State of Investing 2021: New report reveals Australian outlook
Australians saved an extra $113 billion during the 2020 pandemic, yet low interest rates mean more people are swapping their savings accounts for investments.
Finder's new report The State of Investing in 2021 takes a deep dive into Australia's investment outlook across four key areas – share trading, property, superannuation and micro-investing.
The report provides a detailed snapshot of how and where Aussies are stockpiling their wealth, along with what to expect from the investment landscape in 2021.
Below are some of the key findings from the report:
The low cash rate has driven a shift towards investing
- 37 out of 40 of Finder's RBA experts expect the cash rate to remain at a historic low of 0.10% until December 2022.
- Just 27% of Australians currently own shares, compared to 35% of Americans and 33% of Brits. However, 13% of Aussies started investing during the pandemic.
- Shares (27%) are the most popular investment after traditional savings accounts, followed by ETFs (10%), super contributions (8%) and forex (6%).
Kylie Purcell, investments product expert at Finder, says:
- "Traditionally, Australia has been a fairly risk-averse nation when it comes to investing."
- "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."
Share markets to remain volatile in the near term
- Between February and March 2020, the ASX plunged by 33%, reaching its lowest trough since 2016.
- Fidelity Investments data shows 18% of US investors sold all of their stocks between February and May 2020. We can assume a similar situation played out in Australia.
- Yet the pandemic also generated significant growth in technology, education, telehealth, ecommerce and digital payments stocks.
- Top-performing stocks from 2016–2021 are Northern Star Resources (376%), Evolution Mining (224%) and Domino's Pizza Enterprises (44%).
Kylie Purcell, investments product expert at Finder, says:
- "If there's one thing investors should keep in mind in 2021, it is to expect the unexpected."
- "Although the share market plunged during COVID-19, some sectors like telehealth and technology performed exceptionally well."
- "The sharemarket is returning to its pre-COVID-19 growth trajectory, however global recovery hinges on a successful vaccine rollout."
- "Aussies should make sure to diversify their assets – it can be highly risky to sink all of your money into a single stock, as the pandemic has showed us."
The property market is looking hopeful
- CoreLogic data shows that while property prices faltered initially in 2020, all major cities except Melbourne achieved positive year-on-year growth by October.
- The smaller capital cities have seen the largest gains, with Hobart reporting a 14.6% year-on-year increase, followed by Darwin (8.9%) and Canberra (8.7%).
- ABS data shows owner-occupier home loans reached a record $18.2 billion in December, with 26% growth over the previous year.
- The market outlook is less rosy for investors, with approximately 60% of investors reporting a net rental loss in 2020.
Micro-investing and robo-advice platforms will continue to prosper
- Micro-investing has become popular among younger generations as an easy way to invest in the stock market from their mobile phones.
- Between 2016 and 2020 Raiz Invest (previously Acorns) grew by a factor of 24, now holding $464 million in investor assets .
- According to Google insights, 73% of smartphone users regularly use an app to manage their finances.
Australians are switching up their super
- Around 8% of Australians invest in additional super contributions.
- Nearly a third (29%) would consider switching funds if their provider was investing in industries they deem unethical. This increases to 45% for gen Z.
- According to the Responsible Investment Association Australasia, 62% of Australians believe ethical super funds perform better in the long term (up from 29% in 2017).
- Top-performing ethical super funds over the past five years include Australian Ethical Balanced (6.9%), Future Super (6.7%) and AustralianSuper Socially Aware (5.1%).
Kylie Purcell, investments product expert at Finder, says:
- "Ethical investing is becoming increasingly important to Australians, especially the younger generations who aren't afraid to boycott a brand if it clashes with their values."
- "Even beyond the ethics, the majority of Aussies think ethical superfunds perform better in general – and they're not wrong."
- "Australian Ethical, for instance, has achieved a five-year annualised growth rate of 6.88% on its balanced fund, outperforming the industry average of 5.9%."
Please see here for the full report: The State of Investing in 2021, which details the Australian investment landscape throughout 2020–2021.
Kylie Purcell is available for interview.
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