. It recently introduced extended hours of trading for US shares.
Unlike the Australian market, Wall Street has “pre-market” and “after-hours” trading either side of its regular hours, where it is possible to trade US stocks.
Up to now, Australian investors using Stake could only trade US shares during the regular trading hours in the United States, which is mostly during the early hours of the morning in Australia.
With extended hours, Australian investors in Sydney and Melbourne, for example, can trade US shares at any time, except between noon and 8pm.
Meanwhile, competitor Superhero has enhanced its superannuation offering with more actively managed diversified and single-sector investment options.
Superhero Super’s Direct feature allows members to invest a portion of their super into individual shares across the 300 largest Australian-listed companies and more than 200 ETFs, listed investment companies and hybrid securities, without the need to open a self-managed super fund.
While the supply of new investors is softening, figures from Stake show that younger investors’ love affair with US tech stocks continues. Almost a quarter of its users who invest in Wall Street stocks are under age 26, with Tesla, Apple and Amazon their most-favoured stocks.
Stake’s younger investors are also continuing to buy ETFs that track the returns of the Australian shares, as well as those that track global shares and those that track US shares, as they seek to add diversification to their portfolios away from single stock bets.
Jon Howie, the chief commercial officer at Stake, says the platform’s customers are generally building their portfolios in a way that is diversified across markets, largely through ETFs, and also by taking specific views on companies with which they are familiar.
Stake is continuing to see a strong increase in the number of Gen Zs signing up with the platform.
The rapid growth in the number of neobrokers – who are challenging market incumbents such as CommSec and Nabtrade – particularly among younger investors, has not gone unnoticed by the Australian Securities and Investments Commission.
It is believed the regulator will soon release a review into the share-trading platform sector that it has been conducting for the past two years.
- 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.
Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.