Investing attitudes in Australia shift with age
The elderly are into equity while property is popular with everyone.
Personal investment obviously depends on an individual's wealth, lifestyle and living circumstances and in Australia, new research shows age plays a significant role too in determining the way people manage their savings.
Independent financial services consultancy Rice Warner recently published its Personal Investments Market Projections 2015 report, analysing the $2.2 trillion worth of investments held outside superannuation and the primary residence.
The report found that across all age groups the largest personal assets are property investments, while similar value is held in cash and term deposits.
Elderly Aussies are into equities. While stocks and shares make up about 10% of all personal investments, those aged 75 and over hold almost one-fifth (19%) of these assets.
Middle-income earners typically hold non-super investments in uncomplicated, easily manageable term deposits.
Investors with a high net-worth generally hold a generous proportion of their personal investments in direct equities and direct property, with an increasing capacity for international investments.
Investing by age
15-24: This group holds around 40% of their personal investments in cash. The remainder is held in savings products, managed funds and term deposits. Keep in mind these individuals usually don't have a huge income, and parents and grandparents often make investments on their behalf.
25-34: At this age, investors are beginning to grow their wealth and in the decade from their mid-twenties, direct property assets make up 44% of total investments.
35-44: Direct property continues to dominate investments, growing to 49% of total assets. Why is this such a popular strategy? Record low interest rates, tax incentives and negative gearing are just some of the benefits.
However, cash and term deposits are still prolific. Rice Warner anticipates this avenue of investment will continually reduce over time as more investors search for greater yields.
45-54: Direct property and term deposit investments remain high at 48% and 35% respectively.
Rice Warner recorded a decline in the allocation of funds to direct equities across all age groups, owing to market volatility and investor uncertainty. However, the group anticipates a forthcoming resurgence in these assets.
55-64: Direct property investments begin to ease (45% of total allocation) as many properties would no longer be negatively geared. Cash and term deposits rise.
65-74: Interest in direct equities, cash/term deposits and equities begins to tick upwards, slowly. Property investment reduces to 40% of total allocation.
75+: Direct equities trading jumps to 20% of personal investments. Rice Warner suggests the liquidity, growth and yield potential of equities are big incentives for retirees. On average, just 20% of their personal investment portfolio is held in direct property.
Whether you’re a complete novice just starting out or a seasoned investor looking to expand your portfolio, it's beneficial to understand your objectives, calculate costs and implement a sound strategy to successfully grow your wealth.
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