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Australians are investing less as cost of living bites

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Inflation is changing not just how we invest but what we're investing in.

The cost of living crisis isn't just affecting our spending habits, it's also changing the way we invest.

Research from popular Australian trading platform Stake shows that 39% of investors have cut down on how much they're saving and investing over the last 6 months, with 51% blaming increased living costs.

Women and young people are the most impacted by the cost of living crisis and the most likely to have cut back on spending.

Over two thirds (69 per cent) of women have been forced to cut back on spending over the past six months, compared to just over half (54 per cent) of men.

The same spending cuts were seen by up to 70% of 18-24 year olds.

Changing investment trends

Paired with uncertainty about an upcoming recession and rising interest rates, many investors appear to be biding their time.

Over 20% of Australians that have cut down on investing point to concerns about the current state of the market.

Most Australians surveyed said they're now focused on long-term investing, with almost half (48%) saying they expect to hold onto their assets for over 10 years on average. Just 5% of investors say they're short-term traders.

Comparatively, the average investor made over 6 trades per week in 2020, according to ASIC.

Today's market is vastly different to what we saw between 2020-2021 where thousands of new investors a day entered the market to take advantage of the higher volatility.

In the last 12 months, Australia's stock market (S&P/ASX 200 index) has risen just 5% while the S&P 500 has increased 9% after suffering a bear market in 2022.

Australia's top stocks

Rising interest rates paired with inflation is also having an impact on equity selection.

The most purchased equities in the last financial year are a mix of mining stocks and broad market index funds, according to Stake's research.

While inflation has seen prices increase, it's been a boon for Australia's mining industry.

Top 5 Most Bought ASX Stocks Last Financial Year

1. Vanguard Australian Shares Index (VAS)
2. Pilbara Minerals (PLS)
3. Core Lithium (CXO)
4. BHP (BHP)
5. Vanguard Msci Index International Shares ETF (VGS)

Meanwhile the most popular US stocks by Australian investors reflect the recent tech rebound. In the last 12 months, the Nasdaq-100 index has jumped over 17%.

Top 5 Most Bought U.S. Stocks Last Financial Year

1. Tesla (TSLA)
2. Apple (AAPL)
3. Alphabet (GOOGL)
4. ProShares UltraPro QQQ (TQQQ)
5. Amazon (AMZN)

Despite the US market typically beating Australian shares over many years, Australians stocks are the current favourites.

Meanwhile, ETFs are the top choice for investors with less than 5 years of experience.

1,500 non-retired investors were surveyed as part of Stake's 2023 Ambitious Investors Report.

Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involve substantial risk of loss and therefore are not appropriate for all investors. Past performance is not an indication of future results. Consider your own circumstances and obtain your own advice before making any trades.

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