ASIC retail investor research finds shares popular as ever, crypto gaining

  • Australian shares remain most common asset class held followed by cryptocurrency according to retail investor research by ASIC

  • The regulator says it’s concerned there are limited protections for crypto-asset investments given they’ve become ‘increasingly mainstream’

  • Investment portfolios estimated to make up around half of investors’ total wealth on average including Australian shares and crypto

Retail investor activity remain stronger than pre-Covid 19 pandemic levels according to ASIC retail investor research, which helps the regulator determine where it should concentrate its efforts.

This is part one of Stockhead’s coverage on the extensive research documenting retail investor behaviour which surveyed 1,053 Australian retail investors aged 18 and over who had directly traded in securities, derivatives or cryptocurrencies at least once since March 2020.

Conducted in November 2021, ASIC said the survey results provide a point-in-time snapshot of investor behaviour during a period of increased activity in retail markets, supplementing existing market data and research conducted in Australia and overseas. The report was prepared by SEC Newgate in close consultation with ASIC.

Despite changes to economic conditions with rising inflation and subsequent interest rate hikes since the research was conducted, ASIC said retail market activity has generally remained elevated this year compared to pre-pandemic levels.

“With so many new investors active in financial markets, the research builds on our understanding of retail investors and helps us consider where our regulatory efforts are warranted,” ASIC chair Joe Longo said.

The growth in retail investment markets since Covid-19 has fuelled changes to the mix of assets (ASIC refers to as product type) being traded.

“The research also confirms the prominence of digital and social channels as sources of information for investors, and the diversity in trading platforms they use,” he said.

Retail investor interest in crypto assets

Of retail investors surveyed, the most common asset class held by investors was Australian shares at 73% followed by 44% cryptocurrency. A quarter of surveyed investors who held cryptocurrency indicated that cryptocurrency was the only investment they held.

The research also showed that, after bank trading platforms (used by 31% of surveyed investors), the three most commonly used platforms all specialised in cryptocurrency, raising the ire of ASIC.

“We are concerned about the number of people surveyed who reported investing in unregulated, volatile crypto asset products,” Longo said.

“This research does highlight during this particular point in time, the appeal of crypto assets to the market.

“According to the survey, only 20% of cryptocurrency owners considered their investment approach to be ‘risk-taking’, raising concerns that investors did not understand the risks of this asset class.

“ASIC is also concerned that there are limited protections for crypto asset investments given they have become increasingly mainstream and are heavily advertised and promoted and said there is strong case for regulation of crypto assets to better protect investors.”

Digitalisation and socialisation of trading

ASIC’s research show investors are using a range of online trading platforms that offer easy access to a range of products, while using social media platforms to source information on investing. Since March 2020:

  • 34% of surveyed investors reported sourcing information from Google searches

  • 41% of surveyed investors reported sourcing information from social media and networking platforms, including YouTube (20%), Facebook (11%), podcasts (10%), and financial influencers (10%).

With more than half (51%) of new investors aged between 18 to 34 years old, Longo said it was encouraging to see younger investors engaging in the market with a third of all surveyed investors reporting to be ‘in it for the long-term’.

However, fear of missing out (FOMO) came up as a major reason for investing. Half of those surveyed admitted they have invested because they didn’t want to miss out.

It’s feared FOMO, combined complex and opaque financial product and service offerings, and the speed and reach of marketing and distribution through digital channels, may expose investors to new risks or higher levels of existing risks.

“ASIC is working to better understand the use of digital engagement practices and maintain regulatory pace with these developments. Risk is part of the investment process, but entities need to operate fairly and avoid the use of features that can harm investors,” Longo said.

Lack of diversification among retail investors

Asic’s report highlighted a lack of diversification with 82% of investors surveyed holding fewer than five product types overall, such as Australian shares, cryptocurrencies and international shares.

More than one-third or 36% of investors held one product type only, while 24% held two different product types, 22% held three or four product types, and 18% held five or more product types.

Of those investors who held only one product type, 53% were invested in either Australian shares only or 31% cryptocurrencies only.

How much are Aussies investing?

Reported total value of investors’ portfolios was mixed with more experienced investors having a higher value. One in five investors or 20% estimated they held up to $5k, around one in four or 24% estimating between $5k and $35k. There was 25% estimating holding between $35k and $200k and 27% holding $200k or more.

There was 58% of recent investors reporting they held less than $35k compared to 20% of most experienced investors. The proportion with a portfolio value greater than $200k was three times higher among the most experienced investors than recent investors – 47% versus 16% respectively.

The most experienced investors were also more likely to be older, with 68% aged 55 and over, and were more likely to have investment properties and self-managed superannuation funds (SMSFs) and therefore, larger portfolios.

Investment portfolios make up half of investors’ total wealth

Investors were asked to estimate, using a percentage figure, how much their current investment portfolio made up of their current total wealth (including primary residence and any investment properties, and all forms of savings, investments and superannuation).

Investment portfolios were estimated to make up around 48% of investors’ total wealth on average with Australian shares, cryptocurrencies and residential investment properties were the most dominant within individual investment portfolios.

Of those who reported owning Australian shares, 51% estimated they formed at least half of their portfolio value. For cryptocurrency, 40% of investors indicated it made up at least half of their portfolio, while 43% reported residential investment property made up the largest chunk.



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