Investor numbers surge amid rising ETF and cryptocurrency popularity

A new ASX report says 51 per cent of Aussies have investments other than their home and super, with some interesting trends.

Young adults believe they are the nation’s most risk-averse investors, but are the biggest owners of one of the world’s riskiest asset types – cryptocurrency.

A new study by the Australian Securities Exchange says crypto is held by more than 31 per cent of investors aged 18 to 24, compared with 15 per cent of the overall population.

Crypto aside, exchange traded funds have been the fastest-growing investment in the past three years, and more than half of adult Australians now hold investments other than their super and family home, according to the 2023 ASX Investor Study. Overall, Australia has added 1.2 million investors since 2020, taking their total number to 10.2 million.

The research, conducted for the ASX by Investment Trends, found 18-24-year-olds, or “next generation investors” have an average portfolio size of $45,500 and are less willing to accept volatile returns than any other age group.

Investment overall was buoyed by the pandemic, with winners and losers.

“The apparent financial conservatism of younger investors is at odds with their level of investment in cryptocurrency,” the report says.

“It possibly appeals to their excitement about new technologies or a desire to do things differently to their parents.”

Young investors also have the lowest level of asset diversification among all ages, and also are the age group most likely to hold ETFs and international investors, as well as crypto.

More than twice as many males hold crypto than females, 69 per cent versus 31 per cent.

The popularity of ETFs grew faster than any other asset class in the three-year period, up by one-third and now held by 20 per cent of investors. Crypto’s ownership was a new option in the 2023 report, which says new investors still plan to buy it despite its ongoing volatility. “Problems with cryptocurrency exchanges may act as a handbrake on future growth,” it says.

“Overall, time will tell whether cryptocurrencies are fully accepted into mainstream investing.

Catapult Wealth director Tony Catt said investment overall had surged since the start of the pandemic, boosted by the rise of buy now, pay later stocks – before their subsequent fall.

“We saw a significant spike in activity during Covid – everyone was bored,” he said.

Mr Catt said many of the young adults who flooded into crypto saw it as gambling rather than investing, and many did not understand the risks.

The world’s biggest cryptocurrency, bitcoin, has lost more than 55 per cent of its value in the past 18 months.

ETFs appealed to younger investors too, Mr Catt said.

“They like the relatively easy cost-effective way of getting exposure to the markets, without having to decide whether they buy BHP or the Commonwealth Bank” he said.

“The sophistication of ETFs has grown too, and you can have sector-specific ETFS that are much more appealing to that generation, including cybersecurity, robotics and AI.”

Infrastructure funds and bond investments also grew in popularity, albeit from lower bases, the ASX study found, while the proportion of investors holding residential investment property dropped from 39 per cent to 35 per cent.

ASX-listed shares remained the most popular investment overall despite their ownership dropping slightly from 60 to 58 per cent.

The ASX study also examined high value investors, which it calls HVIs and defines them as the top 10 per cent of investors by wealth and trading volume.

They have an average age of 49 and a median portfolio size of $1.45 million, compared with $132,000 for the other 92 per cent of investors.

“On average, HVIs have been investing for 6.5 years, with 46 per cent having invested for more than 10 years,” the report says.

“This has allowed them to amass sizeable portfolios … this cohort is the best diversified of all investor segments.”

Originally published as Investor numbers surge amid rising ETF and cryptocurrency popularity