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ETFs skyrocket in popularity

A new ASX report lifts the lid on where Australians invest, which asset class is soaring in popularity, and who high-value investors turn to for advice.
By · 29 Jun 2023
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29 Jun 2023 · 5 min read
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A record 10.2 million Australians own investments outside of their home and super. That’s according to the latest Investor Study from the Australian Securities Exchange (ASX).

I reckon it’s great news! It means more of us are taking the opportunity to build wealth, earn passive income and become financially independent through investing.

Which is Australia’s favourite investment?

Across the investment landscape, Australian shares hold the top spot, held by close to three in five investors. From here there’s a big gap to the nation’s second favourite asset –  residential property, which is owned by around one in three (35%) investors.

Term deposits come in at number three (28%), but it may not be long before exchange traded funds (ETFs) fill this spot.

Back in 2020, just 15% of investors owned units in ETFs. Today that figure is 20%. As the ASX explains, the growing popularity of ETFs comes down to the way they provide exposure to a wide range of companies, regions, asset classes and strategies, making it easier to diversify.

ASX-based portfolios are on the rise

What’s interesting about the ASX report is that despite rising interest rates and increased living costs, plenty of us have been able to grow our portfolios. Among the 7.7 million Australians with ASX-listed assets, the median (ASX-based) portfolio is $170,000, up from $130,000 in 2000 – an increase of $40,000 in just three years.

This portfolio growth is not always the result of actively squirrelling money away. Part of the beauty of investing is that your assets can do plenty of the hard work for you, rising in value over time. Over the last three years for instance, Aussie shares have delivered 7.1% annualised gains, with capital growth of 12.1% in the last 12 months alone[1].

Moreover, the ASX report shows that the longer we invest, the more likely we are to be rewarded with growth. Those who've been investing in ASX-listed assets for 10 years or more have a median portfolio of $850,000, almost double that of people who've been investing for 5-10 years ($430,000).

Over one in ten high-value investors embrace robo advice

The ASX also sheds light on attitudes to financial advice. It’s already well-documented that many Australians would like advice when it comes to investing but they simply can’t afford it.

That’s not surprising. Adviser Ratings’ recently noted that the average advice fee is currently $4,000, with some advisers charging up to $13,000[2].  

According to the ASX survey, 34% of adults would be happy to use an adviser, but they think they’re too expensive. However, one in ten investors are meeting their advice needs through the use of robo advice or micro-investing platforms.

When it comes to ‘high-value’ investors – those who own the top 10% of wealth and a median ASX-based portfolio of $1.45 million – robo advice is a popular choice used by 13%. Over one in two (55%) high-value investors also hold units in ETFs.

What’s intriguing here is that on the face of things, this group of investors appears most likely to be able to afford the cost of face-to-face advice. But as the ASX explains, high-value investors are less concerned about forming a personal connection with an adviser, and are more interested in receiving independent information.

Every investor’s needs are different. But the ASX findings do shed valuable light on the way successful, experienced investors recognise robo advice as unbiased, while also having a keen interest in the benefits that ETFs can bring to a portfolio.

If you’re interested in reading the full report, jump onto the ASX website.  

 


[1] https://www.spglobal.com/spdji/en/indices/equity/sp-asx-200/#overview

[2] https://www.adviserratings.com.au/news/why-more-australians-say-they-ll-spend-big-on-advice/

 

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Paul Clitheroe
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