Aussie investors set sights on long-term goals despite volatility

Posted: 4 April 2022 11:57 am
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Australian investors are avoiding the most common mistake and continue to invest even in a volatile market.

Despite a tumultuous start to 2022, investors are remaining diligent with their long-term financial objectives and are continuing to invest as usual, new research has found.

According to the latest survey figures on its own clientele, Vanguard has found the typical investors are remaining disciplined and staying the course even as markets continue to swing.

Its data shows cash flows remained steady through volatility caused by the Ukraine crisis. While both buy and sell trades dipped in volume, cashing out activity remained at regular levels.

Avoiding the most common mistake

In good news for those investors who are remaining in the market, they are avoiding one of the most common mistakes retail investors make, which is selling at the wrong time or trying to time the market.

Unfortunately many sell when markets are at a low point due to fears over what will happen next for the share market. While it makes sense in theory to avoid losing more money during a pull-back, it is actually one of the worst things you can do.

Instead, Vanguard Australia's head of personal investor Balaji Gopal notes it appears investors are not falling into this trap.

"It is really pleasing to see our investors tuning out the noise and staying invested in the share market despite the ongoing volatility, avoiding the most common mistake that has long-term impacts to an investment portfolio," Gopal explains.

"Panic selling during a falling market guarantees that you lock in your losses and conversely, holding on to your investments puts you in good stead for when the market rebounds."

However, while markets remain volatile, it is worth highlighting the entire market isn't falling.

While the tech sector remains sluggish, other sectors such as Australia's market, the ASX200, is only down 1% year-to-date.

This is due to commodities showing strong signs of growth despite weaker investor sentiment in other sectors.

Lockdowns prove a financial winner for investors

While not the most exciting time for most, the research also shows that investors have used lockdown to their advantage.

Not only are investors using the current crisis, but they did not waste lockdowns, deploying the extra capital into financial markets.

According to Vanguard, daily inflows increased by 57% between August and October compared to the pre-Delta lockdown period, with the number of investors investing daily surging by 64%.

This continued in January with fears of Omicron.

While Delta lockdowns led to increased deposits across all age groups, it appears younger investors were the biggest beneficiaries.

In fact, 73% of those under the age of 35 increased their contributions compared with 55% of those aged between 35 and 55.

Aussie investors over the age of 55 saw a 63% increase in investing during lockdown.

In the Omicron-induced shadow lockdown in January 2022, investors under 35 years old again increased their investing the most, with a 14% increase in deposits, compared to a 6% increase amongst investors aged 35-55.

"Whether it's due to having more discretionary income to invest as a result of social restrictions or the desire to participate in what was a prospering share market, younger investors really used lockdowns to invest to their advantage," said Gopal.

Female investors remain more disciplined

Another key finding was how women and men are navigating the current market volatility, with women remaining more diversified and likely to begin investing sooner than men.

The figures show female investors on average have a higher account balance than male investors.

They are also less likely to buy riskier assets.

Instead, women remain more likely to invest in ethical or diversified funds, while men are more likely to buy active funds and individual shares.

"As research has proven, and as we've observed, women make for disciplined, capable investors who practise sound investment behaviours aligned to Vanguard's principles for investment success."

"That is: They invest for the long term (with half as many female investors than males selling an investment in their first 6 months of investing), they don't appear to try to time the market, and they're well-diversified," Gopal concludes.

Looking to buy the dip?

If you're keen to take advantage of the current market volatility consider investing through an online share trading platform.

Do keep in mind that not all platforms offer the same set of stocks. Some only offer US stocks, so make sure to select a platform that offers ASX-listed stocks.

Choose from the dozens available for Australian investors. Compare the features and fees from the plethora of trading platforms available for Australian investors.

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, CFDs, 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 involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. 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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