Rise of the Gen Y sharemarket investor

CommSec′s 20-year anniversary report has found Generation Y investors aged 25 – 34 years old are rising up in the Australian sharemarket. ASX data from 2014 shows 33% of adult Australians hold shares directly, compared to just 16% in 1994, and Gen Y now forms a growing percentage of new investors.

Gen Y′s two decades of silence in the sharemarket is not surprising, since 20 years ago, most Gen Ys were still finding their feet as 5- to 14-year-old students. Now they′re all grown up and joining the race to invest for their future.

The report shows Gen Ys are starting younger than ever before. In 1995, only 1 in 5 of new CommSec customers were aged under 35 and the vast majority of investors were in their late 40s to 50s, but now over half of their new customers are aged under 35. 28% of Gen Ys now directly own shares.

Why Gen Y is flocking to the sharemarket

As early as 2007, companies like KPMG were beginning to advocate for the sharemarket to adapt to encourage Gen Y to join – and it seems to have worked. KPMG made the following recommendations for investment companies:

  • Look to the medium rather than short term in order to “see” their Gen Y customers entering their wealth accumulation phase.
  • Use new technology to make the sharemarket available to Gen Y 24/7 as they desire.
  • Create easy-to-understand portfolios and more accessible financial advice and customer service for the financial newbie or n00b.
  • Work harder to recruit and retain Gen Y employees in the financial management sector, which at that time had a turnover rate of 30% or higher.

Managing Director of CommSec Paul Rayson credits the emergence of online broking with making the sharemarket “more accessible and affordable to younger investors”. He says technology has helped Gen Y to become more self-directed in their finances than previous generations. CommSec sees 25% of market watching and 13% of share trading happening on mobile devices. Research from Investment Trends shows the majority of current online investors (60%) use a mobile device to trade shares and watch the market.

Founding CEO of telecom Fonebox, Mr Jordan Grives, told the Courier-Mail he agrees. “We′re a generation of Googlers, so if we don′t know the answer to something, we go and find out quickly,” he said.

Mr Grives established the Fonebox Group in 2008 when he was just 19 years old. Mr Grives has this year made the cut in the Queensland Business Monthly inaugural list of young entrepreneurs, the Top 20 Under 40.

Challenges for Gen Y investors

One challenge for young investors is being taken seriously in the marketplace. Mr Grives said, “If you don′t have grey hair, often people don′t want to hear what you have to say. But now they′ve seen more companies like Facebook run by such young people capable of producing extremely successful businesses … the stereotype is on its way out.”

Gen Ys are also being forced to invest differently to their parents in the Baby Boomers thanks to longer degrees and large student loans. Gen Y is not as focussed on property as previous generations. According to APN Newsdesk in 2013, only 55% of Gen Y preferred property over shares, compared to 71% of Gen X and the Boomers.

Gen X and the Baby Boomers have dominated the property market until, as The Guardian reports, prices in urban areas have risen to the point where Gen Y cannot earn or save enough for a deposit. However, a 2014 report by RealEstate.com.au showed that Gen Y was instead buying up regional properties outside the city as investment properties. While Gen X and the Baby Boomers aimed to own their home outright, Gen Y are making sure they own an investment property first while they rent their living space.

It just goes to show Gen Y is growing up fast and making wise investment decisions to provide for their future.

Most popular shares at time of writing

At the time of writing, the top 5 S&P 500 shares listed on the ASX online by volume of shares being traded were all in the Metals & Mining sector except for one:

  1. FMG Fortescue Metals Group Ltd at over 35,756,000
  2. AWC Alumina Ltd at over 29,389,000
  3. S32 South32 Ltd at over 23,140,000
  4. TLS Telstra Corporation at over 22,455,000
  5. ARI Arrium Ltd at over 18,123,000

To view the economic analysis by CommSec, please visit www.commsec.com.au/20years.

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