Young investors bet the house on dialling up their risk
High stock valuations and the biggest investment tax change in decades appear not to be affecting young Australians’ appetite for risk, according to investment platforms.
Craig Keary, CEO of micro-investing app Raiz, said this group was increasingly turning to investing to save for their first home deposit and was looking for outsized returns to achieve this.
“We’re seeing twice as many customers moving up the risk ladder than moving down, so to speak,” he told AAP.
“We have a younger group of clients who are making long-term investments, they are global citizens and they have a better understanding and focus on international markets.”
The Raiz app offers users portfolio options with different risk levels or asset types, where they can choose regular contributions or rounded deposits from daily purchases.
Mr Keary said younger investors were realizing the importance of regular investment and compound interest, and while the cost barrier to homeownership was getting bigger, share trading was more accessible than ever.
“They turn to investing to save for that deposit, but equally they realize they will have to invest regularly and in a disciplined way to have the ability to even consider owning a home,” he said.
“Despite the volatility we’ve seen in the markets for a number of years, people are realizing that it’s really about time in the market, not timing the market.”
Rob Talevski, chief executive of Australian trading platform Webull, said there was no sign the federal government’s tax reforms were quenching young investors’ thirst for growth stocks.
“With tax changes, our clients focus on those left alone rather than those touched,” Mr. Talevski said.
Under the changes, the 50 percent capital gains tax deduction on assets held for more than a year will be replaced by an inflation-adjusted 30 percent minimum tax on capital gains.
“While it is true that growth capital will be taxed more tightly, the majority of Webull clients want growth in US shares and large gains remain attractive regardless of the new CGT calculations.”
However, Webull’s clients were holding dividend income, franking loans, negatively geared share portfolios and anything else stashed away under superannuation, all of which will be unaffected by the reforms.
“This doesn’t mean younger investors in the savings phase will move into low-growth, high-yield stocks listed on the ASX, but certain age groups will,” Mr Talevski said.
“This means clients are looking at institutional and SMSF (self-managed superannuation fund) brokerage accounts to optimize returns while continuing to target high-growth US sectors.”
