This article appeared in the May 2011 ASX Investor Update email newsletter. To subscribe to this newsletter please register with the MyASX section or visit the About MyASX page for past editions and more details.
Latest share ownership study reflects attitude changes since GFC.
By Sandra Boyd-Hoare, ASX
Fewer investors are delegating the management of their investments to other people. That is a key finding of the latest ASX Share Ownership Study, which provides an important snapshot of share ownership trends in Australia. The Study is the 12th in a series dating back to 1991.
ASX released the 2010 Study in May.
The study found the number of investors who had neither knowledge nor interest in the sharemarket and preferred to delegate management of their investments to others, had decreased – to 12 per cent compared to 23 per cent in the previous study in 2008.
Experiences during the global financial crisis appear to have encouraged many investors to take a more active role in building their knowledge and making decisions about their investments.
Other key findings from the 2010 study include:
43 per cent of Australians own shares
In late 2010, 7.26 million people, or 43 per cent of the adult population, participated in the Australian sharemarket either directly (via shares or other listed investments) or indirectly (via unlisted managed funds). The level of direct participation was 39 per cent, or 6.59 million people. Direct participation includes the investments of self-managed superannuation funds (SMSFs), unless those investments were in unlisted managed funds.
Share ownership has increased since 2008
Overall share ownership (direct and indirect investment) increased from 41 per cent in 2008 to 43 per cent in 2010. The proportion of the population holding shares directly increased from 36 per cent in 2008 to 39 per cent in 2010. This included a proportion of the population (9 per cent) holding shares indirectly as well. The proportion with only direct share ownership increased from 25 per cent in 2008 to 30 per cent in 2010. The proportion holding shares only indirectly declined marginally from 5 per cent to 4 per cent.
Ongoing commitment to sharemarket investing
Eight in 10 current direct investors felt it was a good time to buy or hold shares, very similar to the sentiment expressed in 2008.
A considerably higher proportion of current direct investors (43 per cent) said they had traded more than four times in the past 12 months compared to the two previous studies. In 2008, the comparative figure was 25 per cent. In 2010, a greater proportion of current direct investors (39 per cent) also said they were likely to increase the proportion of their funds in shares in the next 12 months.
Looking at the population as a whole, a higher percentage (26 per cent) said they would definitely or probably buy shares, compared to 22 per cent in 2008. More investors (82 per cent) said they considered the sharemarket to be well regulated (up from 78 per cent in 2008).
More Australians have self-managed superannuation funds (SMSFs)
A total of 13 per cent of adult Australians reported having SMSFs in 2010, compared to 10 per cent in 2008. A major change in the composition of investments held by SMSFs was the decline in the proportion investing in unlisted managed funds to 16 per cent in 2010 from 38 per cent in 2008.
Emerging differences in choice of trading relationships
The 2010 study found that although the most active and agile traders continued to be very comfortable with transaction-based relationships (most preferring to trade through online brokers), other segments of the market felt more comfortable with service-based relationships, particularly financial planners/advisers and full-service brokers.
The complexity of decision-making and some investors’ acknowledged lack of a solid understanding of the intricacies of the investment process seemed to be driving this choice.
The 2008 study found that investors seemed to be developing transaction-based relationships with brokers and moving away from service-based relationships.
Changes in segmentation of direct share owners
The 2010 study identified substantive shifts in the way the direct share owner population is segmented. Direct investors tended to fall into one of four main segments with similar sets of needs, attitudes and behaviours. Experiences during and subsequent to the GFC appear to have been a key influence on the changes. The segments identified are:
- Cautious Consulters. Although they have some knowledge of the markets, these investors lack confidence in their own decision-making capabilities and extensively consult professionals, family and friends for advice or second opinions. They are keen to become more self-reliant in their investment decision-making, rather than delegate. They value professional advice but seem to be taking a more active role in managing their own portfolio, working closely with trusted professionals. This is now clearly the largest of the current direct share owner segments, whereas segments were quite similar in size in 2008.
- Prudent Investors. These investors are skilled, knowledgeable and quite confident about their ability to navigate the sharemarket independently, but keen to carefully rebuild their portfolios hit by the GFC. Many may not be naturally conservative, but feel their current approach needs to be.
- Agile Investors. Like Prudent Investors, those in this segment have the skills, knowledge and confidence to buy/sell shares autonomously. However, unlike Prudent Investors, the Agile Investors find the sharemarket very exciting and challenging. They tend to take greater risks than Prudent Investors.
- Disengaged Delegators. These investors are distinguished by their lack of knowledge about the sharemarket and reluctance to make independent decisions. They are confused about the investment options available and prefer to defer or delegate decision-making to experts, especially financial advisers. This is now a smaller segment of the investor population, reflecting that many investors have reconsidered their approach since the GFC.
The trends in the 2010 Study highlight the need for balanced, independent investment education. As more self-directed investors manage their own money, it has never been more important to understand the features, benefits and risks of different investment strategies, products and markets.
ASX education is a great place to start. The ASX website offers free online courses on shares, warrants and instalments, options, exchange traded funds, interest rate securities and futures. Podcasts and videocasts feature commentary from some of the market’s top investment experts. There are also ASX educational events, such as the ever-popular ASX Investor and ASX Investment Roadshows.
About the author
Sandra Boyd-Hoare is Manager, Research, Analysis and Insights, at ASX.
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