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Retail investors add cash but keep long-term focus amid uncertainty: Nabtrade
Retail investors get a bad rap, with media and regulators alike using the ‘mum and pop’ trope to paint them as naïve beginners prone to bad decisions. But according to nabtrade’s Gemma Dale, self-directed individual investors have kept leveller heads than many professionals amid recent upheavals, and while trading levels have declined, the Australian retail cohort is biding its time for an anticipated pivot on interest rates.
In a recent Webinar, hosted by the Australian Investors Association, on how investors are responding to today’s market, Dale examined the sectors and stocks driving markets and portfolio performance, as well as areas investors are avoiding. As director of SMSF and investor behaviour at the online trading platform, part of National Australia Bank (NAB), she said her unique insight into activity on nabtrade has given her a very positive view of retail investors’ capabilities.
“I’ve been fascinated to see how astute and thoughtful individual investors are when it comes to their own money,” she said. “There’s a lot of press around retail investors, and it’s not particularly flattering. We draw the exact opposite conclusion.”
One thing the data show clearly, according to Dale, is how the state of markets today is influencing how people behave. Despite the adage that one can’t time the market, she said, the timing of investments in such moments can make a big difference to returns.
“It’s really critical to recognise that your timing absolutely influences your outcomes, and so it also influences people’s experience of the market and therefore how they behave in the future.”
Looking at investors’ behaviour over the past 12 months, Dale said that while the ASX 200 “hasn’t had a great year”, investors overall have been more circumspect in recent years in dealing with market volatility and stress.
She noted that the market fell 55 per cent over 18 months during the global financial crisis (GFC). In contrast, the onset of COVID prompted a 30 per cent fall, but it took just three weeks.
“Three weeks for this kind of fall is cataclysmic, and yet you see this dramatic bounce-back within 12 months,” she said. About half of nabtrade’s customers started investing at that time, and 2020 was the “biggest influx of new investors Australia has ever seen”.
Today, “what we are seeing from investors is that they are not 1,000 per cent confident about where the market is going”, Dale said, noting that investors are far less confident about the direction of the market than they were during the COVID crisis. That’s prompting them to accumulate cash.
Moreover, the “market’s quite boring right now and just trading sideways” she noted, with the number of new nabtrade investors tailing off as excitement begins to wane.
“It’s a whole new world, the higher cash rate environment. For young people, it’s foreign, and for older people, it feels extraordinary.”
