27% of Australians are actively investing in the ASX, a new report by website Finder claims. The report found Australians saved an extra $113 billion during the coronavirus pandemic but low-interest rates drove Aussies to invest that money in the stock market, rather than their bank accounts.
Over the past year, the S&P/ASX 200 Index (ASX: XJO) increased 30.05%, making 2020 a rather fruitful year to enter the stock exchange game. Of course, the market over a year ago had just crashed due to the pandemic. The one-year anniversary of the crash was last week.
Let's take a closer look at the details.
Image source: Getty Images
More Australians are taking risks with their money
The number of Australians investing who own shares, like in the ASX, lags compared to other nations. Comparatively, 33% of Britons and 35% of Americans are shareowners. However, the number of Aussies who became shareholders did jump over the past year. The number of Australians investing in the ASX increased by 48.2% during the pandemic.
Shares are the most popular form of investment for Australians, followed by exchange-traded funds (ETFs) (10%), additional super contributions (8%), and foreign currency exchange (6%).
One likely factor fuelling the retail trader boom is Australia's historically low-interest rates. Minutes from the last RBA meeting reveal the central bank doesn't expect to raise the official cash rate until 2024 at the earliest.
According to Kylie Purcell, investments product expert at Finder, Australian attitudes to investing money are changing.
"Traditionally, Australia has been a fairly risk-averse nation when it comes to investing," she said.
"But with most people now earning record-low returns on their savings, the stock market has become a more appealing option given its tendency to outperform cash in the long run."
"Although Australia is quite conservative with investing compared to other countries, Finder's research shows that we're starting to catch up as more Aussies look beyond cash to maximise their returns."
The ASX was has been very volatile over the last 5 years
If there's one thing we learnt in 2020, it's to expect the unexpected. Just between February and March last year, the ASX collapsed by 33%. This wiped out 8 years' worth of gains in just 28 days.
While the pandemic was bad for most companies, some sectors thrived. Consumer staples like Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) thrived. Additionally, so did medical equipment companies like CSL Limited (ASX: CSL) and Ansell Limited (ASX: ANN).
One of the best-performing companies over the last 5 years, according to the Finder report, was Domino's Pizza Enterprises Ltd. (ASX: DMP). Its value grew by 44% over the period. Some funds are still rating Domino's as a buy.
The report also found micro-investing becoming increasingly popular with young Australians. Micro-investing is when someone makes very small investments over time with the expectation it will add up to a sizeable nest egg.
