The investment millennials are turning to instead of property
Millennials now make up 29% of all exchange traded fund investors in Australia, compared to 19% five years ago.
The number of Australians invested in exchange traded funds (ETFs) continues to rise, with more than 385,000 investors as of October 2018 representing a 20% increase for the year prior. Of these 385,000 Australians invested in ETFs, 29% are millennials which is up from just 19% in 2013.
An ETF is an investment product that tracks the performance of an index, for example the ASX200. ETFs are traded on an exchange like regular shares and offer investors instant diversification. "The ETF industry has continued to grow and mature in Australia, and we are seeing a marked decline in the age of the average investor as ETFs become more mainstream," said CEO of Australian ETF issuer BetaShares Alex Vynokur.
"Investors continue to be attracted to the ease of access, diversification benefits and cost-effectiveness of ETFs. In addition, investors we have surveyed cite the ability to access overseas markets as a key reason for choosing ETFs as an investment vehicle."
Vynokur said with property prices as high as they are, many millennials are looking for alternative ways to invest their savings. "Younger investors are being squeezed out of the traditional investment market in Australia, which is property. Young Australians are able to save, but certainly they're not able to save enough for a house deposit," he said.
"We expect that the younger age demographic will remain a key driver of industry growth going forward, with ETFs likely to become the investment product of choice for this generation."
Apps like Raiz (formerly Acorns), which is popular among millennials for its micro-investing "round up" feature, invests in a range of ETFs on behalf of its users. However Vynokur said these investing apps weren't necessarily driving the huge growth in the ETF sector. "We haven't yet seen in this country robo advice driving ETFs up in the way that they have in the US."
As well as the average age of ETF investors getting younger, there's been a rise in the number of investors seeking out ethical ESG investment options (investment opportunities that take into consideration environmental, social and governance impacts). "From almost a standing start four years ago, there are now 11 ESG oriented ETFs trading on the ASX with almost $900m in assets under management. Given the high levels of interest we are experiencing in these products from our client base, we expect continued strong future growth in this area," said Vynokur.
If you want to start investing in ETFs, you can compare online share trading platforms here to get started.